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Price Discrimination, from Larry Fletcher

2006-10-24 · Clive Burlin, Larry Fletcher
Original source

A dollar for one donut makes it hard for bums to justify sitting in Dunkin’ all day eyeing mom’s overstuffed low-hanging purse. Perhaps it is just a wise ‘customer sorting’ measure, bringing the retail big spender, families, full tickets, dozen buyers and not the 50 cent penny pincher/bum/lowlife who won’t spend much anyway/complains the most/scares off the grandmas, families and women. Send him over to your competition to keep them busy making nada.

I learned this in the auto glass replacement biz when I stopped doing mobile chip repairs for $35 and side view mirror replacements for $60 and instead booked all mobile jobs at a $160 profit minimum, same as all my other glass jobs. Forwarding them to my keenest competition overloaded them with the worst jobs and added about $160,000 a year to my model, and kept them busy not getting the high paying jobs as they were ‘booked’ with low paying ones. Also, a customer ordering a $35 dollar service was five times more likely to cancel/no show, so this dropped my cancellation percentage.

Clive Burlin adds:

Speaking of coffee and donuts, with their rapid expansion in the NJ/PA area, I think Wawa is going to put 7-11 under enormous financial pressure.

To give a simple example, 7-11 has been forced to start selling cigarettes at state minimum since Wawa started encroaching on their territory where before they were 50-60 cents more expensive. A few other reasons why Wawa is going to hurt 7-11:

  1. A lot of their new stores are opening up with gas stations attached and the gas prices are ultra aggressive.

  2. Coffee is not only fresh (a pot has to be discarded every 20 minutes), but they have at least 12 different types, from Kona to flavored.

  3. Clean bathrooms. 7-11 doesn’t have facilities.

  4. Made to order hot and cold sandwiches. 7-11 has a small selection of premade.

  5. Free ATM machines. 7-11 has Citibank, which charges a fee.

  6. Three or four registers going at once instead of the 7-11’s one.

  7. Huge, well-lit parking facilities.

  8. More selection and better pricing on groceries.

If Wawa keeps expanding across the country, 7-11 as we know it may not be around for too much longer.