Of coffee shops, discount sales and a headache

The hyper sales pitch everywhere has taken the joy out of shopping

MUMBAI: I woke up around noon this Sunday with a splitting headache and an SMS reminding me that it was the last day of a discount sale.

Now, shopping is a good stress-buster, and even rids a bad headache, sometimes. So I got to the mall as quickly as I could and once in, made for the coffee shop, hoping to get a fresh sandwich with a hot cuppa.

But, ordering coffee can be extremely stressful these days, I realised in no time. “Cold or hot?” the attendant asked. I said ‘hot’, and he handed me a huge menu with nearly one hundred ten names to choose from.

I asked for cappuccino, and he asked, “Will that be small, medium or large?” as if it was alcohol I was ordering instead. I settled for ‘medium’, hoping he was through with his questions.

But he wasn’t. “Would you like it with some whipped cream or chocolate, sir?” he asked.

“A plain cuppa cappuccino,” I said aloud, sealing the conversation.

Why are these guys so persistent? Even women wouldn’t make so much ordering their marriage trousseaus, I thought as I flipped open Tim Harford’s The Undercover Economist, which I had bought sometime back but never opened. I got my answer just a few pages into the book.

The idea, says Harford, is to figure out whether the customer is less sensitive to price. If the answer is in the affirmative, then the next step is to get him to pay more.

Obviously you can’t get the customer to pay more for the same product. Hence, the first step is to make the product a little different from the standard offering, in my case a cup of cappuccino.

“It doesn’t cost much more to make a larger cup, to use flavoured syrup or add chocolate power or a squirt of whipped cream,” writes the author, citing the example of coffee chain Starbucks.

“By charging wildly different prices for products that have largely the same cost, Starbucks is able to smoke out customers who are less sensitive about the price,” he adds.

Indian coffee shops have obviously been picking up the tricks of the trade from the international market.

Brunch over, I stepped out of the coffee shop and into the retail outlet next door, where the discount sale was.

Retail chains in the country generally organise such sales twice a year, in February-March and August-September, offering discounts as high as 50% on the maximum retail price.

Every time a retail chain sells a product at a discount, the average price at which they are able to sell that particular product comes down.

So, why don’t they offer a 10% discount throughout the year, instead of offering a 50% discount twice a year, I wondered as I went about my shopping.

Harford had the answer. “If some customers shop around for a good deal and some customers do not, it’s best for stores to have either high prices to prise cash from the loyal (or lazy) customers, or low prices to win business from bargain hunters.

Middle-of-the-road prices are not good: not high enough to exploit loyal customers, not low enough to attract bargain hunters.

But that’s not the end of the story, because if prices were stable, then surely even the most price sensitive customers would learn where to get particular goods cheaply. So rather than stick to either high or low prices, shops jump between two extremes.”

As I walked home, the headache was still on. The cup of coffee and some good discount shopping hadn’t really helped.

So I made for a chemist on the way to buy some headache pills. But, there were questions waiting, here as well: “Saridon, Anacin, Disprin…?”