[BobbyH]

If you think about it, it is economically rational behavior for a barista/bartender to do this for regular customers. After all, she gives you a drink that is free to her and gets back real money as a tip. The only loser is the coffee shop or bar, who has trouble tracking the number of drinks served.

My friend runs a bar and this is a huge problem for him that he calls a "bribe back". The only solution he found is hiring good people, as monitoring the bartenders makes him look like he doesn't trust or respect them.

[blhack]

I hope your friend also understands how much this will get people like me to come back.

There is a bar in Phoenix that I used to go to all the time (when the weather calms down, I'll start going again [because I bike there]). One of the major reasons that I went back so often, is because I felt like a regular there. It was a very common occurrence for the bartenders to offer me a free drink. A lot of these free drinks were beer that had been poured wrong, or stuff that they would have had to pour down the drain, but not all of them.

This is something I think a lot of people don't understand (not saying your friend, just in general); when you own a business, you're not selling widgets, you're selling customer service. I wasn't going to the bar to buy beer, I was going because one of the bartenders looked at me one night (I was feeling down about something) and said "Dude, what's wrong?" and tried to cheer me up...or another night when another bartender didn't charge me the $10 that they usually charge for growlers (a glass chug that holds 1 gallon of beer and is for transporting it home [common at breweries that don't bottle their beer])...

All in all, that place has probably given me 10 beers for free; at most $20 worth of product. But that $20 has probably come back to them 10-100 fold in the last couple of years. I'd say about half of my family's birthdays now take place at that bar, (I've taken my sisters and my mom there, they all love it, it really really is truly unlike any other restaurant I've been to in Phoenix), as well as most of my friends. I've recommended it to literally hundreds of people.

Contrast this with a bar in Tempe where I took a visiting friend for drinks: the bartender didn't want to talk to us and, when we asked him why he was using a jigger to measure the mixed drink that my friend ordered (it was taking a long time and we said something to the effect of "We really don't care about the measurements being that exact") he explained how close of an eye the managers keep on the alcohol shrinkage.

Another story for me is dell: when I call dell, I talk to Lisa, who remembers my name, remembers where I live (Phoenix) and remembers the time that her and her husband came here to visit...and how nice the weather was. "Is that place on scottsdale road that sells the ice cream still there?"

Artificial as I'm sure all of this is (Lisa probably has a computer that remembers this stuff for her), I like it. I like going into a coffee shop and feeling like the owner of the shop is a friend of mine and I'm just coming over to his house to hang out (there was a coffee shop in Des Moines, IA; 3 years after I moved away, I came back to have to have the owner greet me with "RYAN!?! Where the hell have you been!? Has the band been on tour or something? [the first time I went into his shop I had a DW drums tshirt on. The joke from then on was that I was a famous drummer]).

I think it's important for business owners to remember this type of thing: you're absolutely not selling coffee, or beer, or dell computers, you're selling me a little temporary friend that makes me feel like they really and truly care about whatever problem I am coming to them to solve.

[lsc]

"I think it's important for business owners to remember this type of thing: you're absolutely not selling coffee, or beer, or dell computers, you're selling me a little temporary friend that makes me feel like they really and truly care about whatever problem I am coming to them to solve."

This is only true in non-commodity markets. Yeah, the coffee shop is selling you the 'coffee experience' - the service, more than they are selling you the coffee. But if you follow that chain backwards, you can bet that someone along the line is selling actual coffee.

to take the example I actually know something about, yeah, dell wants to be my buddy. But micron? micron wants to sell me some fucking ram. Because cheap reliable servers are central to my business, I find my friends elsewhere, and I bypass dell and go to suppliers that don't want to be my friend, and I pocket the difference.

On the other hand, when I buy things like accounting services or coffee, I expect something that is more 'full service' - I know jack about accounting, so you've gotta put me at ease, and be willing to pretty much just handle it for me. If I didn't know what I know about hardware, and if my servers needed to be reliable but cheap wasn't as big of a deal, I'd think about buying my servers from dell, too, with the silly expensive support plans. (dell, on the minimum support plan, in my experience is worse than building yourself. On the other hand, the gold plated support, I hear, is damn good.)

So, uh, yeah. Sometimes you are selling your product, and sometimes you are selling "the experience" of the product. Most of the time, you are selling a little bit of both.

But, you are right that it's very important to remember what you are selling... If you try to sell me 'the experience' when I try to get ram, I'm probably going to walk. and if dell tried to just sell the servers when they went to sell to $BIGCORP, without the, uh, "tips" and gladhanding, they'd loose out just as badly.

[blhack]

>I bypass dell and go to suppliers that don't want to be my friend, and I pocket the difference.

Do you? My relationship with dell isn't just about getting warm fuzzy feelings when I call our rep to order stuff, it's about knowing that, if I do have a problem, it's going to get resolved immediately when I call her.

