Coffee can cost you 69 cents, $1.29, $3.25, or even $6.99…
…and I’m just talking a simple cup of joe, not a latte or cappuccino.
The same is true of life coaching, web design, weight loss programs, yoga classes, virtual assistance, or any other New Economy service or offer.
Price is relative. Price tells a story. And pricing is a decision to be made, not a hole to fall into.
Coffee can teach us a lot about pricing
How much should a cup of coffee cost? And what does that have to do with how much you should sell your product, app, program, or service for?
The first answer is, it depends. The second answer is, everything.
The price of a cup of coffee is influenced by a lot of factors. And one of the factors that influence it least is the material cost of the beans.
Even expensive coffee beans tend to be relatively “cheap” (with a few notable exceptions).
The factor that influences it most is perhaps the different markets it’s sold in. You can get coffee almost anywhere, and where you get it influences how much you expect to pay.
Grab a 64oz Big Gulp of coffee at a gas station and you might pay 69 cents.
Pick up a 24oz coffee at a fast food chain and you might pay 99 cents.
Sip on a 16oz coffee from a specialty chain and that’ll set you back a little over $2.
Or, sidle up to the brew bar at high-end coffee establishments and that cup of coffee might set you back $5-7 (yes, I’m still talking about brewed coffee, not espresso).
While there is certainly a difference in the cost of the materials, overhead, and labor at these establishments, the price of a cup of coffee is influenced as much by the conversation you share with your barista, the environment of the shop, and the people you expect to meet there.
The same dynamic is at play with digital products and most services. While there are hard costs that influence price, most of the price is subjective and based on many factors that have nothing to do with materials or overhead.
Meaning influences price to a huge degree
The price of coffee is also largely dictated by what the product means to its customers.
Gas station coffee is a necessary evil, the solution to the problem of working too many hours, too early in the morning. Fast food coffee is a convenience, a simple pick-me-up in the middle of a hectic day.
Specialty chain coffee is a predictable luxury. Brew bar coffee is an experience all its own, a ritual, a little slice of heaven for the connoisseur.
If the local specialty shop started charging 69 cents for a cup of coffee, it would be jarring to your consumer mind.
You’d ask, “Why?” and you’d expect an answer about a promotion. If they just exclaimed, “Well, that’s what it costs,” you’d start to wonder, question its quality, wonder about the people running the place.\
If you price your products or services discordantly from what your customers expect to pay, you’ll leave them wondering the same things.
Whether too low or too high, the price of your product is suddenly something that makes people uncomfortable. And uncomfortable people don’t buy.
If your product or service promises a big life change or meaningful transformation, the price should be fit into that context.
To make sure you’re putting your customers at ease with both the experience of your product or service and the price you’re asking them to pay for it, consider these questions:
- What do you want your product or service to mean to your customers?
- How do you want them to experience your product?
- What does your customer expect your product to mean to them?
- How does the set of features you’ve arranged for her add up in her mind?
- What other products, services, or solutions might he be relating to your product?
Pricing is largely a chicken & the egg scenario
And too often, business owners play chicken.
You don’t have to price your products like a gas station prices coffee. You can choose to have a more refined aesthetic, offer a more distinct point of view, cultivate a more demanding clientele, create more favorable positioning–and charge more.
It’s your choice.
Don’t believe that these factors are out of your control. If there is any part of your business that you believe is negatively impacting your ability to set the price you want, take control and change it.
Adjust your brand or positioning, change marketplaces, rework your network, invest in design. Create an experience that really means something to your customers and results in a sustainable, profitable price for your product.
Make your customers comfortable with both the value your business is creating and the price you ask your customers to pay. And then have a cup of coffee.
