Pricing Systems Experiences

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Pricing Systems Experiences

Postby Benjamin Myers on Wed Oct 14, 2009 3:02 pm

I am looking for some idea's on pricing coffee's. For our first couple of years of business we have sold all our coffee's at a flat rate of $7 a pound to our wholesale clients. As we have been buying more and more expensive coffee's over the years, I am wondering what is the trusted industry system for pricing wholesale coffee's and if anyone has any experience with transitioning clients from a flat-rate to a varied rate. Is there a a golden rule to this? I know that all coffee's are not created equal and this is something we probably should have done a while ago, but since I am doing it now, I thought I would solicit idea's from this community as to what works well and thoughts.

This is my first time posting here, so be gentle.

1000 Faces Coffee
Athens, GA.
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Re: Pricing Systems Experiences

Postby Tim Dominick on Thu Oct 15, 2009 9:30 am

Ambex makes a RoastCalc software that really helps you discover your production costs. It takes into account labor,percentage of loss to roasting, packaging, package size, energy. You need to have an accurate figure for your green coffee costs including green, financing, shipping, storage and any costs associated with sourcing.

Once you have the green price figured out the program does a good job. It allows you to set a margin and calculates the price based on margin % or you can input how much you want to make on each pound. I bought it at a RG retreat auction a few years back and have used it ever since. The nice thing is that you can print screen and actually hand it to your clients so they get a sense of your true cost and realize that you are not trying to get rich by raising their prices.

I think a flat rate pricing plan is hard to use when you start to have a broad array of coffee prices. If you really want to run it right you'll have to really know your true average price. That gets complicated if usage rates change or input costs rise or fall. We tried it for a few years and were never satisfied with our results.

It is also hard to adjust for customers if you switch from a flat rate to a variable cost. People tend to be skeptical of any change, and it is likely that in your case very few, if any, coffees would cost less than your current $7 rate and most would be more expensive. If you have supporting documents to illustrate your decision it makes it go a little easier when it comes time to have that discussion with your customers.
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Re: Pricing Systems Experiences

Postby Gregory Kolsto on Thu Oct 15, 2009 9:44 am

hey Ben,

I have a few thoughts, and they are:

Obviously, introducing new customers to an increased baseline cost is easier than helping customers to understand the value inherent to purchasing better and better coffees.

Other than new customers, there my be some existing customers who get it and want it, and know how to pass the knowledge and pricing down the line to the end user. That's the ideal, yeah? Others that go, "huh?" might take more time and sampling to get them hooked.

A tiered system could be an option too - $7 for specialty staples, standard Sumatras, Costas etc(if you choose to stay @ $7). You could then increase prices based on value added seasonals, special prep, limited quantities etc.

You guys have some cool branding on your site, and there are definitely creative options to sweeten the deal that don't cost you a lot. T-Shirts for the customer, limited edition posters for the time the coffee's around - and maybe it's a training session to teach them more about why the coffees are special and how they can excite their customers to take it home etc.

Those things add value to you and your company and strengthen the relationships heading on down the supply chain. But you know that already... I hope this helps.

get it on~

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Re: Pricing Systems Experiences

Postby nick on Thu Oct 15, 2009 11:22 am

Pricing is always more art than science.

This article on Wikipedia will help give you a crash-course on the various pricing strategies:

In short, there is no formula or system. It would seem that the best approach would be a mix of cost-plus and value-based pricing strategies.
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