When it comes to taxing your regulars, context is everything.
Recently I took on a new project with an open source developer community that’s exploring ways to commercialize their technology with additional services or product layers for the first time.
In helping this technical team think through things like “utility taxes” or other service agreements, I’ve been thinking a lot about the hidden taxes that we pay without thinking, just to go about our day. Take credit card charges as one example.
I’ve been getting up and out the door for work much earlier than usual for the past few weeks, which means my normal coffee shops are closed. During normal business hours, I’m a regular at cafes that charge $4.50 for a drip coffee and $5.75 or more for a latte. But the only place to get a caffeine fix before 7am in NYC is at a coffee cart or a bodega, so I’ve had to change my routine.
I’ve been stopping at the same corner store for the past couple of weeks. The transaction is seamless: I walk in, pour myself a hazelnut drip coffee, add a sleeve, turn around, greet the shop owner, and tap my phone to pay. I’m in and out in 60 seconds. (They really know their audience.)
But yesterday I got a slightly later start to my day. Rather than walk in at 6:15, I walked in at 6:55 am, just minutes before the regular cafes start to open. Immediately I noticed the store was four times as crowded. There’s a line at the counter for breakfast sandwiches. I hesitate but repeat my routine: Pour myself a drip coffee, add a sleeve, turn around, greet the shop owner – but then pause. There’s now a woman at the register. That’s new.
I offer her my phone but she shakes her head. I remove my headphones fully to listen:
She’s saying: “Credit card minimum. Cash only. That’ll be $2.75.”
I immediately felt a wave of indignation pass over me. But fortunately I happened to have exactly $3 in cash in my pocket so I decided not to debate her on my conflicting actions from the past few weeks. I complete the exchange, take the quarter as change and move along. Annoyed and a little confused, but mostly just happy to have caffeine in hand.
Today however, I’m back to my usual schedule. When I clock into the bodega at 6:23 am, the usual crowd of construction workers and truck drivers are all in place as usual. I walk in, pour a drip coffee, add a sleeve, greet the shop owner, and eye him carefully as I reach out my phone to pay.
He says: “ApplePay? That’ll be $3.”
Aha! I immediately break into a smile. That explains it. All along I’ve been paying a 9% increase in coffee cost for the privilege of using my credit card.
It made me wonder: Why was I so annoyed yesterday by the woman who charged me 25 cents less for the coffee, and not annoyed by the man who’d been covertly upcharging me 25 cents a day for the past three weeks?
Obviously in this particular instance, it was less about the price I was paying and more for the convenience of sticking to my workflow. Like it or not, when I walk in, headphones around my head, with the look of a hurried and focused workaholic, this guy knew he’d be better off letting me stick to my flow state of doing things my way. And frankly – and this is the kicker – I still feel like I’m getting a deal.
Given the significantly lower cost of a bodega coffee compared to my usual places, the 25-cent difference barely even caught my attention. Even a $3 coffee is $1.50 less than I pay at 7am.
If there’s a conclusion to be drawn from this reductionist example, maybe it’s this: Whether you’re selling coffee at 6am in NYC or selling infrastructure for software developers and builders, context is everything.
How can you identify the people who won’t mind (or maybe even notice) a marginal cost increase to guarantee ongoing minimal disruption? Who are those people (or communities)? And how much would they pay to sustain their version of “flow state”? I’d love to hear more about open source projects who are tapping into this user exploration effectively.