How Do I Raise Prices Without Losing Clients?Nov 14, 2022
I walked out of Starbucks yesterday in a huff..
So I went to Starbucks yesterday, looked at their price list and saw that my favourite Cortado was £3.10. I stood there trying to work out how much it cost them to make it
1️⃣ Firstly starting with the unit cost of the coffee beans
2️⃣ Then adding cost of the milk
3️⃣ Then adding an amount for the cost of labour
4️⃣ A little bit for their overhead
5️⃣ And finally a mark up of 20% which I thought was appropriate
➡️ I came to a figure of £1.40
Much lower than the £3.10 that they were asking for. I shrugged my shoulders and decided I wasn’t going to pay that extortionate amount and walked out.
None of that actually happened because it never does!
We don’t care about the cost structure of whatever it is that we’re buying. We only care about the result, the outcome, the solution, the utility for US. We make a judgment based upon a simple equation:
Is the VALUE i’m getting higher than the PRICE i’m paying - if so, then I buy.
The reason why I pay more than 10x for a coffee from Starbucks than what it would cost me to make one at home is because I VALUE:
👉 the consistency of the flavour
👉 the smell of coffee beans in the store
👉 the fact that I can sit and work there on my laptop
👉 not having to spend time washing up my own cups and milk frother!
And that’s the same thing your customers are doing when looking to buy from you
Nobody cares how many hours you put in, nobody cares what your costs are
They only care what VALUE they get from you
So get better at portraying and communicating your VALUE and you’ll be able to get higher prices and please, STOP charging for hours because that’s not what your clients are buying.