Lessons I learned From Seth Godin #2: Price is a Story

## Lessons I learned From Seth Godin #2: Price is a Story

How much should we pay for a cup of hand-crafted cappuccino?

If you go to McCafe, you could get it at $5 – $7 (MYR) per cup.

But, If you go to Starbucks, it'll cost you $13 – $14 (MYR) per cup.

Why cappuccino in Starbucks cost 2x more than in McCafe?

Is cappuccino in Starbucks taste at least 2x better than in McCafe?

Debatable – but my verdict is NO.

In terms of taste, they are more or less the same.

But why is cappuccino much more expensive in Starbucks than McCafe?

This is a great question.

Do you know why?

Well, here's the thing…

The majority of people who buy coffee from Starbucks don't care about the taste.

What they really desire is the experience of buying coffee at Starbucks.

You see, people who went to Starbucks weren't there because they want to enjoy a cup of nice aromatic, authentic coffee.

They are there because of the story they telling themselves and others about money and status.

The story of they have earned enough to buy a cup of overpriced coffee, and they have more money than taste (in coffee).

Sometimes, you could see many students' seats hogging at Starbucks (pre-covid 19 era).

Is Starbucks really a good place to study?

Highly doubt it!

Consider how noisy it is most of the time, and sometimes it turns into a children's playground.

Yet, you could see every day there are a lot of students/freelancers/digital nomads hogging Starbucks to study or to do their freelancing work.


Because it's all about "status".

The status of being able to study at Starbucks, instead of McDonald's or public library.

The status of being able to work at Starbucks instead of at home or office.

Most people who only drink coffee from Starbucks don't know what real coffee tastes like.

To a long-term coffee lover like myself, most of the items on the Starbucks menu are just pure abominations.

Who put jelly into coffee? ¯\_(ツ)_/¯

Starbucks understands their customers very well.

They know their coffee is over-priced.

They know their coffee doesn't taste better than the alternative.

Yet, there are lots of people queuing up every day to buy coffee at Starbucks.

This is because Starbucks knows that if they can elevate your experience of buying & drinking their coffee, then taste is no longer in the equation.

This is why they invest heavily in the infrastructure to provide the experience their customers desire.

There is even a say that Starbucks barista purposely misspelled your name – so that it'll trigger your urge to share it on social media, which will spread their brand further (viral marketing 101).

Why do you think they always write your name in that tiny space on top of their logo?

There is plenty of space at the back of the cup – why didn't they write it there?

Everything they do, from the lovely environment, over-priced products to constantly misspell your name – is to tell the story of buying coffee at Starbucks is expensive, but it'll be worth it for the experience & status you're getting back.

Being said that, this is just one part of the story.

Starbucks isn't selling over-priced products because they are greedy and evil.

They are selling expensive products because they want to re-invest the margin back to their infrastructure, employees, and, most important, the cost of telling the story their customers would love to engage in.

Regardless of what other cafes do, they can never succeed Starbucks.

Starbucks isn't here to sell you coffee – they are here to sell you the experience of buying coffee at Starbucks.

Starbucks is in its own category.

You can't simply compete with someone that is in their own category.

Seth Godin said it best:

"Price is a story. It is not an absolute number, but a marketing tool."

Is Your Price Your Marketing Tool?

Whenever we'd determine the price of a product or service, we need to know what kind of story we want to tell.

Do we want to tell our customers/clients: ours is the cheapest, if you want a bargain, buy it from us.


Do we want to tell our customers/clients: Ours is the most expensive, and we promise that the value we delivered will be worth every penny.

So, what is the story your customers/clients tell themselves when they buy something from you?

Is it "I got a bargain!" or "This thing is really important to me – therefore I paid extra so that I can get the most value from it"

Of course, we can't simply change the price – because we want to tell a specific story – we must have enough assets to back it up.

We can't be the cheapest one – if selling below the margin is going to hurt our business long term.

At the same time, we can't be the most expensive one – if we can't deliver enough value to justify the price.

So, the question for today is…

Do you have a pricing strategy?

What kind of story do you want to tell with that pricing strategy?

Is your pricing strategy attracting the kind of customers/clients you want?

Does your pricing strategy allow you to re-invest the margin to build a sustainable business that doesn't drive you crazy?