Yay! Hi! I’m one of the co-founders of Rhetoric Coffee and I love talking about this stuff.
Pricing is tricky. There are fixed and variable costs involved in making a product, and your overall goal as a company is to make enough money to cover all the costs. Usually a profit, too. For us this is “product and growth” because we don’t (can’t) pay ourselves yet, and we’re not interested in profit until we have employees so we can do our profit sharing program.
Everyone has a number in their head that they’re okay paying. This is what negotiation is about. For “market pricing” (where there is a fixed price displayed), it’s about finding an amount above cost and below the maximum the market will bear. There is theoretically a maximal (quantity * price), where you’ll sell more at lower price (possibly - more on that in a bit), but also it’ll be less revenue.
Some companies, since they have a monopoly on the market, or they have a monopoly in how their prices get displayed (airlines, college textbook publishers/wholesalers), can get away with market segmentation, and will try to display to you a price that you feel okay with paying, whether that’s higher or lower than someone who would be comfortable paying more or less.
Unfortunately, people buying your product (and their perceived maximum price & perceived value), your product’s price, and the quantitative/qualitative quality (assuming blind or double blind judgement) don’t have a linear relationship. C.f. Beats by Dre. There are a ton of hidden variables in this equation.
So - what should you sell smaller portions for??
As I said, there are fixed and variable costs. Some of those costs are per-unit. For us that would be the bag, screen printing the bag, shipping the bag. I guess you could call that “shipping and handling”.
Some of our costs are per-quantity, like the green beans that we buy, time on the roaster, etc.
And some of our costs are “floating” like our website, Google Apps, the art that we commission, etc.
Going from 1 lb to 3/4 and 1/2 lb, we tried to address whether it should just be “1/2 price”. Well, the per-unit costs don’t go down, but the per-quantity costs do go down. And our “floating” cost also goes down because we’ve sold more units.
What we did was quantify this by making a profit margin curve, and then placed the costs and ideal price on that curve. Then we took those prices and made them “sound nice” while still being very close to the original amount that would cover the cost of making those units. As you can probably tell I’m an excel nerd, so I love doing analysis stuff like this.
My personal preference right now is 14:1 water:coffee ratio, with the amounts of 280g water to 20g coffee – with a Hario V60 ceramic pourover. My ideal extraction time is 2:30 - 3:30 including a 30 second bloom. With our most recent blend it’s been tasting better with a longer extraction (finer grind).
We usually recommend the Blue Bottle coffee guides since they’re beautiful! Hopefully as we get more off the ground we can offer our own brew guides that incorporate per-roast strength numbers since the roast changes each shipment, and thus “dialing it in” changes the optimal strength to bring out all the complex flavors we’re going for.
Brian mentioned our melange blending technique. We’re actually experimenting even more with this. Our last blend, the “Cottonwood Blend” (internal name: “Vin Diesel Pitch Black: The Movie Blend”) was 5 different origins of coffee and 3 different roast levels (light, medium, and dark). It has an extremely full body and the singular, most distinct note our roaster (co-founder James Parrish) identified was “Myrtle berry”; a citrusy-peppery-rosemary.
Being small means we get to bend and break rules The blend was primarily an AA Kenya coffee, to which James exclaimed, “No one blends Kenya!!” and laughed maniacally.
Anyway, thanks Brian for talking about us!
If y’all want a sample, just email me email@example.com and we’ll send one right away, on the house, and if you need bulk/wholesale/office/custom blends, also talk to me about that, 'cause you get nice price breaks.