Economics Questions

Re: Customer Feedback

ViennaSausage — Mon, 21 Jul 2008 22:21:23 GMT

ryanpatgray:
There is no requirement that a cup of coffee in one store have the same price as a cup of coffe in another store. If people want the coffee badly enough they will pay more.

I can't remember the source, but a professor, I presume and Austrian, was telling an anecdote about a hotdog stand outside a lecture hall. Although he may sell more hotdogs @ $2.00 because the price is lower, the hotdog stand is more profitable selling less hotdogs @ $5.00. A little counter intuitive, but the anecdote was insightful. Anyone know of the origins of this one?

Re: Customer Feedback

Stranger — Mon, 21 Jul 2008 21:47:49 GMT

ryanpatgray:

As I said, there is a point of absurdity. Customers in feedback forms demanding that Starbucks provide free BMWs with every cup of coffees should not be listened to. There is also a situation where governments may create an environment that is inhospitable to opening a store no matter the price you charge. But I do think that customer feedback is usually quite valuable.

Right, customer feedback is valuable when the customers have information that you do not have.

Re: Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 21:38:06 GMT

Stranger:

ryanpatgray:

Stranger:
They don't know what your costs are. Only you know that, and only you can decide if a store can remain profitable.

If demand for a product is high enough the cost can be raised enough to pay for the cost. There is no requirement that a cup of coffee in one store have the same price as a cup of coffe in another store. If people want the coffee badly enough they will pay more.

What if it's already as high as it has gone and not earning enough to keep the store open? The customers do not have this information. Only the owner does.

As I said, there is a point of absurdity. Customers in feedback forms demanding that Starbucks provide free BMWs with every cup of coffees should not be listened to. There is also a situation where governments may create an environment that is inhospitable to opening a store no matter the price you charge. But I do think that customer feedback is usually quite valuable.

Re: Customer Feedback

Stranger — Mon, 21 Jul 2008 21:29:21 GMT

ryanpatgray:

Stranger:
They don't know what your costs are. Only you know that, and only you can decide if a store can remain profitable.

If demand for a product is high enough the cost can be raised enough to pay for the cost. There is no requirement that a cup of coffee in one store have the same price as a cup of coffe in another store. If people want the coffee badly enough they will pay more.

What if it's already as high as it has gone and not earning enough to keep the store open? The customers do not have this information. Only the owner does.

Re: Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 21:21:59 GMT

Stranger:
They don't know what your costs are. Only you know that, and only you can decide if a store can remain profitable.

If demand for a product is high enough the cost can be raised enough to pay for the cost. There is no requirement that a cup of coffee in one store have the same price as a cup of coffe in another store. If people want the coffee badly enough they will pay more.

Re: Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 21:14:16 GMT

ViennaSausage:
Major bookstores do something similar. Although Borders and Barnes and Noble are national bookstores, they cater to the local market. For instance the Barnes and Noble in Los Angeles has a whole floor dedicated to movies, film, tv, art, whereas in some BN's it's only a few bookcases wide.

Very true. Some bookstores also have a "local interest" or "local authors" section or both. A bookstore near Disneyworld might have more books on Disneyworld than a store in Baltimore and many of those books would be shoved into the "local interest" section. In Columbus, Ohio many books about The Ohio State Buckeyes would be in the Local Interest section and far fewer books about the team would be found in a store in Orlando, Florida.

Re: Customer Feedback

Stranger — Mon, 21 Jul 2008 21:08:01 GMT

ryanpatgray:

Stranger:

This may be true, but the customers do not know what makes your business profitable.

They may not know the technical details or know how much you should charge (they would prefer it was free  ) but they in fact ARE what makes your business profitable. It is their needs and desires that you must meet.

They don't know what your costs are. Only you know that, and only you can decide if a store can remain profitable.

Re: Customer Feedback

ViennaSausage — Mon, 21 Jul 2008 21:05:51 GMT

ryanpatgray:
Even McDonalds does this to a certain extent in that it offers different menus for Saudi Arabia, India and other countries than it does in the United States. There is no reason this type of localization could not be brought to the next level. If it were, Starbucks might be able to profit from the "local character" of its many stores.

Major bookstores do something similar. Although Borders and Barnes and Noble are national bookstores, they cater to the local market. For instance the Barnes and Noble in Los Angeles has a whole floor dedicated to movies, film, tv, art, whereas in some BN's it's only a few bookcases wide.

Re: Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 20:31:46 GMT

Stranger:

This may be true, but the customers do not know what makes your business profitable.

They may not know the technical details or know how much you should charge (they would prefer it was free  ) but they in fact ARE what makes your business profitable. It is their needs and desires that you must meet.

Re: Customer Feedback

Stranger — Mon, 21 Jul 2008 20:25:49 GMT

ryanpatgray:

Stranger:

Customer feedback is only useful when your customers have information that you don't have.

Customers ALWAYS have feedback that you do not have. They know what they want. Unless you are a psychic you do not know what their desires are. You may assume that they prefer one blend of coffee when they actually prefer a very different blend. Coffee preferences may also vary from one region of the country or the world to another. People in Seatle might not like the same blend of coffee that people in Baltimore like.

This may be true, but the customers do not know what makes your business profitable.

Re: Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 20:25:06 GMT

Stranger:

Customer feedback is only useful when your customers have information that you don't have.

Customers ALWAYS have information that you do not have. They know what they want. Unless you are a psychic you do not know what their desires are. You may assume that they prefer one blend of coffee when they actually prefer a very different blend. Coffee preferences may also vary from one region of the country or the world to another. People in Seatle might not like the same blend of coffee that people in Baltimore like.

Re: Customer Feedback

Stranger — Mon, 21 Jul 2008 20:18:58 GMT

Customer feedback is only useful when your customers have information that you don't have.

Re: Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 20:11:24 GMT

Anonymous Coward:

The best customer feedback indication is profit margin.

No argument from me on this point.

Anonymous Coward:

An unprofitable store would suggest that the customer support simply isn't there.

This is where I disagree. An unprofitable store suggests that some need or desire of the local customer base is not being met. One reason that Starbucks and other chain stores have been criticized in the past is that some claim they destroy "local character". While I certainly realize that the motivation behind many of these claims is anti-capitalist in nature, there is indeed something to be said for localizing to meet the demands of certain markets. Even McDonalds does this to a certain extent in that it offers different menus for Saudi Arabia, India and other countries than it does in the United States. There is no reason this type of localization could not be brought to the next level. If it were, Starbucks might be able to profit from the "local character" of its many stores.

Re: Customer Feedback

Anonymous Coward — Mon, 21 Jul 2008 19:21:50 GMT

The best customer feedback indication is profit margin.

Sure, everyone wants to have a coffee house right around the corner but are they willing to pay for it through their spending habits is another matter completely.

An unprofitable store would suggest that the customer support simply isn't there.

Customer Feedback

ryanpatgray — Mon, 21 Jul 2008 19:14:51 GMT

I saw an interesting article about customer feedback, specifically with regard to Starbucks’ announcement that it will be closing a large number of stores. Apparently many Starbucks customers are pleading for it to not close their local store. Here is my question: To what extent is it wise for a company like Starbucks to heed these demands? Customer feedback can be valuable right? Obviously there is a point of absurdity in this regard but Starbucks has profited from customer feedback in the past (i.e. offering some “organic” blends for people who want them.) Shouldn’t it listen to customers at least to some extent? If you KNOW there are a large number coffeeholics living near a particular store you had slated to close shouldn’t you reconsider this decision?

Here is the article about Starbucks: http://online.wsj.com/article/SB121642002363666365.html?mod=hpp_us_inside_today