Upselling

[Fat Guy]

Yes, the Manhattan real estate market is quite atypical in that we don't really have a multiple listings system in place the way they do pretty much everywhere else in America. I think also city people are likely to have funky balance sheets so there are often sources of money that customers don't reveal to brokers up front, and Manhattan brokers (agents, whatever) have seen funds materialize out of nowhere enough times that they don't have much faith in the original parameters. Still, on the point of this thread, it's upselling whether the more expensive property is good for you or not.

[cabrales]

I would only point out that (1) exploitative behaviour in a business is a great [way] to lose custom and destroy a firm's reputation; (2) where there are big information asymmetries between seller and buyer, and a tendency in sellers toward exploitative behaviour, the usual next step is regulation.

Jonathan -- I am not indicating that it is appropriate for restaurants to seek to maximize profits at the expense of diners' pleasure. However, my own view is that what is preferable to a diner is highly subjective and a restaurant may believe that it is (or is not) recommending something superior at a greater cost to a diner. What is "exploitative behaviour" is entirely unclear in any given circumstance -- there often is a reason (e.g., better perceived terroir) that a wine is more expensive and there is considerable flexibility in what wine goes with what dishes. Thus, as a baseline point, I would like to highlight that it could be viewed as oversimplication for there to be clearly delineated demarcations between "exploitative behavior" and a dining room team seeking to make available more expensive food and wine, which might be appealing to the diner, to the diner.

That a restaurant has, as you mentioned, reputational concerns over the long run is an argument that exploitative behavior will not be sustainable over the long run. Unless diners are as a group not cognizant after meals of what they have taken in, they will recognize overpricing as such and upselling as such, under your argument presumably, and discpline the applicable restaurants with reduced patronage. Thus, your argument regarding reputation effects is an argument in favor of there being built-in restrictions against upselling (assuming that consumers can tell the difference).

On information asymmetries, let's turn to the wine case. If there are information asymmetries, it's because the diner has not informed herself about applicable wines. That is something for which the diner should bear the burden. I again highlight that what wine is "better" or more appropriate for a given sequence of dishes is highly subjective, and it is extremely difficult to be sure of upselling in any given factual context. I believe that restaurants should get the benefit of the doubt, unless a diner has an egregiously apparent case of upselling. Even in such case, I believe the diner should be held accountable for her own decisions.

Regulation is not the only solution to exploitative behavior. If a market is reasoably efficient, as you know, the marketplace may place constraitns on exploitation (under most simple models of perfect competition, for instance.)

[mamster]

Okay, I'm jumping in late, and I don't want to derail this important real estate discussion, but this one's easy. If I say to myself, "Man, our waiter is really upselling," it's bad. If I buy what he's selling without thinking about it, it's good. It comes down to the fact that dealing with a really good salesperson is a pleasure, and dealing with a bad one (e.g., scripted telemarketer) is not.

[Jonathan Day]

I am not indicating that it is appropriate for restaurants to seek to maximize profits at the expense of diners' pleasure. However, my own view is that what is preferable to a diner is highly subjective and a restaurant may believe that it is (or is not) recommending something superior at a greater cost to a diner. What is "exploitative behaviour" is entirely unclear in any given circumstance -- there often is a reason (e.g., better perceived terroir) that a wine is more expensive and there is considerable flexibility in what wine goes with what dishes.  Thus, as a baseline point, I would like to highlight that it could be viewed as oversimplication for there to be clearly delineated demarcations between "exploitative behavior" and a dining room team seeking to make available more expensive food and wine, which might be appealing to the diner, to the diner.

That a restaurant has, as you mentioned, reputational concerns over the long run is an argument that exploitative behavior will not be sustainable over the long run.  Unless diners are as a group not cognizant after meals of what they have taken in, they will recognize overpricing as such and upselling as such, under your argument presumably, and discpline the applicable restaurants with reduced patronage. Thus, your argument regarding reputation effects is an argument in favor of there being built-in restrictions against upselling (assuming that consumers can tell the difference).

On information asymmetries, let's turn to the wine case. If there are information asymmetries, it's because the diner has not informed herself about applicable wines. That is something for which the diner should bear the burden. I again highlight that what wine is "better" or more appropriate for a given sequence of dishes is highly subjective, and it is extremely difficult to be sure of upselling in any given factual context.  I believe that restaurants should get the benefit of the doubt, unless a diner has an egregiously apparent case of upselling.  Even in such case, I believe the diner should be held accountable for her own decisions.

