Profit margin woes

[Timms]

Hi, We are working toward the opening of a coffee cafe, serving a light lunch, desserts etc. We have heard several strategies for the percent of mark ups on all products. Does anyone have suggestions? Any advice would be greatly appreciated. Thanks

 

[cafemakers]

Hello Timms,

Our recommendation is to position yourself at the top end of your competitors' price range or just slightly above. However, you must support this strategy by offering a consistently good product and clean, conveniently accessible environment.

Consumers do not make purchase decisions in this small $ specialty goods market based on price. They will, however, make an initial purchase based on the appearance of your shop and expectation of the product quality they will receive at the price that you charge. If charging in the same price range as a Starbucks, for example, they will naturally assume that your product will be just about the same as a Starbucks. As we both know that your product will be better, your prices must project this additional value in the mind of the uneducated consumer.

BUT, if you don't deliver the taste every time, the whole thing falls apart.

It's better for everybody to be at the top end of the price scale: 1) you make more money 2) your higher pay attracts better employees that stay with you longer and 3) even your customers benefit by enjoying a better product, and with the security that your profitability will help to ensure your continued presence and future growth.

Best of success!

Andrew