There was a time when coffee was coffee. Ice cream was ice cream. A phone was a phone. Even a pair of shoes was, well, just a pair of shoes.
At one level, at the lowest price/profit level, there are still merchants stuck in this time warp, continuing to conduct business as if people still bought products.
Today, that cup of coffee comes with more options than a Lexus. Would you care to add vanilla or caramel syrup? A double shot? Foam? Cinnamon sprinkles? Thus the $5 price for the 50-cent cup of coffee.
But even that is only half the story.
Ordinary products morphing into complex arrays of choices, options, add-ons, brands and luxury brands is one way prices have been inflated and margins inflated even more. The profit margin of the double-shot of extra something or other far exceeds the profit margin of the cup of coffee itself.
The designer name bag selling for 11,000 doesn’t cost 100-times more to make than the similar appearing bag sold at Target for 110.
This is a path to profit
Starbucks does not define itself as a coffee shop or even more elegantly as a coffee house. They describe themselves as being in the ‘third place business’–home, office, Starbucks in between.
They are not merchants just of jazzed up coffee drinks. They are merchants of place, of feelings, of status, and maybe most of all, of experience. Their inspirations are more Disney than Denny’s.
One of the many students of the Starbucks phenomenon, Ken Herbst, assistant professor of marketing at Wake Forest University’s Babcock Graduate School of Management makes the obvious point: “If you walked up to someone about to buy a pound of coffee at the grocery store (at about $4 a pound) and tried selling them just a cup for $5, they would tell you that is too expensive. But if you are at the coffeehouse, you are going to pay for the experience.”
Price for the same product also varies by context. This is easy to see with commodity items like food, even though many restaurant owners still never grasp it. When is one-third pound of peanuts not one-third pound of peanuts? In a jar, on the shelf, that’s all they are, unless dusted with Starbucks mocha latte powder and packaged in a fancy tin.
But when served hot, from a vendor’s cart in the park, scooped into the bag and sprinkled with cinnamon by a handlebar mustached man in red-white striped jacket and straw hat, with calliope music playing from the CD player in the cart–then they are not peanuts at all. They are an experience that evokes emotional feelings. Even as you read my words, your mind may have flashed to Mary Poppins in the park or a trip to the circus as a child. While it is not so easy for most to transfer this idea to other businesses, it does, in fact, transfer to any business.
Context alters or liberates price. Move the exact same product from one context to another and its price can easily be altered.
In this months Mouster Class Blueprint, I show you exactly how “place” matters to your pricing an how to be sure you are selling in the right place.
In addition to place strategy, in this month’s Mouster Class for Inner Circle members, I am revealing how EVERYTHING in your business revolves around price, including:
- The lies marketers tell you about needing more leads and clients. I debunk them all
- How to raise prices without losing one client
- Why profit is the only metric that matters
- 8 ways to price and increase price, no matter what your competitors charge
- The most important aspect of pricing
- Price positioning: Should you be high, low or average? The answer will amaze you
- How price affects profit more than costs
- The 2 mission critical factors to setting your prices. Without these, you are doomed to a low bank account and dwindling customer base.
- How to use the awesome power of scarcity to command high prices
- How “place” defines price.
- Differentiation versus Discrimination: Should heavy people pay more to fly?
- How not to get caught in the Bundling, unbundling, volume and multi person pricing trap
And much, much more!
But don’t dilly dally, this months Mouster Class Blueprint goes into the DSNi vault at midnight on 4/30/21.
Take care of it here: https://www.deliverservicenow.com/invitation-to-become-a-dsni-inner-circle-cast-member/
And to show that I follow my own advice, the price of being a DSNi Inner Circle member is going up on May 1, 2021 from 97 to 119.
In other words your daily investment is going from the price of a Tall Starbucks to the price of a Grande.
If you join before 5/1/21, you will be grandfathered in for life at today’s investment into your business.
