Price increases are one of the most painful things we consumers endure, and we sure have had to endure a lot of them the last couple of years. We have had sticker shock at the grocery, and in other cases, realized it wasn’t our imagination that while the shelf price did not go up, the package had shrunk.
No matter what, it sucks, because wages and salaries always lag inflationary pressures on price. But when the price increase looks more like a tax on good times, then it hurts even more. Like with what is happening at about 800 pubs in the UK. Stonegate, a giant among pub owners, has about 4500 different pubs under its corporate umbrella, and under several operating names. Now comes word it is going to implement surge pricing on beer during peak hours at selected pubs.
And people are crying in their last cheap pint of it.
Also Known As…
Surge pricing, which also goes by the name of peak pricing or dynamic pricing, is the concept of raising prices when demand is highest. And Stonegate wants to add on 20 pence (or about $0.25US) per pint at busy times, like at its Slug & Lettuce chain. It may not seem like much, but I have seen London pubgoers having a good time before. It could easily add $1-$2 per bar tab.
Prices will remain as-is during the off-hours, so perhaps people will be encouraged to engage in day drinking and other such off-peak hours. As for the folks who want to drink when everyone else is (and through no fault of their own, thanks to work/life schedules), it feels like they have been sucker-punched.
Now before you throw the baby out with the beer water, consider that we have been confronted with surge pricing here in the States for years. It’s just that the sellers don’t package it as baldly as Stonegate is doing. Ever noticed how a matinee theatre ticket is much cheaper than, say, a Friday night ticket? Or how airline tickets and hotel stays are more expensive on weekends, but cheaper other days?
More Examples, Please
Yup. Take, for example, my recent visit to Northern New Mexico. On Thursday night, my room at the Hotel Don Fernando de Taos was only $110. For Friday and Saturday nights, it was roughly double. And pity anyone who wants to fly somewhere on a Friday and return on Sunday.
But then there was the case of AMC Theatres who, earlier this year, started charging more for prime seats. That landed with a thud, and they nixed the plan. You know. Just when people are starting to return to the theatre, raise the prices on the good seats. Nope, nope, nope. It’s a theatre, not an arena. They are all good seats, except for the first two rows.
I have also seen petrol stations in Germany use dynamic pricing, with higher prices at the morning commute time, as well as the return in afternoon. During the day, prices are lower. Unless you are unemployed, retired, or working midnight shift, you will never get your fuel cheaper (and right now it’s running about $7.48US per gallon). Still, the Germans tolerate it, my friends tell me.
Poor Execution
Stonegate could have executed this better, because they are coming out looking like the bad guy. Consider the global naysaying and commenting. Sure, they offered a lot of pithy excuses and rationalizations, like it will allow them to have more staff on hand during those peak hours, blah blah blah. But a price increase is a price increase, and this sounds like a penalty right at the time of day you want to be chilling.
I suspect that Stonegate will only tolerate the negative fallout for so long, and will have to walk it back. I don’t buy the surcharge as enabling them to have more workers. That should be a given, and paid for by the added sales that were already in place because of the peak. Please don’t push the burden of paying even more staffers on the backs of your most loyal customers.
Just raise prices across the board 10 pence and call it good. That will probably be a few pence below the JND, or Just Noticeable Difference. That’s how you raise prices. Small bumps go unnoticed or are just not worrisome. But a big one always is.
Surge pricing is a fact of life. I get it. Just don’t make it a hard pill to swallow. Because if my favorite rehydration station—Pondaseta Brewing in Amarillo—were to do something like what Stonegate is doing, I’d just stay home.
Dr “No Taxation Without Representation” Gerlich
