Starbucks focus on selling good coffee experiences to customer, so indicates that it is not just a cup of coffee. The company has put in so many effort to distinguish itself from cafes such as CCD. In addition, This company design of the coffee shop with the relaxing music and the types of products it sells all add value to create the Starbucks experience. Starbucks' pricing level has reached the effect of "affordable luxury".

2. Understanding Customer Value and Value-based pricing

So that, we look at what exactly the customer value are created by Starbucks for them in this concept to price the product that customer is willing to pay for. The company uses various complex algorithms and formulas for this and assigns different weights to each parameter. There is no one universal formula for all the products. It is more of an art of understanding customer value and decoding what they perceive as the value in the product.

For example for a Cup of coffee:

Value based Pricing = (Customer time saved in not preparing the coffee) x (personalization the coffee experience) x (15% to 60%)

In conclusion, Starbucks has strong brand value, although their products's prices are higher, it is because they need to pay off higher production costs. Starbucks sets its prices on a simple idea way, it is high value at moderate cost. When people feel like they are getting a good deal for their money, they are more likely to pay a higher cost.

Starbucks appreciates that the mainstream of their customer base is impervious to price. It uses small price rises that everyday customers may not notice to increase margins.

So, this goal can help Starbucks create value for customer towards your most profitable product.