<story><title>Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy</title><url>http://www.joshlehman.com/thoughts/stop-using-the-cup-of-coffee-vs-0-99-cent-app-analogy/</url></story><parent_chain><item><author>andrewfelix</author><text>Well said.&lt;p&gt;&lt;i&gt;&quot;Starbucks Craftsmanship&quot;&lt;/i&gt;? Please.&lt;p&gt;Not sure what artisans you have running Starbucks cafes in the US, but in Australia the barristers are largely low paid teenagers using un-cleaned machines and second rate beans. To top it off most of the drinks have dollop of cream or some other sugary ingredient to mask the awful quality of the coffee.&lt;p&gt;I would gladly &apos;gamble&apos; 99c with an iPhone developer over a Starbucks beverage.&lt;p&gt;EDIT: I&apos;m talking specifically about &lt;i&gt;Starbacks&lt;/i&gt;. Australia has excellent coffee. I&apos;m drinking a lovely Sprocket coffee as I write this.</text></item><item><author>tptacek</author><text>Horrifying.&lt;p&gt;The point about the coffee cup comparison isn&apos;t that cups of coffee are the benchmark experience for product pricing; if that were the case, my next root canal would cost $0.20.&lt;p&gt;The point of the coffee cup comparison is &lt;i&gt;marginal utility&lt;/i&gt;: the money you spend on an expensive cup of coffee almost certainly has very little utility at the margin, because you are happy to chuck it away for a bad cup of coffee.&lt;p&gt;Oh, you really like Starbucks coffee? That&apos;s unfortunate, because it&apos;s pretty bad, but more importantly: you &lt;i&gt;militantly miss the point of the comparison&lt;/i&gt; when you benchmark the experience of installing a new app against the enjoyment you get from a cup of coffee.&lt;p&gt;This place has an enormous problem with pricing and economics. Unlike Patrick, who really does sweat the fact that developers are making small fractions of their overall worth due to underpricing their offerings, I should be overjoyed at the fact that the biggest collection of new software entrepreneurs on the Internet hangs out at a meme generation engine for exploitable market inefficiencies. But unfortunately, I&apos;m an obnoxious nerd, so all I can think to do about this is yell. ARGH.&lt;p&gt;A dollar at the margin for a person with a $600 phone on a $50/mo data contract is &lt;i&gt;not an enormous gamble&lt;/i&gt;. It is a pittance too trivial for that person to even contextualize. The problem isn&apos;t that people are unwilling to give up $1 for apps; it&apos;s that they&apos;re hesitant to give up $0.25 for &lt;i&gt;anything&lt;/i&gt; online. When you start with the understanding that there&apos;s huge impedance at &quot;anything above free&quot;, it&apos;s clear why &quot;$1&quot; is not a particularly great price point, and why &quot;better strategies to motivate people to part with $1&quot; is a terrible meme to propagate.</text></item></parent_chain><comment><author>kscaldef</author><text>You&apos;re missing the point in two ways&lt;p&gt;a) &quot;Starbucks&quot; serves in this situation as a generic term for an espresso drink of your choice.  Like Kleenex or Xerox or what-have-you.  When someone says &quot;people will spend $4 on a coffee at Starbucks without thinking about it&quot; they don&apos;t mean at Starbucks specifically, they just mean &quot;some coffee shop that isn&apos;t 7-11 or Dunkin Donuts or McDonalds&quot;.&lt;p&gt;b) Even within the category of espresso-serving, $3ish coffee shops, the argument still applies.  In a strange town (&lt;i&gt;), in the absence of other reliable information, I will probably go to Starbucks because I know that I&apos;ll get a somewhat over-roasted, but drinkable, latte.  If I walk into a random independent coffee shop, there&apos;s some chance I&apos;ll get an excellent cup of coffee.  But, experience has also taught me that it&apos;s more likely that I&apos;ll get something that&apos;s no better, or frequently worse, than Starbucks.  