The cup-of-coffee pricing fallacy • Hacker News Board

Re: The cup-of-coffee pricing fallacy

#61

Post by wink » Sun, Feb 02, 2020, 9:17 PM UTC

gnicholas wrote: post #46

This article frames the cup-of-coffee pricing comparison as: "$100/mo is less than a cup of coffee every day". But I most frequently see the comparison as: "$5/mo means giving up just a cup of coffee once a month". In this formulation, I think it's a pretty reasonable comparison, since a prospective user doesn't have to sacrifice much (just a semi-luxury item, one day a month) in order to use your service. The author…

I don't think it's any more reasonable.

I like coffee, but I've not bought even a 4€ cup of coffee in a few months. Actually I don't visit coffee shops a lot, I much prefer drink my coffee at home (or at work, where it's free)...

Also if they argued that 7€ would be just 2 beers per month... maybe I'd still take 2 beers over some ridiculous SaaS. TLDR: I don't like subscriptions.

Re: The cup-of-coffee pricing fallacy

#62

Post by vhvjkyhkogvv » Sun, Feb 02, 2020, 9:19 PM UTC

notyourday wrote: post #58

pembrook wrote: post #42

Earlier quoted context omitted.

But if you’re poor...you’re probably also not in the market for a $100/m B2B Saas product.

If you're poor you are not a target customer for any non-essential paid for monthly service.

A cost of doing business is one of the most essential expenses there is.

Re: The cup-of-coffee pricing fallacy

#63

Post by hrktb » Sun, Feb 02, 2020, 9:24 PM UTC

gnicholas wrote: post #46

This article frames the cup-of-coffee pricing comparison as: "$100/mo is less than a cup of coffee every day". But I most frequently see the comparison as: "$5/mo means giving up just a cup of coffee once a month". In this formulation, I think it's a pretty reasonable comparison, since a prospective user doesn't have to sacrifice much (just a semi-luxury item, one day a month) in order to use your service. The author…

For me the fallacy lies in two parts:

- my standard cup of coffee is not 5$. It’s a free perk on the job, coffee I drink at home and buy in bulk so I don’t think in terms of cups, or a 2€ expresso I buy to sit in some warm place waiting for someone or to use the toilets.

In particular for the last instance, it’s a cost I won’t skip because I bought some service online at the same price. I’d pay the 5$ service in top of my coffee.

- coffee I really want to pay for at 5~10€/$ is extremely good and comes from a specialized place that invests a lot in making good coffee and providing a place to enjoy it. It’s of tremendous value and not something I get from random starting services. TBH I’d value it more than a third backup of my photos through dropbox for instance.

Re: The cup-of-coffee pricing fallacy

#64

Post by gnicholas » Sun, Feb 02, 2020, 9:24 PM UTC

wink wrote: post #61

gnicholas wrote: post #46

This article frames the cup-of-coffee pricing comparison as: "$100/mo is less than a cup of coffee every day". But I most frequently see the comparison as: "$5/mo means giving up just a cup of coffee once a month". In this formulation, I think it's a pretty reasonable comparison, since a prospective user doesn't have to sacrifice much (just a semi-luxury item, one day a month) in order to use your service. The author…

I don't think it's any more reasonable. I like coffee, but I've not bought even a 4€ cup of coffee in a few months. Actually I don't visit coffee shops a lot, I much prefer drink my coffee at home (or at work, where it's free)... Also if they argued that 7€ would be just 2 beers per month... maybe I'd still take 2 beers over some ridiculous SaaS. TLDR: I don't like subscriptions.

If you really don’t like subscriptions, then people who are considering how to pitch their SaaS services probably shouldn’t put too much weight on your opinion...

Not to be rude — just pointing out that feedback from someone who is highly unlikely to purchase a type of product is less relevant.

For the record, I also don’t like subscriptions, and I probably put too much weight on my distaste when pricing my startup's products.

Re: The cup-of-coffee pricing fallacy

#65

Post by notyourday » Sun, Feb 02, 2020, 9:26 PM UTC

vhvjkyhkogvv wrote: post #62

notyourday wrote: post #58

Earlier quoted context omitted.

If you're poor you are not a target customer for any non-essential paid for monthly service.

A cost of doing business is one of the most essential expenses there is.

If an owner of the business cannot afford or won't frivolously spend $5/day on a coffee, he or she won't spend money on a SaaS feature that he or she can get for free. Even if he would, to get $500/mo the SaaS would need to find one hundred of such owners.

If SaaS is to price its service at $100/mo, then people for whom extra $5.00/day is a big deal won't be looking at this service at all, won't be contacting the owner about implementing yet another feature, etc. To get to $500/mo revenue, SaaS would need to find 5 owners.

Re: The cup-of-coffee pricing fallacy

#66

Post by monadic2 » Sun, Feb 02, 2020, 9:33 PM UTC

vhvjkyhkogvv wrote: post #62

notyourday wrote: post #58

Earlier quoted context omitted.

If you're poor you are not a target customer for any non-essential paid for monthly service.

A cost of doing business is one of the most essential expenses there is.

The absurdity of an “essential price”... essential to what, class?

Re: The cup-of-coffee pricing fallacy

#67

Post by segmondy » Sun, Feb 02, 2020, 9:33 PM UTC

The cup-of-coffee pricing does make sense. It's not for everyone, there are folks who drink coffee at least 5x a week by paying for it. Those sort of statements are targeted to them. However the fundamental flaw is that in that thinking is with software, someone might just show up and offer free software, we don't see the same with coffee. What makes B2C software hard to sell today is the free apps. Consumer's are now price sensitive to useful apps and most companies think they can make it with ads.

Re: The cup-of-coffee pricing fallacy

#68

Post by unethical_ban » Sun, Feb 02, 2020, 9:35 PM UTC

OJFord wrote: post #47

nunez wrote: post #29

I hated this assumption too, but for different reasons. First, the price for a plain old cup of coffee at Starbucks differs from region to region, but it usually normalizes at around $1.80 (taxes included). Refills are $0.52. While, yes, Starbucks’s coffee-based offerings (like lattes) are more expensive, coffee from Starbucks is quite cheap and VERY consistent (and cheaper than at a mom and pop coffee shop). Second,…

> First, the price for a plain old cup of coffee at Starbucks differs from region to region, but it usually normalizes at around $1.80 (taxes included). Refills are $0.52. That sounds really cheap, or what's a 'plain old cup of coffee' - does Starbucks sell filter coffee over there?

Texas: $2.10 for a tall (12 oz) cup of coffee. A double espresso with foam is about $2.30.

Re: The cup-of-coffee pricing fallacy

#69

Post by bravoetch » Sun, Feb 02, 2020, 9:35 PM UTC

The author misunderstands people. Nobody is doing the math or spending effort to otherwise rationalize spending decisions this way. It's an emotional plea - and we're all dumb so it works. Same reason all retailers are always having a 'sale'. We really are that stupid.

Re: The cup-of-coffee pricing fallacy

#70

Post by [deleted] » Sun, Feb 02, 2020, 9:37 PM UTC

seanwilson wrote: post #15

To me, the coffee price comparison makes your service sound like it's a frivolous and unimportant purchase. You're better pointing out how much it will cost a business in time and money to solve a problem themselves and compare that to the cost of your product. If you're selling too cheap, the problem probably isn't big enough or important enough.

[deleted]