How to Raise Cafe Prices without Negative Pushback
As a cafe owner, there comes a time when you need to raise some prices. Whether it’s due to the rising costs of coffee beans, your special organic ingredients, or the need to pay your skilled staff a fair wage. Or maybe a thorough cost analysis shows that you’ve been under-pricing some menu items! Here’s how to raise coffee prices without over-stressing yourself or creating negative customer pushback.
Let’s look at the price change strategy in two parts. One is based on your reputation for integrity and high quality. The second uses menu engineering and technology to adjust prices as smoothly as possible. Many people leave the change too late and then panic about the big increase they must make. A more thoughtful and regular process makes the changes less obtrusive and worrying.
1. Your X-Factor sets you apart from competitors
Many things add up to your X-Factor or point of difference. When you’re confident about this, you’ll be much less fearful about what others will think, a customer comment, or losing a customer to the cafe down the road.
How do you work out your X-factor? Ask what the reviews say you are awesome at. What do your customers compliment most? What is iconic about your venue that makes it remarkable, i.e., people talk about it and use it as a point of comparison to alternate venues? What do you do better than anyone else, and what are you and your team most proud and passionate about?
Are you using sustainably sourced coffee beans? Are your pastries made fresh daily with organic ingredients? Are you using an amazing Italian espresso machine with the latest temperature controls? Do you offer a cosy ambience and excellent customer service? Are the furnishings top quality and comfortable, with great aircon and music?
Your community connections and honest relationships also help to avoid price competition. People know that price changes, if they have to happen, are made for the right reason – you talk honestly about the increased cost of supplies and wages, and why you need to raise coffee prices. This is so different from a large retailer whose prices jump, but no one knows why.
You might tell customers why you are raising prices, or maybe not if it’s a small change – do you really have to justify it? Make the message general rather than highlighting every item, and use small signs and friendly conversations to explain the reasons, e.g., an increase in the cost of premium coffee beans and power, a wage rise, or a rent increase.
Make sure your staff is well-informed and understands the reasons for the price increases. They should be able to communicate this to customers confidently and positively – they’re usually the ones who are asked directly. What is their script?
Keep the Menu Dynamic: Consider smaller, incremental increases instead of a sudden significant price hike. This makes the adjustment more manageable for your customers and less noticeable. For example, raising the price of a coffee by 20 cents every few months is often more acceptable than a one-time increase of a dollar.
New Offers at New Prices: When introducing price changes, it’s an opportunity to roll out new menu items. Seasonal drinks, exclusive pastries, or a new line of healthy smoothies can attract attention and distract from the higher prices. The Winter Cinnamon Latte, or the Summer Berry Cooler – customers are more accepting of price changes when they see new and exciting options on the menu, and most importantly, you are avoiding comparisons – you’ve never had these two drinks on your menu before!
Digital Menus and Apps Make Changing Easier: With electronic menu boards and app-based menus, prices can be adjusted by time of day, week, or season—this is dynamic menu pricing, and very few customers will notice. It can be done manually or automatically. $1 more here or there can mean hundreds of dollars a week with popular items. Talk to your POS and app providers about what’s possible.
Play with Price Endings: Move away from ‘flat pricing’, e.g., the $4 coffee or the $10 salad. Instead, add 30c, 50c, or 80c to every flat price, so it’s now a $4.30 coffee and a $10.80 salad. Doing this to all items can give you a 4-5% increase in sales revenue.
Improve the Pricing Spread: ranging from the cheapest item to the most expensive with lots of prices in between. This way, you can adjust prices in the middle range, and it will be less noticeable, leaving your top and bottom ‘marker’ prices alone. Prices should be a good ‘jumble’, with all types of prices, and not all main courses at the same price or all starters at the same price – ingredient prices vary, and a mix of prices in each section gives more options for adjustment. Your coffee menu prices could go from $3.80 for a small espresso to $10.80 for the 20oz Double Latte with extra syrup – now there are plenty of pricing steps in between.
Use a ‘Decoy’ Menu Price: This is a much higher-priced item you know you won’t sell very often, but it makes other items look cheaper. Maybe the 20oz Maxi Iced Latte with Double Cream Whip? Can you introduce something like this? On restaurant menus, an example is the deluxe seafood platter at a luxury price, making other seafood dishes (that have had price rises) look better value.
When it’s time to raise coffee prices, you can manage the changes smoothly with careful planning and clear communication. You can also ensure your cafe thrives by emphasising quality and your X-Factor, enhancing the customer experience, and maintaining transparency.
