Case Study: Premium pricing played right

In this article, I share an interesting encounter I had sometime back which made me realize how even businesses operating at an extremely small scale can make use of simple business strategies effectively to make the business more profitable. If you are a startup founder or a business graduate, you very well understand what a premium pricing is, right? Hear me out now and let me show you how a small tea vendor (the roadside cart types) in Hyderabad, India was making extra money simply by playing premium pricing right.

premium pricing played right

Well, one fine day while I was living in Hyderabad and was visiting a friend who used to live in Begumpet area, he took me to a tea stall nearby which he frequented. It was a regular tea stall which sold tea for Rs. 6 (the one that operated out of a cart just outside a snacks corner) but they had a unique product to offer that day. No, they weren’t offering any exotic tea. It was just the same old Indian chai. So what was the uniqueness? It was the packaging. Instead of using regular cups or disposable glasses, the chai-wallah was selling his tea in a small mud pot which are completely recyclable. And the best part? He was selling the same quantity of tea for Rs. 10, a good Rs. 4 more than the actual price. And as per the tea-seller, the mud pot costed him around Rs. 1 which meant a pure additional profit of Rs. 3 per cup (Assuming he was not actually re-using the pot after washing them which I don’t think he was).
Now, that’s what I call premium pricing played right. I and my friend were astonished at the strategy this small business owner had adopted. We never felt we were being cheated. In fact, we were happy to pay the extra 4 bucks to have the tea in the pot.

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