THE CAFE COFFEE FRAY – CAN COFFEE EVER BE CHEAP?

Popular coffee houses know how to make their customers pay and want them to choose specific products. How do they do it? – the pricing strategy at its best!

Not being an avid drinker of espresso, I ordered it while having a chat with my friend at one of the tables of CCD store in my city (since the chat was supposed to be work-related and hence concise, I tried to save money). Those who don’t know what it is – it’s 30 ml of grounded coffee beans and boiled water together (high in caffeine levels). After a tough round of brainstorming I could not help but get annoyed at the price; it was only a few bucks less than a cappuccino which costs significantly more to produce.

Thereafter I browsed zomato for espresso costs in the three of the most popular coffee houses in the nation – Starbucks, CCD and Barista and found that espresso shots cost significantly high so as to deter non-espresso drinkers from venturing to buy one. At Barista, it costs as much as the cappuccino!

Starbucks provides most of its coffees in four different sizes – the flat white espresso comes in short (costing 190), tall (costing 215), grande (240) and venti (265). Most outlets would reduce or increase the absolute price a customer pays when he buys more of the product but Starbucks doesn’t. It charges the same absolute price i.e. 25 when you grab a bigger coffee (for every drink). What does this mean?

The logic lies in what type of a product is coffee. It is not like pizza – if you go as a group you can order a large one and share. Everyone prefers his own cup and exactly the size they prefer – everybody has a certain capacity to intake caffeine and thus different prices for different sizes would not affect decision. Therefore, the best Starbucks can do is to charge the same absolute price for movement to bigger sizes.

A significant tool that these shops use to figure which consumers can more for their coffee is charging a higher price for a relatively cheap service. For instance a cappuccino costs 99 and a hazelnut cappuccino costs 119; an increase worth 20 is not usually the scene on the cost side. Usually an add-on such as chocolate syrup or another flavour is added for consumers who are vulnerable towards paying more for a slight improvisation of their drink – they are‘willing and able’ to pay more.

And the worst part is that coffee-lovers are usually ‘coffee-lovers’ – they can’t wish for even a slightly inferior drink since all they care about is the steamy brew to savour the evening that brings a nice person or a book to chat with.

THE CHOICE OF STEPPING UP

    In face of pervasive injustice which much easily evades the supposedly long hands of law, people sometimes face a choice of whether to step up and revolt or brood about it in dinner table discussions while they care about saving themselves from the wrath of subduing forces of crime. The crime that haunts an individual arouses fear in others at the minimal expense. The state is meant to protect us, however reality belittles this assumption. Who then is supposed to protect the law-the answer is nowhere which leaves just one option which entails people to protect themselves by united revolt, not just against the state but also the perpetrators of crime.

A murder on the streets will inflate of dominance but will have to burst at some time. This certainly requires people to go ahead and risk their lives in preventing the murder (a risk which is much of possibility). The simple idea that even if a thug who is allegedly harassing an individual has a single bullet will hold off masses from protesting by virtue of the fact that anyone who steps first will be the single target to that bullet. The question thus deduced is that at what point of time will people fell that the gravity of the issue holds higher importance than risking their lives?

A generic notion that serves as the answer is that when people realize that the crime ‘being done’ jeopardizes not just the life of the victim but also gravely humiliates the freedom they command, they will revolt as an overarching option to live in morbid mental state. The epitome of this theory finds itself in the independence struggle in India. The British regime found little civil opposition only as long as people found their freedoms being overwhelmingly compromised. It was then that extremists like Bhagat Singh, Sukhdev and Rajguru found ecstasy in being hanged for their fight against the British tyranny.

It is only till repressive states come under the lawful eye of the state (which seems like a faraway dream) that the masses have to be their own soldiers. Uniting against dominance of local thugs after the crime is committed will attract state attention. However, a life saved matters much more than the insincere cure of the innate disease of that crime.

In public places, where eave-teasing is common, the hesitation to intervene will have to broken possibly by gathering unity (which is much easier said than done). Tactics to distract the thugs can buy time to perform the onerous task.

‘The only thing as strong as fear is hope’ (the Batman series) – fear will have to be bogged down by hopeful wisdom at the need of the hour. If individual protests fail to incite unity, nerves will have to flex for intelligent action.

I DON’T NEED THAT, BUT I DO WANT THAT

How sure are you of the fact that you always buy of what you were very determined to buy? Do you realize that sometimes the seller incites you to get a taste of something you wouldn’t order in the first place? If you have experienced something like this then you’ll find an interesting logic behind the tricks and traps of the seller – ‘the power of coupling products’.

WHY FRENCH FRIES:/

Imagine you’re sitting at Burger King or at McDonald’s and waiting for your king size burger like a cheetah for its prey. Now all you need is your burger and a glass of chilled coke. Why in any way imaginable would you want to have French fries? Off course for the discount, but imagine if there wasn’t a discount; you’d still order your coke and want to have every delicacy that you like but I bet the fries compare nothing to your chicken whooper. The reason you’ll still order fries is that you have been adapted to the combo – the coke and the burger hides the ordinariness of the fries and your hands just involuntarily move towards the fries in between the coke sips. So the fries are sold for much less but at least they are sold! (still way above the production cost)

Amazon does the same thing with books – when you buy a book, you’re suggested another one which if you order with the previous one, you get the combo at a lower price and can save shipping costs. So even though you would not want the second one or you could wait a bit till you read the first one, you anyways order because the price is really low.