There is another company that I work with, which is small, and specific to my industry, and I have a very good relationship with one of the sales people there (they're in Canada).

Well, one day, something went wrong with their product so, instead of calling and asking to talk to a CSR, I called and asked to talk to Al. Al apologized up and down because, unfortunately, the FedEx guy had already come and there weren't any more pickups for the day.

So do you know what he did? Got in his car and drove the part that I needed down to the fedex office at the airport. I had the part in my hands a little over 12 hours later.

Another one: Our office buys all of our toner from cartridge world. The guy that we talk to down there, his name is Kent, is really nice. One day, I called Kent and told him that I needed a toner cartridge for one of our printers, but I needed MICR toner (for checks). Unfortunately, he told me, they didn't have any that I could get that day, but they could ship me one in a week. But in the meantime, he would bring me a printer of theirs as well as a cartridge for it, and he wouldn't charge me for it, just thanks for always doing business with him.

This type of thing is absolutely invaluable to my business.

We'll be a Cartridge World customer for life because of this. We're not buying toner from them, we're buying the ability to print documents. I suspect that you're not buying RAM, you're buying servers that work. Do you think anybody from micron is going to jump in their car and bring you something when you need it? Or care that something got messed up and fix it for you immediately?

[lsc]

>Do you? My relationship with dell isn't just about getting warm fuzzy feelings when I call our rep to order stuff, it's about knowing that, if I do have a problem, it's going to get resolved immediately when I call her.

right. you need to pay a /whole lot/ to get that relationship; the cheap level support contract, in my experience, is usually worse than just fixing it myself.

the thing of it is, at least on the more affordable support plans, Dell expects a corporate environment where unexplained reboots, so long as the server comes back up in a reasonable period of time, are acceptable. In my business I say a reboot costs me... so I've got to figure out if it was hardware or software, and then trace it down from there. Dell and RHEL seem to say "Well, it came up clean, what do you want?" Dell and rhel are both awesome when a box is down and it stays down, but those problems are trivially easy for me to solve myself, so I don't really see the point of buying support for that.

>Do you think anybody from micron is going to jump in their car and bring you something when you need it? Or care that something got messed up and fix it for you immediately?

Absolutely not. and yeah, if it was something I couldn't fix myself, this would be a big concern. like I said, I go 'full service' in areas where I'm helpless, like accounting. But the thing is, when my ram goes bad, I don't /need/ micron to drive down and fix it for me. I have spares of everything, and I am better at diagnostics than any dell tech I've met.

Also, if you buy the cheap support plan from dell, well, you are waiting until Monday for your part anyhow.

Now, yeah, maintaining that skillset is pretty expensive. if it wasn't central to my business, if hardware wasn't where the majority of our money went, you would be right, it wouldn't make any sense. But hardware is where the majority of my money goes, and I am able to provide a level of service that exceeds what I have seen from dell, so it does make sense.

[ahlatimer]

My favorite local coffee shop is like that. I know the owner fairly well, and he always drops by to chit chat whenever I come in. I refuse to go to any of the other coffee shops in town, even if the coffee is cheaper or marginally better, because I've built a relationship with the owner.

When I was shopping for a new motorcycle, I bought one from the dealership that's 45 minutes away instead of the one that's 5 minutes away because of the reputation the close one has of ripping people off. The bike I was looking at was actually available cheaper at the closer one, but I'd rather give my money to a dealer that's not going to try to scam me later on, even if it's less convenient or more expensive.

I truly appreciate good service, and I'll happily pay more for it. I'm surprised more businesses don't care about excellent customer service, or is it that a lot of people truly don't care about service?

[blhack]

People get tricked into thinking that they're buying something good.

When I go to a coffee shop, a lot of times I'll sit there with some of my friends and work on a project at their tables, or I'll use their internet, or read a book, or whatever. The $2.5, or $4 or whatever that I'm paying for a cup of water run through ground up beans is mostly paying the for a barrista to ask me how my day is going so far, and for the table. It's like a day-hotel; the table is my room, the person at the counter is the front-counter clerk, and the $4 is my room fee.

This is fine, I'm more than willing to pay $4 for a coffee when I'm going to be sitting there for 5 hours working (in fact, if I'm staying this long, I'll usually buy more than one cup of coffee even though I don't need it.). The $4 is insane for a cup of coffee, but I'm buying more than just coffee.

Starbucks is the same thing, but a bit more interesting (I think). When people go into starbucks, they're paying $4 because they want to feel like members of the cool kids club. The coffee has names that you have to be a member of the little club to understand, the interior is very starbucksy, there is obscure "art" on the walls, etc.

This makes sense. Yeah, you could go to the gas station across the street and get something that tastes about the same, but then you wouldn't have access to the cool kids club. The $3 difference between a gas station cappuccino and a Starbucks "coffee flavored milkshake for adults" is the membership fee.

