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Mar 27, 2022

There was a time when coffee was coffee. Ice cream was ice cream. A phone was a phone. Even a pair of jeans was, just a pair of jeans.

There are still businesses stuck in this time warp, continuing to conduct business as if people still purchased products.

Today, that cup of coffee comes with more options than a Porsche. A double shot, soy milk, almond milk, extra hot, topped up, half strength, in a takeaway cup because it tastes better. Thus, the $5.50 price for the 50 cents cup of coffee.

But even that is only half the story.

Breaking the price - product link

The profit margin of the double shot of extra something far exceeds the profit margin of the cup of coffee itself. The Prada Shearling Tote selling for $4,450 does not cost 200 times more to make than the tote at kmart for $20. This is a path to profit and to greater acceptance by affluent consumers. But as I said, it is only half the story.

Ordinary products morphing into their own category

Like them or not, Starbucks altered the coffee drinking world.

It redefined itself from a coffee shop to the "third-place" - home, office, Starbucks in between. It positioned itself as a merchant of feelings, of status, and most of all, of experience. A new category. And many other businesses have followed. Dean & Deluca (groceries), Under Armour (undies), Varsity Burgers and my favourite Burning Man (a camping trip in the desert with a bit of music ), have jazzed up their offerings to be in a new stratosphere with luxury pricing to match.

Price is no longer tied to product.

Far more appealing to "people with money"

As soon as you disconnect price and product in your own mind about your own products and services, you'll be liberated to make a great deal more money and to have much greater success appealing to the affluent and the top-end-of-town.