Tag: Nespresso

💎 On how Nespresso increased willingness to pay by changing their comparison set (“the machine’s paying for itself”)

I’ve just got one of those Nespresso machines, it’s fantastic. The really interesting thing about this Nespresso machine is that if I asked you to go out and buy those Twining’s super premium teabags which are £6.50 for 25 teabags you’d look at me as if I’m bonkers. For £6.50 you should get 100 teabags, 1,000 tea bags, you know? But actually it’s 25p for a cup of tea, it’s not bonkers, you pay a quid or two at Starbucks, but paying that for a teabag seems impossible. Wha’t clever about the espresso machine is that because it comes in individual pods, if you had to buy a jar of espresso coffee it would cost about 150 quid. You say to yourself: “I can’t, I simply cannot buy this thing, I cannot bring myself to pay 100 quid for a jar of Nescafe, it’s impossible”, but because the things come in individual pods, our frame of reference isn’t Nescafe, it’s Starbucks, where we actually pay a quid or two for a shot of coffee at Starbucks, so at 26p, well the machine’s paying for itself, right?

Excerpt from: Rory Sutherland: The Wiki Man by Rory Sutherland

💎 If a brand can change its comparison set it can change a shopper’s willingness to pay by orders of magnitude (a lesson in selling coffee)

Consider Nespresso. They sell in distinctive pods, which provide the right amount of coffee for a cup. Because they’re sold in that unit we compare their price to other places selling by the cup, such as Costa or Caffe Nero. When compared to the £2.50 Costa charge, Nespresso pods, costing 30p-37p, feel like a bargain.

But stop for a second and remember back to when they launched. If Nespresso had sold their coffee in standard packaging the natural comparison set would have other brands of roast and ground coffee, like Taylor’s or illy. Their price would have been judged against the norm for other coffees — roughly £4.00 for 227g. Even with tens of millions of pounds of advertising they could never have persuaded consumers to pay £34 for a 454g bag. But that £34 figure equates to 7p per gram, exactly what they’re charging now.

Excerpt from: The Choice Factory: 25 behavioural biases that influence what we buy by Richard Shotton