Starbucks tests $1 coffee and free refills

With McDonald’s planing to create new coffee bars and Dunkin' Donuts selling premium coffee inexpensively, Starbucks want to fight back by offering small cups of coffee for $1 with free refills. Will this tactic help boost sales at the chain?

Starbucks competitors Dunkin' Donuts and McDonald’s sell coffee at just above $1, and Starbucks wants to do the same by offering drip coffee for just a buck. It is offering this price on a test basis at its hometown Seattle and will expand to other areas if it becomes popular, according to Wall Street Journal. Previously, Starbucks minimum price for an 8 oz. cup was $1.50 plus taxes. The new pricing is a considerable discount with free refills thrown in, too. Starbucks didn’t say exactly when this test marketing began, how many stores are involved and whether the discounts are available for other brews. Starbuck spokeswoman Bridget Baker said it is not a new business strategy. They will deny it until it becomes official. Instead Baker said in a statement: "Testing is a way of life for us, as we are constantly looking for new ways to connect with the customer and provide the best Starbucks experience.” It is a complete change in policy compared to last year, when Starbucks raised the price of coffees and other drinks by 9 cents. The reason given at that time was rising costs of dairy products, which has remained high even now. Starbucks Chairman Howard Schultz, who recently returned as chief executive after the company fired CEO Jim Donald, has acknowledged the faltering economy appears to have contributed to the decline. Schultz said the reason for the decline in sales was they were concentrating more on growing the company and less on customer service. He wants to reverse that trend. Starbucks has more than 15,000 coffee houses worldwide. The price will help boost coffee sales and may lure the buyers to purchase other items at Starbucks. It is a good strategy provided they are able to make some profit margin at this price. Will this price compel you to buy Starbucks coffee over its rivals?