The trick here is that Starbucks (as well as their competitors) now also runs coffee shops where you can't even go inside. You can't stay there, there is no obscure art, no atmosphere, no nothing. You drive up, get your coffee, and leave. You probably even finish your coffee in the car before anybody has chance to see the familiar logo that means "cool kid".

So why do people still go there and pay the $3 membership fee to a club that doesn't exist?

Because they've been tricked into thinking that they're buying coffee.

[illumin8]

Yeah, this is a huge problem. I was on a business trip once and eating dinner at the bar of TGIFridays. I normally wouldn't eat at a chain restaurant like that, but I was in Virginia and there was nothing nearby.

In any case, these college kids were sitting at the bar next to me, and we started talking. They seemed to be friends with the bartender and one of the told me "give the bartender a $20 and you'll drink all night for free." This was a Friday and I was stuck in VA for the weekend, with my hotel across the street so I was like, OK. Anyway, I slipped the bartender a $20, and he proceeded to make all kinds of drinks for us. He was using the top shelf liquor, not the well drink stuff, and he was making all kinds of custom martinis, shots, etc. We literally finished well over $200 worth of drinks in the space of a few hours. When the check arrived, it only had my meal on there, and all the drinks were missing.

Essentially, the bartenders gave us about $200 worth of drinks and we only paid for our meals, plus $20 each in tips (there were 4 of us).

If I owned that TGIFridays somewhere in VA, I'd be seriously worried about how much money my bartenders were stealing from me. It is literally stealing when a bartender can make an extra $100-200 a night just by slipping free drinks to his friends. I guess the markup is so much on alcohol that most people wouldn't notice.

[_cbsz]

There are companies that audit bartenders by very carefully inventorying the liquor. I found out from this article in my college's newspaper: http://www.michigandaily.com/content/2008-09-24/bar-audits-m... .

The company is Bevinco (www.bevinco.com), and I'm sure there are others.

[mordero]

Yeah, I remember watching a video in an accounting class about internal controls of a bar in Texas which would weigh bottles every night and dispensed drinks through a soda gun.

Found another example of companies using some audits to keep track of liquor usage. [http://findarticles.com/p/articles/mi_m3190/is_43_40/ai_n267...]

[edge17]

I definitely know about some bartenders at a similar establishment that lost their jobs for that type of behavior. The bartender's basically stealing from the establishment.

[jamesbritt]

'My friend runs a bar and this is a huge problem for him that he calls a "bribe back". The only solution he found is hiring good people, as monitoring the bartenders makes him look like he doesn't trust or respect them.'

Back in my bar-hopping days I learned about buy-backs. I was surprised the first time it happened, but it was explained that this was common thing (at least if you drink enough).

Given that it was apparently common knowledge in the bar culture, I'd have to believe that anyone running a bar knows this is happening and either makes some educated guesses on the amount, or simply has the bartenders do some tracking. It seems like just part of doing business and sales, nothing underhanded.

Broadly speaking, it seems a businesses will have trouble keeping customers if the owner or manage does not give the line people authority (within some bounds) to give stuff away. I've mainly seen this in the hotel business. You can keep a customer, and make them want to come back, by smoothing over a complaint with a comp'ed night or free meal, and the win to the hotel is terrific (it's expensive to get new customers vs. keeping them). But if the restaurant manager or front desk staff has to first get the OK from the head of F&B or the Front Office manager it tends to just not happen because people are afraid they'll get in trouble for doing what is arguably right and in the long-term interest of the business.

[dandelany]

Yes, it's economically rational for the barista/bartender, but it's not necessarily bad business for the bar/coffeeshop either. If the bartender is smart about when and how often she hands out these freebies, she can convert one-time or occasional customers into loyal, regular customers, which is much better for the bar in the long run.

It reminds me of the Apple store - 9 times out of 10, if you go in there with something broken that's out of warranty, you have to pay the full price to repair it. However, Apple geniuses are given a little bit of leeway, and often offer "unnecessary" free out-of-warrany replacements that, while costly to Apple in the short-term, generally pay handsome returns in the long run by encouraging loyalty.

[BobbyH]

Yeah, I agree. What I was trying to articulate is that this is a good example of a principal/agent problem, as the Principal (owner) has interests that differ from those of his Agent. Solutions to this generally either decrease information asymmetry or involve a better incentive system for the Agent. However, as you point out, it's possible that the Agent will act in his interest and still benefit the Principal.

Wow, I just looked and this exact example is actually featured on the Wikipedia page for Principle-agent problem. http://en.wikipedia.org/wiki/Principal-agent_problem#Employm...

[whatusername]

My wife took her dropped/broken iPhone into the apple store. She's too honest and didn't realise when the genius was asking her if it was broken/having issues before she dropped it that he was wanting to put it through under warranty.

[philwelch]

Fun story--I had a dropped/dented PowerBook once that I never got fixed because it was my fault, but it had another issue due to a manufacturing fault that I did send it in for. They sent it back with apparently a brand new, undented case.