Starbucks $2,700 Espresso Machine…. & Your Business
For every group who purchased an offer, 20% of those people would be willing to spend 5 times more.
This comes from the 80/20 rule, and it is freakingly accurate when running a business through this framework.
This model explains why Starbucks has a $2,500 espresso machine. Here’s how it works.
If 10,000 spend $4 on a latte then, 2,000 will pay $20 for a latte and scones, 400 people would pay $100, 80 would pay $500, 20 would pay $2,500.
Now, no one is going to spend $100, or $500 at Starbucks but they know that there is a small % of people who would be willing to spend much more and as they have already invested in acquiring and servicing these customers it is the majority of the revenue will sink to their bottom line in the form of profit.
As online business owners, we have to look at our business through this lens if we want to guarantee long-term success.