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8 Best Pricing Strategies for Coffee Shop

If you want to open a new coffee shop, there are several things you need to do to make the business a success and one of them is to make sure you have a winning pricing strategy.

A winning pricing strategy is a pricing strategy where both the owner of the coffee shop and the customers are considered winners. The customers get value for the money spent at the coffee shop, and the owner of the coffee shop also makes a profit from every cup of coffee sold.

It might interest you to note that most new businesses that grew within a short period of time and eventually became a competitor within their market space started with a pricing strategy that people found difficult to resist. In this article, we will discuss some of the best pricing strategies that a coffee shop can adopt if indeed they want to win a fair share of the available market in their space.

Best Pricing Strategy for Coffee Shops

  1. Competitive Pricing

If you open a coffee shop in your location, trust me, you will be competing with other coffee shops or businesses that serve coffee hence you should adopt a pricing strategy that will help you favorably compete.

No doubt one of the ways you can penetrate the market in your location is through competitive pricing. Competitive pricing is a pricing strategy that involves selecting strategic price points to best take advantage of a product or service-based market relative to the competition.

Interestingly, you may decide to charge the same price for a cup of coffee as your competitor, but you may want to give extras that will make people see your coffee shop as customer friendly.

  1. Cost-Plus Pricing

Another pricing strategy that a coffee shop can adopt if they want to win customers over is to adopt a cost-plus pricing strategy. Cost-plus pricing is computing all the costs and expenses in producing a product you have on your menu.

For example, if you want to calculate cost-plus pricing for coffee, you need to know the total amount you need to sell to be able to recoup your capital, then divide it by the minimum number of cups you need to sell, and then add a small percentage as mark-up for profit. It is advisable to start with minimal markup so you won’t be chasing customers away from your coffee shop.

  1. Penetration Pricing

If you are new to the coffee shop business, one of the ways you can gain a fair share of the market in your space is to adopt what is known as penetration pricing.

Penetration pricing is one of the major strategies that new businesses adopt when they want to penetrate the market. When it comes to penetration pricing, it is advisable to make your price lower than the average price of coffee in the location, even if you are not going to be making a reasonable profit.

The idea is to first get customers to patronize your coffee. Once you are able to gain customers, you may choose to start increasing your price gradually to meet the industry’s average.

  1. Price Skimming

Price skimming is yet another pricing strategy that a coffee shop can adopt. Interestingly, price skimming is a pricing strategy that is suitable for a well-established coffee brand that wants to establish its superiority within its market space. Basically, price skimming is a pricing strategy that settles for a price that is higher than the industry’s average.

For example, if a cup of coffee goes for $2.5 in your city, you may want to sell your own cup of coffee for $3.5. Trust me, if your coffee is unique, and your coffee café or coffee shop is well-positioned, then you may attract people with high purchasing powers, that are always willing to spend a premium for whatever they like.

  1. Value-Based Pricing

Similar to price skimming is value-based pricing. Value-based pricing is a pricing strategy that involves setting a price for your coffee based on the value you or the people around you place on your coffee. For example, you can buy a bottle of coca cola for $2 from a dispensing machine, and some people can pay up to %10 or more for a bottle of coca cola from a luxury hotel or restaurant.

Please note that you can only adopt this pricing strategy if you have your coffee café in a highbrow area or if your coffee shop brand is well-known and well-accepted.

  1. Complementary Pricing

Another pricing strategy that a coffee shop can adopt is what is known as complementary pricing. Complementary pricing is a pricing strategy that involves lowering the price of the main product or service while increasing the prices of other complementary products or services that the customers will need.

For example, a coffee shop that wants to adopt a complementary pricing strategy is expected to lower the price of a cup of coffee while they increase the price of complementary products such as snacks.

  1. Flexible Pricing

Flexible pricing is yet another pricing strategy that a coffee shop may choose to adopt. As the name implies, flexible pricing is a pricing strategy that involves changing your price to fit into the price of coffee in the location where you have your coffee shop.

If you operate a coffee cart business or retail coffee from a truck, this is one of the pricing strategies that will best suit your business model. You can choose to change the price of your coffee based on the location where you are at any given time.

  1. Price Bundling

Lastly, price bundling is yet another pricing strategy that a coffee shop may want to adopt. Price bundling is all about fixing a price for two products that are bundled together. For example, a coffee shop that wants to adopt a price bundling strategy will not just fix a price for their cup of coffee but will fix a price for both a cup of coffee and a serving of pastry.

Interestingly, you can hardly find a coffee shop that only sells coffee, they usually sell snacks and most people that order a cup of coffee would usually order snacks (toast, sandwich, donut, burger et al).

In conclusion,

Some of the pricing strategies for a coffee shop discussed above may not suit your coffee shop hence you must make sure you settle for a pricing strategy that suits your shop. This is so because the pricing strategy works based on the location of your coffee shop and of course your capacity.