As a cafe owner, there comes a time when you need to raise some prices. Whether it’s due to the rising costs of coffee beans, your special organic ingredients, or the need to pay your skilled staff a fair wage. Or maybe a thorough cost analysis shows that you’ve been under-pricing some menu items! Here’s how to raise coffee prices without over-stressing yourself or creating negative customer pushback.
Let’s look at the price change strategy in two parts. One is based on your reputation for integrity and high quality. The second uses menu engineering and technology to adjust prices as smoothly as possible. Many people leave the change too late and then panic about the big increase they must make. A more thoughtful and regular process makes the changes less obtrusive and worrying.
1. Your X-Factor sets you apart from competitors
Many things add up to your X-Factor or point of difference. When you’re confident about this, you’ll be much less fearful about what others will think, a customer comment, or losing a customer to the cafe down the road.
How do you work out your X-factor? Ask what the reviews say you are awesome at. What do your customers compliment most? What is iconic about your venue that makes it remarkable, i.e., people talk about it and use it as a point of comparison to alternate venues? What do you do better than anyone else, and what are you and your team most proud and passionate about?
Are you using sustainably sourced coffee beans? Are your pastries made fresh daily with organic ingredients? Are you using an amazing Italian espresso machine with the latest temperature controls? Do you offer a cosy ambience and excellent customer service? Are the furnishings top quality and comfortable, with great aircon and music?
Your community connections and honest relationships also help to avoid price competition. People know that price changes, if they have to happen, are made for the right reason – you talk honestly about the increased cost of supplies and wages, and why you need to raise coffee prices. This is so different from a large retailer whose prices jump, but no one knows why.
You might tell customers why you are raising prices, or maybe not if it’s a small change – do you really have to justify it? Make the message general rather than highlighting every item, and use small signs and friendly conversations to explain the reasons, e.g., an increase in the cost of premium coffee beans and power, a wage rise, or a rent increase.
Make sure your staff is well-informed and understands the reasons for the price increases. They should be able to communicate this to customers confidently and positively – they’re usually the ones who are asked directly. What is their script?
See also: What Profits Are Used For – teaching staff about business
2. Manage the mechanics of menu price changes
Keep the Menu Dynamic: Consider smaller, incremental increases instead of a sudden significant price hike. This makes the adjustment more manageable for your customers and less noticeable. For example, raising the price of a coffee by 20 cents every few months is often more acceptable than a one-time increase of a dollar.
New Offers at New Prices: When introducing price changes, it’s an opportunity to roll out new menu items. Seasonal drinks, exclusive pastries, or a new line of healthy smoothies can attract attention and distract from the higher prices. The Winter Cinnamon Latte, or the Summer Berry Cooler – customers are more accepting of price changes when they see new and exciting options on the menu, and most importantly, you are avoiding comparisons – you’ve never had these two drinks on your menu before!
Digital Menus and Apps Make Changing Easier: With electronic menu boards and app-based menus, prices can be adjusted by time of day, week, or season—this is dynamic menu pricing, and very few customers will notice. It can be done manually or automatically. $1 more here or there can mean hundreds of dollars a week with popular items. Talk to your POS and app providers about what’s possible.
Play with Price Endings: Move away from ‘flat pricing’, e.g., the $4 coffee or the $10 salad. Instead, add 30c, 50c, or 80c to every flat price, so it’s now a $4.30 coffee and a $10.80 salad. Doing this to all items can give you a 4-5% increase in sales revenue.
Improve the Pricing Spread: ranging from the cheapest item to the most expensive with lots of prices in between. This way, you can adjust prices in the middle range, and it will be less noticeable, leaving your top and bottom ‘marker’ prices alone. Prices should be a good ‘jumble’, with all types of prices, and not all main courses at the same price or all starters at the same price – ingredient prices vary, and a mix of prices in each section gives more options for adjustment. Your coffee menu prices could go from $3.80 for a small espresso to $10.80 for the 20oz Double Latte with extra syrup – now there are plenty of pricing steps in between.
Use a ‘Decoy’ Menu Price: This is a much higher-priced item you know you won’t sell very often, but it makes other items look cheaper. Maybe the 20oz Maxi Iced Latte with Double Cream Whip? Can you introduce something like this? On restaurant menus, an example is the deluxe seafood platter at a luxury price, making other seafood dishes (that have had price rises) look better value.
When it’s time to raise coffee prices, you can manage the changes smoothly with careful planning and clear communication. You can also ensure your cafe thrives by emphasising quality and your X-Factor, enhancing the customer experience, and maintaining transparency.
Check the other useful blog posts on the Foodie Coaches website…
Want to get some 1 on 1 help with your business? Talk to one of our coaches