The cup-of-coffee pricing fallacy
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The cup-of-coffee pricing fallacy
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Re: The cup-of-coffee pricing fallacy
#2I've always hated it because it makes the assumption that everyone is at the same position in the class hierarchy - I'm poor, the last time I drank a coffee shop coffee was something like 8 years ago and even then it was bought for me by my psychologist, your 'cup of coffee a day' price just sounds extravagant to me.
Re: The cup-of-coffee pricing fallacy
#3It's funny because I've often had the opposite thought. Cafes should sell subscriptions. The margin on a single cup of coffee is humongous because there's so much overhead in running a cafe and such variable demand. That seems like a perfect business case for a subscription model.
Re: The cup-of-coffee pricing fallacy
#4I've always hated it because it makes the assumption that everyone is at the same position in the class hierarchy - I'm poor, the last time I drank a coffee shop coffee was something like 8 years ago and even then it was bought for me by my psychologist, your 'cup of coffee a day' price just sounds extravagant to me.
Maybe it's by design?
You aren't their target demographic.
People that do spend money on a cup of fast coffee would realize it's fine for their budget, and associate whatever offer with something affordable.
Re: The cup-of-coffee pricing fallacy
#5In many instances I would argue relationships in the B2B sale are more important than price. I have both lost and won many deals because of only the relationship.
Just recently a fairly large one we lost had a fantastic ROI, about a 10% ramp time to the competition, and even had the CTO's buy in. But we lost and found out it was bc the VP was neighbors to the other sales rep and he convinced the CTO not to buy from us. From what I can gather from the other folks that were championing for me was mostly untrue FUD was used by this VP, all in an effort to help his buddy. Their cost was supposedly ~30% higher and I usually stomp that product to the ground - because of business cases.
Re: The cup-of-coffee pricing fallacy
#6I'm the person who has been quoted.
The person whom I addressed that was going to run a business selling access to a commenting feature. https://news.ycombinator.com/item?id=22209411
The competition for that feature is free comments via Facebook so anyone who does not want to spend money has that ability. The other set of "competitors" is accessed for free via open source software that one can install.
As soon as the person signs up a first client, he or she would have to provide the service for some period of time. Just shutting it down won't be an option. Any and all businesses are a pain in the ass to operate.
Say that in order for this "business" to be viable in the eyes of the person running it ( not profitable, just viable ) it would need to eick out $500/mo in revenue.
To do that at $5.00/mo he would need to get 100 customers. That's a very tall order because the competition is free and price sensitive customers are going to go to a free service (facebook) or they are going to go to whatever service that shows up that will underprice the OP.
There's however another group of potential customers. They are people who for some reason need a problem of commenting solved and are willing to pay for it. Not a lot. But a some reasonable amount of money. What's reasonable? Well, a dinner for 2 in major cities is the USA is going to run you about $120. People who go out in those cities 4-10 times a month are the same people who have a daily Starbucks/La Colombe/Joe's Coffee/Pete's Coffee habit. They could make the coffee at home for $0.25 a cup just like they could make a dinner at home for $3/per person. Instead they choose to spend money not on the cheapest option but on option that simply solves their problem. They demonstrate it by buying Starbucks coffee and going out to dinner twice or three times a week.
It is much easier to find 5 of people who spend $100/mo on Starbucks who need to have commenting problem solved and convince them to spend $100/mo on it than to find 100 people who would spend $5/mo who think that spending $100/mo on solving their problem is too much. Why? Because the second group has already demonstrated that $100/mo is an expense they are willing to take.
Re: The cup-of-coffee pricing fallacy
#7I've always hated it because it makes the assumption that everyone is at the same position in the class hierarchy - I'm poor, the last time I drank a coffee shop coffee was something like 8 years ago and even then it was bought for me by my psychologist, your 'cup of coffee a day' price just sounds extravagant to me.
You are unlikely to be a customer of a paid-for commenting service as the alternative is free.
PS. I don't get the downvotes. Someone who says they won't spend $5 on a coffee because they are poor would be willing to pay for commenting feature on their website?! Something that they could get for free?
Re: The cup-of-coffee pricing fallacy
#8It's funny because I've often had the opposite thought. Cafes should sell subscriptions. The margin on a single cup of coffee is humongous because there's so much overhead in running a cafe and such variable demand. That seems like a perfect business case for a subscription model.
Sounds like a great way to end up with a cafe full of freelancers working on their macbooks.
Re: The cup-of-coffee pricing fallacy
#9It's funny because I've often had the opposite thought. Cafes should sell subscriptions. The margin on a single cup of coffee is humongous because there's so much overhead in running a cafe and such variable demand. That seems like a perfect business case for a subscription model.
That's mostly because competition increased, hence margin per cup had to increase.
A 90% markup on a product (even when taken away) is exceptional. Yea a subscription model could make sense, many local coffee shops struggle and end up closing doors after a while.
I rather propose reducing the margin, have more people consume such Beverage out instead of home made, or worse: the vending machine at the office. But disrupting the market pricing practices is very difficult of course. I would like that, a cup of coffee without commitment, for a fifth of the current retail price, that's still a 50% markup. As a coffee shop owner, I would also like that: My counter visited by 10 times more customers, seeing happy faces for coffee at great, in fact adequate, value.
Re: The cup-of-coffee pricing fallacy
#10It's funny because I've often had the opposite thought. Cafes should sell subscriptions. The margin on a single cup of coffee is humongous because there's so much overhead in running a cafe and such variable demand. That seems like a perfect business case for a subscription model.
Sounds like a great way to end up with a cafe full of freelancers working on their macbooks.
Turning it into an oversubscribed co-working space with third-wave coffee included in the subscription.