Of Product Pricing and WiFi Meets Coffee?

“We are in the real estate business. The only reason we sell hamburgers is because they are the greatest producer of revenue from which our tenants can pay us rent.” –Harry Sonneborn, CFO(McDonalds)

Let me admit here that CCD (Cafe Coffee Day) is pretty much my office these days. I spend almost 2.5 days/week (cumulatively speaking) at CCD and like I earlier mentioned [Read: What Business Are you In – Case Study: Cafe Coffee Day], CCD is not in the business of selling coffee, but is in the business of enabling business (meetings) + relationships (dating included).

Having said that, my preference for CCD has gone down – and here is why.

First, What Is A Product?

A product offering has two parts – Actual Product and the Augmented Product.

– Actual Product is what you sell [e.g. the physical product].

Augmented Product is why people buy your product for.

In other words, Actual Product is the tangible part (i.e. a cup of coffee), while Augmented is the value-addition/perception which may/may not be tangibilized (example: comfortable meeting place/easy to locate a CCD joint etc).

In short, Augmented Product enables decision making, when competitive products deliver an undifferentiated product.

Coming back to CCD example, I recently noticed that they have started charging separately for WiFi access (~INR 30/hour). And on the other hand, another outlet, Gloria Coffee does a smart thing. You can avail free WiFi after you have bought something from the outlet. And the WiFi credential is valid only for 1 hour. So in short, if you want free Wifi (augmented product), you pay for the actual product (fyi: a lot of UnPluggd2 operational planning was done @Gloria Outlet/Indiranagar).

Given that a place like Bangalore witnesses a whole lot of business meetings at these coffee outlets, who do you think has a “better product”?

The discussion context is : How would you design pricing for such products? Your options are:

a) Include WiFi price in the product, but keep it for premium customers (i.e. free WiFi only when customer buys something/Gloria styled).

b) Exclude the price and charge separately (CCD styled)

c) <Share your idea>*

The key to answering this is knowing how you want to position your product. If you position your coffee outlet as “FREE WIFi Zone”, you attract a certain target segment (maybe, less of dating couples). And if you simply position your outlet as “WiFi Zone”, you tend to have more dissatisfied customers who expected “Free” as the default keyword (“what!! you are charging INR 30 for WiFi? WTF!”).

As a product guy/girl, what would you do? How will you identify pricing? What are the other important attributes you need to know?

What’s your opinion? Do discuss.

* I am assuming that you are equally sick of coffee at CCD (or any other place) and the augmented product actually enables consumption of the actual product.

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