By Don Archer
Working her way through college, my daughter took an evening job as a server at a semi-upscale restaurant. Besides paying tuition, she's learned quite a bit. No longer is she the helpless child needing mom and dad to do everything for her. She's transformed into a fine young lady who knows how to handle a rowdy 15-top. (That's server lingo for a bunch of tables shoved together to accommodate a large group of partially intoxicated college students who've been waiting an hour for half-price appetizers to start.) She knows her stuff and because she does has subsequently landed a better position at another restaurant, this one's much more upscale.
The new place is Greek and at each meal they start their guests with a sorbet to cleanse the palate. They sell wine by the glass and the bottle, and every table has two servers, one solely for the water.
Late night talks after work have taught me a lot about the restaurant business. Besides confirming that I wouldn't want to own one, I've learned that the wine they sell is upscale as well— $60 a bottle and up. Of course you don't have to buy the whole bottle—you can get a 6-ounce glass for just $20.
After hearing this, I was fascinated by the prospect of selling a drink for $20, so I consulted the oracle (Internet), and asked how many ounces are in a bottle of wine? 25.
Doing the math, it turns out you can get four six-ounce glasses out of a typical 750 ml bottle of wine. This means if you buy wine by the glass you'd be paying $80 for the entire bottle rather than the $60 you'd spend if you went ahead and purchased it by the bottle.
As I reconsidered my stance on owning a restaurant, I thought how some might label this selling strategy an inconsistency on the part of the restaurateur. Suggesting that, rather than risk offense and accusations of gouging, a wise owner would either sell the bottle for $80 or drop the price-per-glass to $15?
The whole world demands consistency. In affairs of the heart, we need to be assured that our friends and loved ones will remain true. Where food is concerned, consistency assures us that we'll get what we've had before. It doesn't have to taste the greatest, just as long as it's what we expect. And as an employer, you're required by law to be consistent, you're prohibited from discriminating against employees on the basis of race, color, religion, sex, national origin, disability, genetic information, or age. But in terms of pricing, consistency is another matter.
A restaurant reserves the right to sell food and beverages in any quantity they choose. If a customer wants to buy an entire case of wine, the mark-up might be considerably less than if they were only buying a glass. Someone could conceivably argue that the restaurant is discriminating against the single glass consumer and catering to their higher end customers. And of course they are. But the word discrimination has such negative connotations so they take another tack. Rather than a sign at the entry that says "You must be willing to spend at least $150, before the tip, to dine here," their prices do the talking.
But using price as a strategy isn't unique to the food industry; take a look at hotels. If you arrive, without a reservation, as an individual without any corporate affiliations, and ask for a room—you'll get their cash rate. But if you show that you're with 3M or Exxon, or can produce a rewards card, you'll get an entirely different rate.
Even pawn shops can have pricing inconsistencies. They may tag an item with a particular price hoping it will sell. But a shrewd counter-salesman has the ability to gage buyer interest and has the option to drop the price if a decrease in sales warrants, or due to the fact that the item has lost popularity. But he also reserves the right to remain steadfast if a buyer's interest is flagrant and over the top.
All of these businesses operate above-board using price fluctuations as a strategy for varying customer types. Why shouldn't the towing business?
Of course the towing business has fluctuations in price as well. There's market rates for cash customers, rate caps for municipalities, and then there's the motor clubs; rates can vary widely. One club might allow the tower to command market rates while another may slash that amount by 50 percent or more. Spurred on by competitive forces within the ranks, the clubs on a whole, constrict the money a tower can make per call. Knowing their rates are less than adequate, they suggest that money lost will be made up with increased volume. But to even the scales, many towers take it upon themselves to make adjustments elsewhere.
Free from rate caps and contracts, savvy towers charge whatever the market will bear. But be warned that inconsistencies in price can raise red flags in the towing business. While a tower's intentions may be noble—keeping the lights on and the trucks rolling—ill-tempered customers may cry "price gouging" for no reason at all, and make a call to the Attorney General's office.
A simple way to avoid this trap is to have a set Market Rate sheet for services and mail or email it to yourself. This correspondence will have the date on it and will allow you to provide the AG's office with definitive proof that the customer paid at or below what everyone else pays.