Regulation is not the only solution to exploitative behavior. If a market is reasoably efficient, as you know, the marketplace may place constraitns on exploitation (under most simple models of perfect competition, for instance.)  

I'm not going to try to argue this point by point. The market for high-end restaurants is light years from "reasonable efficiency", let alone perfect competition. There are deep seller-buyer information asymmetries, which even the most diligent diner will struggle to overcome: the restaurant wine buyer, for example, does nothing but buy and sell wine, attends auctions, visits vineyards. She will always know more than will all but a very few customers.

I am not at all recommending regulation as a solution for these information problems or predicting that this is the only outcome. I would observe, though, that the industry is already more than a bit regulated, especially in the EU: product nomenclature, preparation temperatures (this in the US as well), etc.

And I don't see that a diner can be "held accountable" (by whom?) for gouging on the part of restaurants. I, at least, don't blame myself when a restaurant serves me a dish that doesn't live up to its description or isn't worth what I paid for it. It happens. It's either bad luck, or shoddy work on the part of the staff; alas, too often the latter.

[it aint easy being cheesy]

Its all very simple! Like any basic sales strategy. If it was done well you don't hold resentment because you enjoyed the product. If it was done poorly or the product doesn't live up to expectations and you feel taken, it was done badly. To chastise a business for trying to make money and increase sales is ludacriss. Everyone assumes restaurants make money hand over foot. Think of how many restaurants you've seen open and then close, to only see another open and close after. Its a very hard business with little profit margin.

[sammy]

An example of poor upselling happened to me while recently dining at Morton's. After we finished dinner, the waiter asked if my 6 year old daughter would like another Shirley Temple. That is nothing more than a last ditch effort to boost the bill by another $3.00. He ended up losing more than that from his tip!

[cabrales]

There are deep seller-buyer information asymmetries, which even the most diligent diner will struggle to overcome: the restaurant wine buyer, for example, does nothing but buy and sell wine, attends auctions, visits vineyards. She will always know more than will all but a very few customers. ...

And I don't see that a diner can be "held accountable" (by whom?) for gouging on the part of restaurants. I, at least, don't blame myself when a restaurant serves me a dish that doesn't live up to its description or isn't worth what I paid for it. It happens. It's either bad luck, or shoddy work on the part of the staff; alas, too often the latter.

Jonathan -- That a sommelier will have more wine information than the typical informed diner does not mean that the latter does not have sufficient knowledge to evaluate a wine list. It might mean that a sommelier has much more than the minimum knowledge required to process a wine list.

I disagree with your use of the word "gouging". How can a restaurant gauge a diner if the diner is accepting the so-called upselling? I can't think of any situation where I feel I have been gauged. That is because I either ask the price of a recommended item, or, if I don't ask, I don't care. With or without upselling, a restaurant does not guarantee a wonderful experience with respect to a product.

My notion of accountability is that a diner should accept the consequences of her own decisions, including her decisions to accept a recommendation for a more expensive dish or wine choice. In other words, I do not distinguish upselling from selling and I consider selling by restaurants (whether obvious or not) to be entirely normal and appropriate. I encourage restaurants to maximize profits.

[Basildog]

Downselling rules.We could push after dinner drinks, more expesive wines, food to take away with you, shirts, books..anything...but thats no fun.

I know i'm in a different postion from most.I have no ambition to make as much money as possible from my restaurant.I need it to make enough so that everyone gets paid, and we get the lifestyle that we have now.I'm here for the long haul...and i want to look back knowing that i gave value all the way down the line.Call me Mr Strange!

[macrosan]

Call me Mr Strange!

Oh we do, we do !

[Jonathan Day]

I encourage restaurants to maximize profits.

Cabrales, I have no quarrel with that. Restaurants (especially independent ones) are dicey businesses, and I would prefer to see more of them prosper rather than falling to the chains.

The issue for me is profit maximisation in the short term versus the longer term, a one period game vs a game played out over multiple cycles. Suppose that I, as chef, over-ordered chicken and now have a piece that is not truly off, but is flabby and past its prime. There is no way that you, as diner, can ever know this until the dish arrives at your table. It is a classic "lemon" problem. I could push this dish on you in a variety of ways. If my goal is one-period, short-term profit, I will do exactly this.

Now of course there are ways around this. You could select the restaurant with great care, checking multiple reference sources. You could taste the chicken and send it back, though most customers prefer to depart quietly (this is all written up, better than I ever could, in Hirschman's Exit Voice and Loyalty). You could try to signal to the chef, before the fact, that you are a discriminating and enthusiastic diner, and that you will be returning many times if the food is good. You could even try to signal that your experience will affect thousands of future diners' choices, e.g. by pretending that you are a professional food critic.

