On Consumer Value Surplus

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I was reading local entrepreneur Collin Austin’s blog this week wherein he discusses his new position at Gulejo Coffee. Gulejo by the way is founded by our Masters Degree in Entrepreneurship alumni.

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Collin is coming on board as the C$O. Read his blog for more explanation, but just know he has a knack for original titles.  Something he did really caught my attention for it’s “out-of-the-boxness” (if I can use that phrase that way). It’s about the consumer value surplus. I would wager, and I’m not a betting man, that Collin didn’t think of the theory regarding consumer value surplus when he and Gulejo created this new strategy. But they nailed it.

Impact_icon_blurConsumer value surplus is the increased value one product has over another as perceived by customer. It is created entirely by the seller by portraying perceived utility greater than the cost of production. #duh Here’s how Gulejo did it.

Gulejo, like most coffee sellers, sold coffee by the pound (16 oz.)and half-pound (8 oz). Collin bumped that up a bit. Now the Gulejo pound is 17 oz. and the half-pound is 9 oz. Price doesn’t change for the customer, that’s value add number 1. Cost to Gulejo should be minuscule, that’s value add 2. In a vacuum that’s all fine and dandy. But this is the real world and competition exists. As a consumer evaluates and compares bags of coffee, Gulejo will stand out. The consumer will perceive greater value for their dollar simply because of the extra ounce. Collin isn’t the first person to use this tactic.

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One of the main”American” breweries is now doing something with “tall-boys” bumping up the 24 oz can to 25 oz. However, I would argue this is rather ineffective. Tall-boys are a secondary revenue driver, they aren’t competitive enough for this to matter. It’s not the big money maker that competes for shelf space. That’s the 6-packs, the 12-ounce bottles or cans most commonly purchased. If I came out with a 13 ounce can, now I would be adding value in a competitive segment. That extra ounce wold now sway customers to my brand.

The same will happen with Gulejo coffee because they have added an ounce in the segment that plays by the pound and half pound. It creates a disruption where the incumbents are bound to the tyranny of the served market.

Good luck Collin, we’ll be watching to see what happens.