Product sabotage

25th August, 2006

Why would a company deliberately hide its best product?

Starbucks does.

Why would a company deliberately damage its best product?

Many high-tech companies do that, and even my favourite local restaurant does.

It doesn’t sound like a winning formula, but it’s at the heart of the way many companies do business.

Take the secret cappuccino, which you can buy in two of the leading coffee chains, Starbucks and Coffee Republic.

The sales assistants know what the drink is and they have a little button on their cash tills to ring it up. It’s cheaper than the other drinks on offer, but it doesn’t appear on the menu.

Starbucks claims that’s because they don’t have room on the menu board. Coffee Republic doesn’t even have that excuse: there’s a blank space with no price where this drink should be listed.

It’s called the “short cappuccino”, and it’s smaller, cheaper and better than the smallest size on the menu, the “tall”.

So what is going on?

It’s all part of an attempt to aim different prices at different types of customer.

Any shop would love to be able to charge high prices whenever they could, while still offering low prices to customers who would otherwise shop somewhere else.

Of course, if shops just asked their customers whether they would like a discount, every customer would say “yes”, so shops need to get a bit smarter about working out which customers will pay which price.

Some of the attempts are obvious, such as discounts for students or pensioners.

You didn’t think it was out of a sense of social justice, did you? Companies simply charge more to people who have jobs, because those people are willing to pay more.

Similarly, when a restaurant or a tour operator offers free meals or accommodation for kids, that’s just a way of charging more to charging childless people who usually have more disposable income…

Continued at BBC Online

The original verison of this article incorrectly said that travel agents offer deals for families with children. In fact these deals are offered not by agents but by tour operators and other suppliers of holiday fun. Apologies to my readers and to offended travel agents.

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