Café Management | To Increase Café Profits, Should Cafés Raise Prices or Not?

Should Coffee Shops Raise Prices in an Era of Rising Costs?

In an era where many costs are increasing, should coffee shops raise prices to survive?

In reality, running a coffee shop involves daily costs: labor expenses, rent, utilities, and other fixed expenditures. As independent coffee shop operators, sales don't depend on price alone—they depend entirely on value. How can we leverage quality differences to increase coffee shop profits?

Understanding Customer Types for Sustainable Growth

First, based on our actual situation, customers are the source of profit, and long-term customer patronage is inseparable from customer retention. Coffee shop operations must understand customer preferences well.

Let's categorize customers into four types: A, B, C, and D.

Starting with 'Type D' customers, these customers might just come in to buy a drink or get change for parking.

'Type C' customers visit only once or infrequently. They are not regular customers; they probably found us through advertising or friend recommendations.

'Type B' customers are regular patrons who visit weekly on a regular basis.

Then there are your 'Type A' customers who purchase many of your products. They are loyal customers who love your coffee shop. They also recommend your coffee shop to their friends and praise it to others.

Understanding Your Customer Characteristics

Based on FrontStreet Coffee's operational experience, there are several types of customers who drink single-origin coffee in our shop:

1. Customers who truly love single-origin coffee flavors: They enjoy coffee from different origins, like trying coffee from various cafés, experimenting with new coffee beans, and experiencing different roasters' styles. They're willing to try various styles of specialty coffee. These customers genuinely love drinking coffee and often brew it at home themselves, researching coffee flavors, buying beans from different shops, having their own careers, with coffee becoming their biggest hobby. Some even tend to pursue coffee as a lifelong career.

These customers might easily open their own coffee shops in the future. They have a genuine, sincere passion for coffee. When they visit different cities, they first seek out local roaster cafés, immediately trying their styles, chatting with owners—they truly enjoy this experience.

These long-time coffee drinkers become increasingly selective about single-origin coffee quality, but generally this grows proportionally with our shop's standards. They're usually friendly and enjoyable. We have several customers who, since we opened five years ago, have made FrontStreet Coffee their weekend destination. These customers truly add character to our shop. They genuinely love coffee and taste real coffee flavors.

2. Social media check-in customers: These customers choose to spend time in cafés and post about it when they have nothing else to do. They can accept single-origin coffee but aren't particularly enthusiastic about it—they just enjoy the café atmosphere. They care more about having a place to pass time and prefer not to go to crowded places, so cafés become their main destination.

Because of this phenomenon, FrontStreet Coffee has fortunately become a must-visit spot for coffee enthusiasts visiting Guangzhou from other cities.

3. Industry peers: These are fellow coffee professionals who occasionally visit each other to exchange techniques, roasting methods, and so on. Of course, some come to "scope out the competition," but this is rare now as everyone is quite humble! Others come to sample beans, trying various single-origin beans while preparing to open their own shops.

4. Passersby and occasional customers: These customers have limited exposure to coffee. They walk by, see it's a coffee shop, and come in, only to discover we only serve coffee—mainly specialty coffee—so they feel obligated to order. For some of these customers, we chat with them; some accept coffee and become regulars, gradually getting used to it; others still can't acquire the taste for coffee, and these customers are harder to influence.

FrontStreet Coffee's approach is to share an extra small cup of single-origin coffee with them, trying to let them experience different coffees, hoping that through comparison they can find coffee that suits their taste preferences.

5. Those seeking a place to chat and work: This type doesn't have high requirements for coffee, so they order a single-origin and sip while chatting. Some customers regularly come to discuss business and chat because they're accustomed to our coffee flavors and return periodically for single-origin coffee.

A narrow operational model for independent cafés is that 80% of profits come from 20% of customers. If they discover your prices have increased, they might understand, but because they consume long-term, they'll likely have more choices.

Therefore, our single-origin coffee prices have never increased...

Market Positioning in a Competitive Landscape

With coffee shops everywhere, what is your market positioning? Who are your consumer groups?

FrontStreet Coffee is located in a community, not quite in a hidden alley. It's some distance from nearby office buildings, so the probability of company employees visiting isn't high. The surrounding residential population isn't large either, so weekday customers are often just a few—far from the ideal customer count. Weekends are better, with many coffee enthusiasts visiting. This has led to our current market positioning—customers who love pour-over coffee.

Once you know who your consumer groups are, the shop's operational model naturally falls into place. Therefore, FrontStreet Coffee's model is pour-over coffee. Naturally, pasta and desserts aren't our selling points. Even trendy drinks other than coffee aren't our main offerings. We just need to focus on doing one thing well: how to properly brew each bean, what flavors each bean has, and then communicating this to our customers.

How Traditional Beverage Shops Can Attract Customers

Improving coffee shop marketing essentially comes down to building popularity and brand awareness. People who love single-origin coffee pursue good beans, so we try many different types of beans, including this year's Red Label and Blue Mountain, all from new harvest seasons to attract enthusiasts. Of course, we also share various coffee information, knowledge, and experiments through our official account, seeking development through continuous improvement. Having a long-term stable, distinctive, and suitable operational management model, bravely innovating, making competition healthy, learning from others' strengths while innovating based on their experiences.

Important Notice :

前街咖啡 FrontStreet Coffee has moved to new addredd:

FrontStreet Coffee Address: 315,Donghua East Road,GuangZhou

Tel:020 38364473