Similarly, if I&apos;m out of saline or need some allergy medicine while traveling, I&apos;m likely to grab it at Walmart, because all their stores are laid out the same and I can find what I need blindfolded.  There is value in predictability in many situations.&lt;p&gt;(&lt;/i&gt;) caveat that this applies to travel in the US, and generally for work.  In various European countries, I&apos;d bet on the random local shop.  And if I&apos;m traveling on vacation, there&apos;s value in experiencing something new and local.  But, if I just want my morning coffee on the way in to the office, easy and predicable wins.</text></comment>
<story><title>Stop Using The Cup of Coffee vs. $0.99 Cent App Analogy</title><url>http://www.joshlehman.com/thoughts/stop-using-the-cup-of-coffee-vs-0-99-cent-app-analogy/</url></story><parent_chain><item><author>andrewfelix</author><text>Well said.&lt;p&gt;&lt;i&gt;&quot;Starbucks Craftsmanship&quot;&lt;/i&gt;? Please.&lt;p&gt;Not sure what artisans you have running Starbucks cafes in the US, but in Australia the barristers are largely low paid teenagers using un-cleaned machines and second rate beans. To top it off most of the drinks have dollop of cream or some other sugary ingredient to mask the awful quality of the coffee.&lt;p&gt;I would gladly &apos;gamble&apos; 99c with an iPhone developer over a Starbucks beverage.&lt;p&gt;EDIT: I&apos;m talking specifically about &lt;i&gt;Starbacks&lt;/i&gt;. Australia has excellent coffee. I&apos;m drinking a lovely Sprocket coffee as I write this.</text></item><item><author>tptacek</author><text>Horrifying.&lt;p&gt;The point about the coffee cup comparison isn&apos;t that cups of coffee are the benchmark experience for product pricing; if that were the case, my next root canal would cost $0.20.&lt;p&gt;The point of the coffee cup comparison is &lt;i&gt;marginal utility&lt;/i&gt;: the money you spend on an expensive cup of coffee almost certainly has very little utility at the margin, because you are happy to chuck it away for a bad cup of coffee.&lt;p&gt;Oh, you really like Starbucks coffee? That&apos;s unfortunate, because it&apos;s pretty bad, but more importantly: you &lt;i&gt;militantly miss the point of the comparison&lt;/i&gt; when you benchmark the experience of installing a new app against the enjoyment you get from a cup of coffee.&lt;p&gt;This place has an enormous problem with pricing and economics. Unlike Patrick, who really does sweat the fact that developers are making small fractions of their overall worth due to underpricing their offerings, I should be overjoyed at the fact that the biggest collection of new software entrepreneurs on the Internet hangs out at a meme generation engine for exploitable market inefficiencies. But unfortunately, I&apos;m an obnoxious nerd, so all I can think to do about this is yell. ARGH.&lt;p&gt;A dollar at the margin for a person with a $600 phone on a $50/mo data contract is &lt;i&gt;not an enormous gamble&lt;/i&gt;. It is a pittance too trivial for that person to even contextualize. The problem isn&apos;t that people are unwilling to give up $1 for apps; it&apos;s that they&apos;re hesitant to give up $0.25 for &lt;i&gt;anything&lt;/i&gt; online. When you start with the understanding that there&apos;s huge impedance at &quot;anything above free&quot;, it&apos;s clear why &quot;$1&quot; is not a particularly great price point, and why &quot;better strategies to motivate people to part with $1&quot; is a terrible meme to propagate.</text></item></parent_chain><comment><author>joshlehman</author><text>I&apos;d say feel free to replace &quot;Starbucks&quot; with any other purveyor of a product you enjoy at around this price point.&lt;p&gt;When I say craftsmanship what I&apos;m really referring to is the overall brand that Starbucks (or other coffee shops) have built. A brand that says &quot;what you get here will meet your expectations&quot;.</text></comment>