Why prices are elastic

Here’s one. A friend complains on Facebook that it costs 14 dollars for a coffee from room service in the small hours at his luxury Chicago hotel.

To be fair it’s just a humblebrag. But someone bites: “Why not just go out to an all-night diner?” The reply comes: “I’m trying to work, plus it’s minus 11 degrees out there.”

Dude—that is why your coffee costs fourteen bucks.

Pricing is elastic.

You’re not buying coffee. You’re buying the most comfortable solution possible to your coffee problem. Cheaper solutions are available, always. But they’re not always pretty. 

When it comes to price positioning, you have to figure out what kind of problem you’re really solving and set that against your target buyer’s relative sense of entitlement.

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