Scones, tuition prices contemplated

Sanjay Paul March 18, 2015 0

The proprietor of the Blue Bean Café was grappling with a problem. Scones, especially those bereft of icing, were not moving rapidly.

Or not moving at all, inquired Homer sympathetically?

That indeed was the case. There were times, noted the vexed proprietor, when the scones sat inside the case, hour after hour, as customers streamed by and ordered various other items. Greek yogurt, muffins, shakes—they all seemed to be doing well, so why not the scones?

After all the scones were tasty. They were produced by full-time employees with terminal degrees. The employees had good health care and retirement benefits. They presented papers at conferences.

The scones that were being produced were the result of a sophisticated liberal-arts cooking process. They were well-rounded morsels of delicacy. They were prepared to meet the rigors of the outside world.

The problem, it seemed, was the price. Perhaps the price was too high, and that was dissuading customers from buying scones in large numbers.

Now, some customers regarded a high price as a signal of better quality—and were willing to buy the scones. But clearly there weren’t enough of them.

What if the Café offered a discount on the price? And the discount were tailored to the type of customer? A rich customer willing to pay more for a scone would receive a small discount; a less-affluent customer a larger one. Of course, customers would have to provide evidence of their income, otherwise everyone would claim to be poor in order to qualify for the larger discount. A form, perhaps called FAFSA, would have to be developed for the purpose.

Some customers—and their parents—appeared to like the idea of receiving discounts. They seemed to draw some satisfaction in informing their friends they had obtained some wonderful scones at a significant markdown from the published price.

The system would also be egalitarian—after all the Café wished to attract a diverse group of customers. But how much further would the rich customers be willing to subsidize their less-fortunate Brethren?

How about lowering the sticker price? A reduction in price, especially a sharp one, might signal a reduction in quality—were the scones being prepared less diligently? Or perhaps the Café was in a precarious financial condition, and had no choice but to try radical remedies? But overall, cheaper scones might entice more customers into buying them.

While customers might be agreeably surprised by the price cut—and the reduction would have to be extended not just to future customers, but also to those who were currently in line—the Café would experience a decrease in scone revenues. Since the Café could not run budget deficits, it would be forced to lay off employees, merge operations and carry out other acts that might in fact lead to a reduction in the quality of the scones.

Alternatively, the Café could announce a policy of keeping the scone price constant over time. This too would be appealing to customers, especially those who wished to spread out their purchases over four years, but the decline in the café’s revenue would be steep. Since the cost of making scones was likely to rise at a decent clip, this strategy would mean falling profits for the café, necessitating further unpleasant adjustments in the future.

Other cafés had employed similar strategies only to announce reversals shortly afterwards. Middlebury Café had tied their prices to the consumer price index, but abandoned the scheme after discovering that their costs were rising more rapidly than inflation.

Perhaps the Blue Bean Café could host sports events, such as football, which tended to bring in more male customers. Such hosting would require a significant outlay upfront, but there was some evidence to suggest that such programs might lead customers to develop enduring relations with the café. Long after they had eaten the scones, they would return to the café, generously inclined to donate funds for a new scone-making machine or a wellness center for the employees.

The Café was exploring all options, said the proprietor. The board of directors wished to see a report.

Homer bit into a scone. Such wholesome goodness, he said. All wrapped up in a simple package. Pity more people did not choose the icing-free scone.

The proprietor nodded. Sometimes, she said, a scone is just a scone. But a scone sans icing? Now, that’s something else.


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