What Philz Coffee Can Teach Us About Product Design
This is an expansion of my piece published on PandoDaily.
I love Philz Coffee. Since I moved to San Francisco nearly three years ago, it’s become part of my routine, my go-to weekend workspace.
Hundreds of cups later, I’ve noticed subtle hacks Philz uses to build a successful business. These clever, small steps re-engage customers, increase sales, communicate premium quality, and suggest value to build repeat business and customer loyalty. But these tactics are not only applicable to B&M businesses. They can be leveraged by online products or services as well.
“Taste it and let me know if it’s good”
If you’ve ever purchased a (delicious) brew of Philz coffee, you’ve heard these words. Philz baristas engage the customer on every order by asking this question. Most respond positively after taking a sip as instructed by the friendly staff. By publicly stating favor for the product, customers reinforce these positive feelings and provide early warning if something’s amiss with the cup. If one were to state anything different in the future, it would be in direct contradiction. And no one wants to be a liar.
Tech Example: I’ve argued support emails are a great thing for businesses as they validate that people care enough to reach out. But most users never take the time. Urbanspoon’s mobile app uses Apptentive to proactively solicit feedback, similar to the Philz baristas, prompting users with the question, “Do you love Urbanspoon?”. Those that choose ‘yes’ are asked to share their love by reviewing the app in the Apple App Store. If the user chooses ‘no’, they are presented an opportunity to express their dissatisfaction directly with the app’s creators. This strategy encourages positive ratings, reinforces user’s favorable feelings for the app, and gives Urbanspoon valuable feedback how they might improve the product.
Each cup of Philz coffee is individually crafted by its baristas, taking up to five minutes to brew. Philz does this on purpose to create exclusivity and make the quality process visible to the customer. This lengthy exercise could be streamlined by filling each cup from a pre-brewed batch, as most cafes do, to reduce labor costs and increase throughput but this comes at a cost. Customers recognize the effort and labor invested in making each cup, incepting a feeling of social reciprocation, a desire to express appreciation for their work and quality of the coffee, further building positive associations with the staff and product.
Tech example: A little humanness can go a long way. Sandi MacPherson, founder of the invite-only professional network Quibb, personally emails every new member. She makes it clear that the email is sent by her and not an automated script by including a personal message from her Gmail account relevant to the member’s background, intentionally including spelling mistakes and typos. This high-touch approach adds personality to the product and expresses an investment by its creator that compels receivers to reciprocate.
Small: $3, Large: $4, Lb.: $16
Pricing a premium product is very important, especially when you are providing a premium experience. A few months ago Philz updated the presentation of their menu, positioning the price of individual cups of coffee alongside the cost of a take-home bag of ground coffee. The expensive $16/lb option serves as a price anchor to the relatively cheap cups of coffee. Philz Coffee is expensive, roughly twice the cost of Starbucks, but this anchor helps reduce its perceived price.
Tech Example: In 2010, Steve Jobs revealed the iPad, announcing the price of the much-rumored device. Preceding the reveal, Jobs cleverly established an anchor of $999 as he referred to the price speculated by the tech community. When he announced the actual price of $499, the audience’s expectations were exceeded with a device at half the cost.
Most cafes serve no more than one or two brews of coffee. Philz’s menu is vast, offering 30 different roasts. While some may argue this may lead to indecision, Philz’s diverse offering gives customers a reason to return and try something new. For long-time customers, it becomes a task list of flavors to experience, potentially increasing retention.
Additionally, not everyone has the same preferences. Some prefer light roasts, others like dark flavors. Their diverse menu increases the product’s appeal and potential audience to ensure there’s something for everyone. I often see indecisive customers ask the baristas for their recommendations. Like the customer of a high-end jewelry store, this concierge service builds trust and a lasting connection with the staff.
Tech Example: Success in freemium gaming requires a large, engaged audience. Candy Crush, the popular web and mobile game, is killing it. Players progress through each level on a map, liken to the board game Candy Land. Where other games present a static list, Candy Crush offers a preview of its 400+ levels while maintaining mystery of what’s to come. Additionally, players’ friends are positioned on the board instigating conversation and social connectedness around the content of each level.
$1 Off Refills
Little known fact: Philz discounts refills by $1 when reusing a cup. This isn’t just to counter the cost of the cup itself but is a tactic to increase repeat purchases. Getting a premium experience at a reduced price feels like a bigger bargain. While the reduced price influences ones purchase decision, the investment in the first cup encourages customers to capitalize on the opportunity, driven by a commitment bias. Once the cup is discarded, the opportunity is lost.
Tech Examples: DealDash (and Swoopo before it) is an auction site for electronics, gift cards, and other merchandise. Unlike traditional auctions, users pay a fee to submit a bid. These non-refundable fees motivate bidders to continue spending money to win the auction and avoid losing their investment without a reward. This fear influenced by sunk costs, often drives bidders to escalate the auction price beyond the value of the product.
You can use the same hacks Philz uses in their store to improve your online products. How might you apply these techniques to help your business succeed?
Consider how you can:
Increase revenue by setting a price anchor with a higher cost option
Build a stronger connection with the customer and brand affinity by incorporating personality and humanness into the product
Maximize appeal and retention by offering a diverse number of products or experiences
Encourage repeat purchases and desired behaviors leveraging user’s past commitments and investment in the service
None of these hacks will make your product succeed, they can only help. Ultimately, a quality product is what really matters. And Philz Coffee is the bomb.
Want to learn more about building engaging products? Sign up for my email list and get a free copy of the upcoming book, Hooked, by Nir Eyal in collaboration with myself.
Also, say hello on Twitter (@rrhoover)! :)
The kind folks at Umano recorded an audio version of this essay. Listen here.