How should a cafe price? After all, most users are actually consuming multiple things at a coffeehouse. Yes, they are getting a jolt of caffeine and maybe a muffin, but they are also consuming a meeting space or a workspace. Indeed, that space may be more important to some customers if getting together with a friend or finding a place with WIFI is more the point of the visit than having a coffee.
That gets us to Tsiferblat, a Moscow-based chain of cafes that has a different pricing model than Starbucks and the rest of the industry. Here is how NPR tells it (Rubles For Minutes, Not Mochas, At Russian Cafe Chain, Jan 10):
Welcome to Tsiferblat in Moscow. It’s one of two in the city, and in English, it would be known as the Clockface Cafe.
When you enter, Polina Poliakova leads you to a cabinet filled with defunct alarm clocks. “When you come to Tsiferblat, first what you should do is take the clock,” she says, explaining what she calls “the ritual.”
So you choose a sturdy Soviet model and Poliakova notes your time of arrival. …
Clockface is the brainchild of Ivan Meetin, a 28-year-old who got started in the business by experimenting with a cafe that ran solely on donations.
Clockface is different, he says. “You don’t have to pay for coffee or tea or cookies,” Meetin says. “You should pay for time, and time costs — I hope — [are] not that expensive.” …
You pay two rubles a minute for the first hour — slightly less than $4 an hour — and then one ruble per minute for the time beyond that. Any time after five hours is free — so you can never spend more than about $12 per person.
Why does this interest me? Because it gets to one of the basic examples I use in my Service Operations class. As I have posted about before, one of the challenges in many service businesses is how you will charge your customers. In many service settings, the cost of providing a service depends on choices customers make after they have contract with the firm. You and I can have the same Internet service provider and pay the same monthly fees. However, if one of us is a serious movie junkie and is streaming videos every night, then the costs we impose on the system differ. A Starbucks is no different. If you get your coffee to go while I camp out to write a blog post, I am using more resources and may, in fact, have paid less than you if I bought a smaller drink.
That’s what makes Tsiferblat so interesting. It basically turns the Starbucks model on its head by, effectively, charging for fat leather chairs instead of coffee. For this to work, it has to be unappealing to wolf down one’s drink and food and go or to pig out on the cafe’s offerings. Said another way, bundling is always going to offer an above average deal to some customers. The novel writer at Starbucks gets a real break relative to renting an office but the to-go customer is overcharged. Those are reversed at Tsiferblat. Simply refusing to offer to go cups might slow down people enough that they at least break even on people who just want coffee and not ambiance and camaraderie. As for those who act like hogs at the trough, there may be a limit to how much coffee one can drink before feeling ill. If not, those that routinely abuse the system can be refused service.
Now is this a better way to price the service? That can’t be universally true. Just think how many commuters and business workers will zip through a well-located cafe on a weekday morning. That’s just a good business and that demand would evaporate if the firm switched to a pay-by-the-minute model. However, when I think of the independent coffeeshops in Evanston with undergraduates camped out for hours, this seems like an opportunity.