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Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

joshlehman.com

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Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#121

Post by tptacek »

photon137 wrote: post #115
tptacek wrote: post #108

Earlier quoted context omitted.

The bit about "coffee" and "$5" and "less than" and "marginal utility" have to do with the value of $5 to the average Starbucks customer reading things on the Internet, and nothing at all to do with the nature of coffee other than that coffee is not Important to people's lives. The point of the comparison is that coffee means so little to people that the cost of a cup of coffee is a good proxy for "how much you shoul…

Why not price the coffee at $30 then for millionaires? Surely the marginal utility of $30 to them would be similar to that of $5 to someone earning $60k? Why would one pay $5 for the same amount of gas one month and $3 in another month when the marginal utility derived from the purchase of gas is precisely the same? Ignoring the price effects induced by the supply/demand characteristics and intrinsic nature of the go…

All manner of ridiculously expensive gewgaws are priced that way exactly in order to exploit the marginal utility of $30, or $100, or $5000 to millionaires.

The problem with pricing Starbucks that way is that a huge chunk of Starbucks strategy involves there being a Starbucks on every quarter, ready for any passerby be they millionaire or middle class, and while it is notoriously easy to do price discrimination within a band of $1-$10 prices, it is very hard to do price discrimination across a $1-$100 spectrum of coffee.

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#123

Post by dinkumthinkum »

I disagree. I think this is completely wrong. Software didn't use to seem expensive at $0.99. Once enough people agree to low-ball at bargain basement pricing, consumers start to get the idea "so good software should really be like $0.10 bubblegum."

By the way, Starbucks is not a "trustable experience" per se. Also, the point is about frivolous spending, many people are willing to plop $5 bucks on a new snack at the grocery story, not knowing how it tastes or not, but not willing to pay anything for software. I think the author is searching to make some point but defining some concept called "trustable experience" but I'm just non-plused.

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#124

Post by tptacek »

robryan wrote: post #67
tptacek wrote: post #47

Horrifying. The point about the coffee cup comparison isn't that cups of coffee are the benchmark experience for product pricing; if that were the case, my next root canal would cost $0.20. The point of the coffee cup comparison is marginal utility : the money you spend on an expensive cup of coffee almost certainly has very little utility at the margin, because you are happy to chuck it away for a bad cup of coffee.…

The real problem is that the app stores are generally a winner takes all top list driven market. If you price an app at 99 cents, you probably have more of a chance of appearing on the paid top list. At which time you generate a lot more revenue that you ever would have at a higher price point, despite the inefficiency of the price point.

That's true, if the only way you have to market your product is people randomly hitting the app store looking for stuff to install.

Just from the first two pages of my phone: Rdio, Downcast, Google Authenticator, PCalc, Songkick, Ratio, and the This American Life app are all things I installed because I went to the App Store to get those specific apps. (Top Shelf, Star Walk, Flashlight, Fruit Ninja, and Osmos are examples of apps I "discovered" in the app store; those are probably not great app categories to compete in).

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#125

Post by andrewfelix »

kscaldef wrote: post #119
andrewfelix wrote: post #59

Earlier quoted context omitted.

Well said. "Starbucks Craftsmanship" ? Please. Not sure what artisans you have running Starbucks cafes in the US, but in Australia the barristers are largely low paid teenagers using un-cleaned machines and second rate beans. To top it off most of the drinks have dollop of cream or some other sugary ingredient to mask the awful quality of the coffee. I would gladly 'gamble' 99c with an iPhone developer over a Starbuc…

You're missing the point in two ways a) "Starbucks" serves in this situation as a generic term for an espresso drink of your choice. Like Kleenex or Xerox or what-have-you. When someone says "people will spend $4 on a coffee at Starbucks without thinking about it" they don't mean at Starbucks specifically, they just mean "some coffee shop that isn't 7-11 or Dunkin Donuts or McDonalds". b) Even within the category of…

It's hard for me to relate to your experience of Starbucks in the US. But in Australia the quality of a Starbucks coffee is inconsistent and typically bad. Australia has a relatively old coffee culture, so most coffee drinkers are discerning.

In the absence of reliable information in a strange town I will always gamble on a the small cafe, as they have to work to get customers as opposed to depend on an advertising budget and novelty style sugary drinks.

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#126

Post by dpark »

tptacek wrote: post #112
tlogan wrote: post #93

Earlier quoted context omitted.

Situation in Apple App Store is actually much better then selling it via web. You could actually convince some people to buy your app for $1. Convincing people to pay for anything on the web is much much harder. A know few real-estate agents which have all their data in Dropbox but they don't want to pay for Dropbox storage and constantly terrorise colleges with Dropbox invitations so they can get some more storage.…

No. The situation on the web is the opposite. People with real business problems can readily be convinced to lay out far more than they do in apps for a year for a web page that solves those problems. Case in point: teachers who want bingo cards to build a lesson plan for a single day's biology class.

The interesting thing to me is that the web seems to be a wholly different market than an app store. Getting me to pay even a dollar for an app in an apps store is tough, and frankly a bad bet. On the other hand, there's absolutely no way I'd pay a dollar for any app on the web. I assume that anything priced that low is a best trash and likely malware.

If you want me to buy an app in an app store, you've got pretty much the same sell whether you're charging a dollar or five. On the web, if you're not charging at least twenty, I've probably already navigated away.

But with that said, I don't spend much on random apps on the web, either. You've still got to make a good sell. It's just that "low price" on the web is $20.

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#128

Post by sjg007 »

crazygringo wrote: post #81

Wow. The negativity of the comments here to this post is astounding. I personally find this post very insightful. Just yesterday, I bought the EA Tetris app for $0.99. I played it for three minutes, and decided I hated the "touch" interface for Tetris. It isn't Tetris at all. And it pissed me off that I paid money for something useless. It doesn't matter if I paid $20 for it or $0.99. It just makes me feel like a foo…

The "inapp purchase" can prevent this. Download for free, play a few levels, if you like buy more.

This is the same strategy cut the rope, angry birds, use. They started before inapp purchases became available but clearly demonstrated the concept.

This is the model that works.

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#129

Post by jacalata »

mmahemoff wrote: post #69
CKKim wrote: post #50

Earlier quoted context omitted.

I've been downvoted, so could someone set me straight on the etiquette for pointing out errors here please? The original article gives only a Twitter account for contact info, the submitter of this HN post is the same as the author of the original piece, and my comment above is 251 characters.

Well, people don't ye olde typo corrections, but seems OTT to downvote this when comments are closed on the post.

^people don't like

Re: Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy

#130

Post by 2muchcoffeeman »

samfoo wrote: post #113
brc wrote: post #105

Earlier quoted context omitted.

There's really no such thing as 'Aussie' coffee, as I doubt coffee is produced in commercial quantities anywhere in Australia, although there are local roasters. What they are referring to is coffee made by an Australia barista. Basically, coffee culture is huge in Australia, and being a quality barista is seen as a cool kind of job to have, despite the generally low pay. It's not unusual on a city street in Australi…

As an American living in Sydney: I've found it to be exactly the opposite. Sure there's a ton of coffee places, but mostly they're the same crappy $4.00 burnt roast. I suspect Melbourne is probably better, but I haven't had enough coffee there to confirm. My speculation is that this is due to a general lack of hip/divy/young "artisan" cafes/restaurants in Australia (yes, yes, I know there are some, I'm talking purely…

I have lived in Sydney a long time. I agree. Most of it is not that good. But everywhere you go there is usually at least 1 place that you can count on.
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