Another night of bar tending brought more thoughts on the economics involved with a bar. Every Thursday we have a special happy hour from 6-8PM that offers dollar drinks on all beers and liquor excluding top shelf items such as Patron and Johnnie Walker Blue Label. The catch is that we charge a $5 cover for each individual that partakes. I was wondering if these consumers consider this a kind of tax or more of a sunk cost. It definitely can be considered a tax because those that pay receive the benefit of cheaper drinks. However for more serious drinkers I feel that they consider it more of a sunk cost because they are going to the bar to drink as much as they can for as cheap as possible so this $5 cover is already taken into their price of their drinks. Considering that our cheapest beers are $3 and our bottom shelf liquor will run you $4 it makes sense to pay this sunk cost and drink til your hearts content. Only drinking 3 beers and paying the cover would be a break even point for the consumer and after that it could be a consumer surplus.
Tonight we also had a pair of females promoting a new liquor for free that anyone could try. As far as brand recognition goes, this is a great idea. I witnessed that handing out this free liquor went over really well with consumer because it is relatively new and it was rare to find someone that had tried it. I feel that doing this and having posters hung up at a bar really help promote their product. I have never understand beer commercials that have frogs saying a product's name or just twins dancing around make consumers go out and buy that product. Yeah these commercials are entertaining but they do not make me buy that particular product at a bar. I am somewhat surprised that one beer company has not opened up their own bar selling their own product only, thus having a huge competitive advantage. We recently switched to only offering one particular company on all our draft beer and I have noticed that the majority of bottles we sell are of this company as well. If one beer company opened up their own bar they could sell their product even cheaper, thus increasing their producer surplus and that of the consumer as well.
Subscribe to:
Post Comments (Atom)
I think that the five dollar cover is a tax on the patrons and it is true that a soon as they pay it and get in the bar it is a sunk cost because they will not get the money back no matter how much they drink.
ReplyDeleteI also do not understand why some of the beer commercials work so well when sometimes they have nothing to do with beer, but they do. Bud light is not the most drunk beer in the world because it is the best or the cheapest, it is the most drunk beer because of the marketing that Bud does. They have had some of the most successful marketing strategies in history.
Here is a link to one of my favorite bud light commercials.
http://www.youtube.com/watch?v=I-XbmIntWn8
I feel the 5 bucks is definitely a tax. it can not be a sunk cost because of the benefits you receive after paying it. once you pay the cover and get into the bar, you are receiving that benefit every time you buy a beer because of the cheaper cost of it. it is just like a tax paid towards the government. you pay your city taxes and essentially have the police at your disposal any time you need them.
ReplyDeletealso, the beer commercials are not as much designed to make you feel that bud light or whatever is so much better than another beer. their sole purpose is to give you a lasting image of the product to make you think about it at that present time as well as easily recall that product when you go to buy something.