Low-price strategies don’t do that. Companies with an EDLP affliction are solely focused on cutting costs—that’s their only customer draw.

The challenge for a company that chooses to open its doors—and grow its business—based on quality products and services and quality customer experiences is that it has only one shot to make a meaningful customer connection. Customers will overcome their aversion to higher prices if the product or service they are buying is well worth it.

For Starbucks, their one shot was exactly that … one shot. The company was—and is—fanatical about quality. For a new customer to buy into the specialty coffee category, to learn what coffee should taste like and be willing to pay a premium for it, that person has to experience a perfect shot of espresso. Intense, dense, and uniquely sweet, a one-ounce shot of espresso serves as the epicenter for most of the coffee drinks Starbucks serves. Back in the day, when more people than not had never tasted anything like Starbucks, every single drink was the company’s one shot at success.

This was also a time before push-button automated espresso machines, so each shot had to be meticulously timed by the barista. A busy Starbucks used to be filled with the noises of beeping timers, informing baristas whether or not their espresso shots were perfectly pulled to be served in a customer’s beverage. If a shot was pulled outside the 18-second to 23-second span (the time Starbucks believes it takes for brewed espresso perfection), it was dumped right down the drain. No questions asked, none needed—the imperfect shot was dumped. Companies driven by cost-cutting wouldn’t think about trashing a product just short of being perfect. But for Starbucks, just short of perfect is nothing at all. One bad shot, one misstep, and the customer might not come back.

Starbucks fiercely protects its pricing power because it knows a low-price strategy is the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee. It also knows if it lowers prices, it will have a hard time ever raising them again. Most important of all, Starbucks knows higher prices bring them healthier profit margins, which fuel the cozy experience customers enjoy.

If Starbucks were to lower prices, gone would be the perfect espresso. Gone would be the enthusiastic and energetic barista behind the counter. The music, soft lighting, stylish décor, and plush seating? All gone.

Because of this, Starbucks has never adopted the low-price strategy, but it did make an attempt at discounting items across the board for a time in the 1990s. For a few years, the company offered an annual Friends and Family Discount Day in an attempt to kick-start holiday sales. For one day, all merchandise (except beverages and whole bean coffee) was discounted 20 percent. While it did cause a definite sales spike on that day, it also caused a whole slew of problems. First, it trained customers to expect lower prices. Well-meaning store managers would tip off their most loyal customers that the one-day sale was coming, and employees would graciously hoard product in the back of the store, so merchandise sales suffered significantly in the weeks before the big discount day. On top of this, the sale wreaked havoc on the supply chain. Distribution centers were unable to replenish stores fast enough, and because Starbucks locations do not have a surplus of space for storage, stores couldn’t hold enough inventory supply to restock the shelves for the day after the sale. There is no telling how many dollars in sales Starbucks lost during the crucial holiday shopping season because its stores simply didn’t have a full array of merchandise to sell following the one-day sale.

So Starbucks lost money on the discount, on the supply-chain strain, and on regular sales leading up to, and following, the one-day sale explosion. The major headache this caused took attention away from the product (the perfect cup of coffee) and what the product could do (enthusiastically satisfy customers), and Starbucks stopped the discount. While it met with some customer dissatisfaction the following year, two years after the company pulled the promotion, the discount was all but a distant memory. Company higher-ups learned from the mistake, and employees and customers turned their focus back to serving and enjoying great coffee at appropriate prices.

If it ever decided to run itself as a priced-to-sell retailer, Starbucks would be admitting it no longer values a unique product or a unique customer experience. Seth Godin, author of Purple Cow, goes one step further, saying that a low-price strategy is “the last refuge of a … marketer who is out of great ideas.” The folks at Starbucks are too smart, too savvy, and too creative to fall for the low-price trap. And if they ever did, Starbucks as we know it—Starbucks as a forward-thinking company—would cease to exist.

Leading Questions …

TRIBAL TRUTH 8
Only Three Strategies Exist to Drive Sales

Let’s face it, marketers get paid to overthink everything.