But sometimes this fails -- as I think it did in the Dumaine coq au vin episode that you described in another thread. You went to the maximum to select the restaurant and then signal your discrimination and interest. The restaurant promised to do the same for you, and it broke its promise. That was an example of what I would call gouging, deceptive practice on the part of the restaurant. And this was a bad business decision for Greuze, given an objective of profit maximisation. It wasn't your fault.

I think this also explains why the quality of the average restaurant in many tourist areas (Cannes, Nice and much of Paris and London come to mind) is so low: the assumption -- on average, correct -- is that most customers will be visiting but not returning. This doesn't mean that all restaurants in these areas are bad, and it is counterbalanced by the "cluster" effect that Porter and others speak of. But when the game is played once and only once, it's hard to see how the quality of the average joint will be strong.

I think we've had this conversation at least once before, so I'll stop here.

[Fat Guy]

I encourage restaurants to maximize profits. 

I think we should keep quiet on that point, because if you want to maximize profits you 1) shouldn't open a restaurant in the first place; and 2) if you open a restaurant it should be several McDonald's franchises.

[cabrales]

But sometimes this fails -- as I think it did in the Dumaine coq au vin episode that you described in another thread. You went to the maximum to select the restaurant and then signal your discrimination and interest. The restaurant promised to do the same for you, and it broke its promise. That was an example of what I would call gouging, deceptive practice on the part of the restaurant. And this was a bad business decision for Greuze, given an objective of profit maximisation. It wasn't your fault.

On the Greuze episdoe, I don't blame Greuze because I do not expect restaurants (even expensive ones) to be deliver perfection. The Greuze episode resulted from several factors, including (i) mistake on the part of the person initially taking my reservation, when I communicated clearly about the request for a coq au vin and received assurances, (ii) my own failure, due to having had too good a time at another restaurant, to call earlier than the night before to confirm, and (iii) the restaurant's mistaken inferences about my level of culinary knowledge and expectations. The "coq au vin" outcome was poor, and I do believe this restaurant was, unusually in my experience relative to other venues, trying to pass off a non-coq au vin dish as one. However, that is not gouging. That is responding to an unfortunate situation, on the part of the restaurant. I would not have chosen the same response, were I in the restaurant's shoes. However, the response was a reasonable one (not a justified one, though). For example, how many of their guests would really discern the difference? Pragmatic, at least.

The issue for me is profit maximisation in the short term versus the longer term, a one period game vs a game played out over multiple cycles.

I note that the Greuze episode might not be an example of profit maximization. For example, the restaurant might appreciate that most of its diners from out of town travel to Tournus deliberately to eat there. (Tournus is a very small town) Thus, perhaps the restaurant did not want to disappoint me, and thought the best approach would be to present a "coq au vin".

Also, I do not mind if a restaurant is seeking to maximize profits over the short term. Who am I to say that that is an inappropriate strategy? The market forces may well discipline a short-term profit maximizer who does not have an appropriate cuisine, as imperfect as the market might be. If the market is imperfect because most diners cannot tell the difference between an appropriate cuisine or not, then the problem is not with the strategy of restaurants.

Edited January 22, 2003 by cabrales (log)

[kitchenbabe]

I agree with most of you here....

I think upselling is a good thing when it enhances the customer's experience. It lets the customer know that the salesperson (whether it be a server or retail clerk) is aware of what the customer is looking for. But you HAVE TO KNOW YOUR PRODUCT. I've been in restaurant and retail for a number of years, and while I am by no means an expert, I have seen alot of different companies and their approach to upselling. It works in theory.

If I have a guest come into my restaurant and sit in my section, for example. He/she starts off by ordering a glass of Chardonnay. As I take them through our daily features (another point here...be descriptive), they decide on our Prime NY Strip. Now. Here I have a choice. I can run down our list of Chardonnays, and suggest our newest label, OR I can ask them since they are ordering a steak, if they'd like to try our newest Cabernet label. OK, the Cab is a little more expensive than the Chardonnay they picked out, so yes my check avg and tip percenage is a little higher. But, I've also listened to my guest, and I know my menu well enough to know that this my be the better wine choice. My guest is appreciative, and therefore I may have created a relationship not only between the restaurant and this person, but created a regular for myself, someone who trusts me and will dine with me everytime he comes in.

