There’s a local gas station that had a simple deal: Coffee refills for $1.
It didn’t matter the size of the cup or the blend you got, it was $1. Based on the cost of coffee, it was easily 90%+ margin. And since it was a pretty good cup of coffee, if I had an extra five minutes, I’d stop for a cup and often buy other things. When it was busy, I’d get my coffee, set my dollar on the counter, and walk out. Over time, I started to recognize other faces and give a nod or good morning.
After Thanksgiving, I stopped for a cup and set my dollar on the counter and went to walk away. The manager stopped me and said the coffee was now $2. I asked her why and she blamed corporate.
Fast forward a couple of months..
I stopped in for another cup of coffee there – the first in two months – and ran into the manager again. We chatted and I asked how it was going: “Miserable”
Surprising your Customers
All her regulars were gone.
The guys who would stop by on their way to work, kept driving. They didn’t grab a breakfast sandwich or sodas for later. They didn’t skip other gas stations to fill up there. None of this was surprising as I was one of them.
It’s hard changing prices in any business but there was something more here. A $2 cup of coffee is still cheap but a 100% surprise price increase blew up our expectations and broke the para-social relationship people had around a gas station.
When you have users or customers, they develop patterns and have expectations. However things worked yesterday, they expect them to be the same tomorrow. When – not if – you need to make a change, you have to figure out how to do it clearly and with as few surprises as possible.
We had a similar situation at ngrok. We found that when people paid annually for N team members, if they added more, we didn’t charge them until their next renewal instead of prorating. When we looked at the revenue impact, it was annoying but not catastrophic, so we had a choice:
- Do nothing, let the error persist; or
- Immediately charge for all the pro-rated licenses, maybe even back charge
We choose a third route:
We fixed the issue so new licenses would be prorated immediately. Then I waived the license for the existing overages and emailed them saying “Oops, our bad. We’re not going to back charge you but we fixed it and don’t want to surprise you.”
We got zero cancelations and a few “wow, thanks!” emails.
The Cost of a Cup of Coffee
Fast forward another couple of months and I visited the gas station again. I grabbed my coffee, a couple sodas, and went to the register. I saw the total.. it felt low. Looking at the screen, I mention she didn’t ring up my coffee. The clerk gave me a meaningful look and read my total again. I paid and left.
Curious.. on my next visit, I did the same and had the same experience from a different clerk. In the few weeks since, I’ve stopped a half dozen times and I’ve paid for coffee twice. I’ve noticed more cars there each time I stop and I saw some familiar faces again. I bet the store’s numbers are coming up. I bet the regulars are coming back and buying more. I bet they’re getting more fill ups month over month.
To be concrete: They missed $10 of revenue from my coffee but got me to stop six more times.
Well done, manager lady.