APPAREL APPARENTLY

The apparel industry goes a step further and directly invites to buy an inferior product (mildly preferred) instead of a superior one (preferred one). Say the superior shirt (A) costs 1000 and the inferior shirt (B) costs 900. However you know that B is not worth it and you are only willing to pay 600 for it. Suppose now that there is 1 + 1 offer on B (you buy one and you get a different shirt of similar quality) which costs 1200. Suddenly you get excited since the invitation of FREE is enticing and you take the offer. Thus although you get the B at the desired price but you bought two of them and  then at least you bought them instead of A!

So the next time you buy something, do fall for the ‘coupling trap’.

BUY SMALL, BUY MORE

The packaging of a product not just appeals to the eye but also renders your rationality useless because we, as consumers, will always compare one product vs the another and not the bigger version of that product with its smaller version once we concede that our consumption levels match that of the bigger.

One such instance where this bias is recurrently damaging is when we buy our shampoo. For instance, a small sachet that just suffices for a single was costs for 2 (all numeric figures in INR) while the smallest available bottle costs for 135. this bottle will fulfill thirty to forty (maximum) washes nearly for which if we used the sachets, it would have cost us a maximum of 80. Even if you add for the costs of packaging, economies of scale would not let the cost breach 100 (not even 100 in fact!). Beisdes a bottle will sometimes entice to use a bit more shampoo than we can use in a wash whereas the sachet has a definite amount which has to be used entirely.

What that 35 implies is the cost of getting the consumer adapted to the product and charging a higher price to him. This process is also called price discrimination – you  determine people who can pay more for your product and charge a higher price to them. Because people are attracted towards the bigger version of the product for reasons of convenience and saving transportation costs, the company exploits this and instead adds these costs to the bottled shampoo.

Hence all that you save from transportation costs gets added to the product costs! You can apply this theory to other consumer durables as well. Therefore the next time you buy something, do ‘try’ to buy small and more of it.

LEAVE THE PRODUCT. TELL ME WHO YOU ARE

On what factors is the competition between various substitutable products decided? Prices, quality, ease of availability? In a nation such as ours where emotional satisfaction is a fundamental part of utility, the image of the brand is vital to sales. Do you ever feel that the person endorsing the brand is more important and influential than the brand itself? The overarching charm of the endorser has become essential there where prices and quality end up on competing.

MOVIE PROMOTION

Celebs that appear on a show for promotion just reveal a sneek peak at the beginning of the show. Thereafter they enjoy themselves and show the funny, emotional and naughty sides of themselves just to get the audience to fall more in love with them because all that matters in the end is the attachment the people have with the lead actors. This is the reason why low budget and hence less experienced starcast led films fail at the box office (and movies like Prem Ratan Dhan Paayo or Houseful 3 earn) – because the audience is hardly attached to the lead actors. These actors are nothing but the endorsers of the film and the film will only earn if the popularity of these actors rise significantly.

THE KUTZ STORE

Kutz is an emerging high-end hair salon in Nagpur with some of the best hair stylists in the city where a basic haircut costs nearly 300. If you demand a service, you need to call them a take an appointment. And when you call them they ask you about the stylist that you wish to get your service from. What might this do to appeal the consumer? You ought to think a bit…………

They do so because this way the importance of getting attached to the stylist becomes more important than the service itself and in order to get the best service you need to keep track of the best person able to give that service. You will find your own personal favourite and hence feel content for being catered to your specific needs. Also you will ask your friends-cum-other customers about the stylist that they prefer and come to different conclusions since everyone has different preferences which will further promote the versatility of the salon.

There can be two situations – first, you might be already getting the best service possible and hence you’re content and continue as a faithful customer; you don’t compare other store services because you’re already comparatively best in Kutz. Second, you might not be getting the best service possible and hence you will continue to try different stylists until you find the stylist that exactly caters to your needs. This way finding the perfect person and being in touch with him will keep you within the embrace of the salon.

ZEN OF PATANJALI

Breaching the turnover of 3000 crore, Patanjali struck the weakest chord in the nation – people’s cultural values. Babab Ramdev being not just a cultural guru, also preached nationalism in lieu of saving money from fleeing abroad. As a result the brand got affiliated to the cultural ethos and the spirit of nationalism.

So in case you launch a product, you will need to ascribe a sentiment or a valuable endorser to it.

BUY SMALL, BUY MORE

The packaging of a product not just appeals to the eye but also renders your rationality useless because we, as consumers, will always compare one product vs the another and not the bigger version of that product with its smaller version once we concede that our consumption levels match that of the bigger.

One such instance where this bias is recurrently damaging is when we buy our shampoo. For instance, a small sachet that just suffices for a single was costs for 2 (all numeric figures in INR) while the smallest available bottle costs for 135. this bottle will fulfill thirty to forty (maximum) washes nearly for which if we used the sachets, it would have cost us a maximum of 80. Even if you add for the costs of packaging, economies of scale would not let the cost breach 100 (not even 100 in fact!). Beisdes a bottle will sometimes entice to use a bit more shampoo than we can use in a wash whereas the sachet has a definite amount which has to be used entirely.

What that 35 implies is the cost of getting the consumer adapted to the product and charging a higher price to him. This process is also called price discrimination – you  determine people who can pay more for your product and charge a higher price to them. Because people are attracted towards the bigger version of the product for reasons of convenience and saving transportation costs, the company exploits this and instead adds these costs to the bottled shampoo.

Hence all that you save from transportation costs gets added to the product costs! You can apply this theory to other consumer durables as well. Therefore the next time you buy something, do ‘try’ to buy small and more of it.