THAT'S upselling. You create not only more sales, but also the relationship with the guest. There's nothing deceptive. I run a business. I want to make money. He wants to spend money. He's willing to spend a little extra to have "the perfect meal". I know how to guide him to make those choices. You have to read your guest and know your product.

It's not rocket science, just human relations.

[Jaymes]

I encourage restaurants to maximize profits.

I think we should keep quiet on that point, because if you want to maximize profits you..... 2) if you open a restaurant it should be several McDonald's franchises.

Or maybe not.

[Deacon]

Sometimes "upselling" is an invitation to friendly haggling. In the case of the hotel room mentioned earlier, say that it's late in the evening. The staff are not in a favorable position to foist an upgrade upon you, but you (because of the time) are in a great position to get a better room (downbuying?). Since the better rooms are going to be going vacant, now could be the time to ask for a free upgrade, or simply a reduction in price. They can hardly object to your haggling, since earlier in the day, when they had favorable positioning, they were willing to upsell you themselves. The customer is usually at a major disadvantage as far as haggling goes, since the hotel/restaurant/whatever has all the information and you have none. If you're dealing with a salesman who needs just one more sale to get that reward incentive, you have the advantage, but most of the time a customer doesn't, and can't, know about it. And certainly the business has no incentive to tell him.

The business about the guy on the speaker at the drive-through who asks if you'd "like to try a brownie/hot apple pie/new expensive sandwich today" etc. etc. before you've even said a word--well, that's just irritating. It just raises my ire unnecessarily, and you'd think raising a customer's ire would not be a desirable thing. One of these days, I'm going to start the conversation with "no, I don't want a hot apple pie."

[Wilfrid]

I do get downsold often enough, and that's a surefire winner if a restaurant wants me to think of eating there again.

Quite recently, I was perusing a wine list which offered several 1999 burgundies from the same village. The prices were different, but not extravagantly so. I only recognized one of the producers, so I asked the sommelier which of the wines he would recommend. If he'd picked the one at the top of the price range (he didn't), that would have been upselling by the definition on offer here (the Shaw definition, let's say). It would never have occurred to me to think of it as upselling. Upselling would be the sommelier turning the pages and showing me his vertical of La Tache instead. Whether I'm out of step with the marketing literature or not, I don't feel I am being upsold unless there's some scale involved and some hint of intent.

I think I'm largely immune to it, anyway.

Come to think of it, about the most common piece of upselling I come across is "'Ow about a nice glass of champagne?" as I arrive at the table. Silly really.

Edited January 27, 2003 by Wilfrid (log)

[mags]

. Good upselling is when it's done to insure you get a better meal with the aim of making you a regular customer. Bad upselling is when the aim is one shot at your wallet. Good upselling isn't thought of as upselling the next day.

Do they have to be mutually exclusive? I own a bookstore, and a huge percentage of our sales are "hand sells," meaning books the customers buy on our recommendation. As an owner, I always want to boost sales. But at the same time, I got into the book business because I love turning people on to books I think they'll like.

I only recommend books that I genuinely believe will appeal to my customers' tastes, but this is far from pure altruism on my part; our customers come back precisely because we make good recommendations. So in the long run, I'm motivated by both money and the desire to improve my customers' experience. I don't know that it's any different in restaurants.

[quanneur]

A link for anyone who's interested in reading more about the Coca-Cola/Olive Garden "Just Say No to H2O" campaign that was mentioned on the first page of this thread:

http://www.commondreams.org/headlines01/0902-01.htm

[Biscotti]

I go to a restaurant once in a while (it is owned by David Liederman of David's Cookies) and they employ an interesting tactic that bothers us tremendously. When you order a glass of wine they pour it for you and then leave the bottle on the table obviously in the hope that you will pour more on your own. I assume their intention is to tempt you to have more than one glass of wine. And, it usually works!

When I am sure I will not be wanting more, I tell them to take the bottle but I am sure other customers just let them put it on the table and end up drinking more.

Has anyone seen this in any other restaurants? How do you feel about this method of upselling?

[tommy]

i took in a meal at michael jordan's the other day. the sales pitch was so constant and so sad, it put a damper on the evening. "can i start you off with some of our [over-priced and crappy] garlic bread?" "can i offer the table some bottled water, perhaps sparkling?" "dessert? no? well i'll just bring the menu over anyway to see if you get tempted." no, dickhead, bring the check like i just asked. i want to get out of here!!!!!

[Pan]

I go to a restaurant once in a while (it is owned by David Liederman of David's Cookies) and they employ an interesting tactic that bothers us tremendously.  When you order a glass of wine they pour it for you and then leave the bottle on the table obviously in the hope that you will pour more on your own.  I assume their intention is to tempt you to have more than one glass of wine.  And, it usually works!

[snip]

Has anyone seen this in any other restaurants?  How do you feel about this method of upselling?

No, I've never experienced this anywhere. I consider it manipulative and sleazy, and I mean it! It borders on the genuinely dishonest, and some customers might misinterpret the gesture. A glass is a glass, period. I would be very upset if I ever thought a restaurant had a policy of instructing its wait staff to leave a bottle of wine on the table deliberately, not in order to comp it but in order to try to induce me to pay more without engaging in any spoken dialogue with me. Most likely, though, I'd simply call the waiter over and say "Didn't you forget to take the wine bottle?" Then, if his/her response were something other than "Wow! Thanks for telling me!", I'd probably decrease his/her tip - depending, of course, on what happened for the rest of the meal.

Do they also pour a cup of coffee for you without asking if you want one, or refill your cup without asking if you want a refill, and then charge you for it? Or do they simply leave the coffee pot on the table?! Just where is this Mickey-Mouse operation?

[Pan]

Also, I do not mind if a restaurant is seeking to maximize profits over the short term. Who am I to say that that is an inappropriate strategy?  The market forces may well discipline a short-term profit maximizer who does not have an appropriate cuisine, as imperfect as the market might be.  If the market is imperfect because most diners cannot tell the difference between an appropriate cuisine or not, then the problem is not with the strategy of restaurants. 

Cabby, you're much more tolerant than I. It may be a good business strategy for restaurants in tourist areas to sucker and cheat their mostly one-time visitors, but when I've been a victim, it's made me angry. I'm a customer, after all, and I don't like feeling cheated, disrespected, or otherwise treated with contempt. And I think there's a fine line between a restaurant deliberately cooking to the lowest common denominator and some really bad experiences I've had, like a good Romanian restaurant trying very hard to charge me for a bottle of wine I never drank (they lost a likely repeat customer) and a restaurant in Budapest charging me an exhorbitant sum for mineral water (they had put it in their menu, but I never thought to see whether they were charging more for mineral water than they charged for dishes!). OK, the attempted cheating in the Romanian place was literally an attempted theft, but what of the place in Budapest? And what of that satay place in Kuala Lumpur that served great satay but lost the possibility of dozens of repeat visits from us because they tried to claim that we had eaten more skewers of satay than we had (showing us skewers that must have been taken from other tables)? I'll give you another example, which involves dishonesty but no attempt at literal theft: I went to a Vietnamese restaurant when I was in Hong Kong. When I made my order, the waiter encouraged me to order another dish. I said: "Isn't the dish I already ordered large?" "No, small." "Are you _sure_ another dish wouldn't be too much food?" The upshot was that the waiter seemed so sure and was so convincing that I ordered another dish that looked interesting, the restaurant got I think 30 more $HK for that one meal, there was enough food to feed a horse, I had nowhere to store leftovers in the Youth Hostel, I was very angry, and the restaurant lost out on a repeat visit, which the food would have warranted.

[macrosan]

When you order a glass of wine they pour it for you and then leave the bottle on the table obviously in the hope that you will pour more on your own.  I assume their intention is to tempt you to have more than one glass of wine.  And, it usually works!

My local Italian restaurant, where I have lunch twice a week, now does this for me. Of course, I'm a regular and they know me very well. They know I normally have two glasses of wine with a meal. So after a while, the boss asked me if I'd like to have the bottle left on the table, and clearly stated that they'd charge me according to how much I drank. Incidentally, they effectively charge me by the inch so it's not a two glass charge if I've only had one and a half glasses

Of course that's quite different from your experience, Biscotti. You're right to be aggrieved. In fairness to them, of course, you don't have to be tempted

Incidentally, isn't this the basis on which sushi restaurants operate ? You take what you want off the conveyor, and then they charge you by the number of empty bowls ?

[Biscotti]

Just where is this Mickey-Mouse operation?

The restaurant is Luna in Mt. Kisco, NY (Westchester County).

I have also been to David Liederman's other restaurants in NYC (although I believe they are both closed. One was called Chez Louis) and I don't recall this practice being done there.

By the way, the restaurant has good food and since there is a shortage of such restaurants in Westchester, we continue to go back. I am not sure we would do so if not for this. That is how angry their doing this makes us.

[Pan]

Why don't you simply tell the waiter/waitress to take the wine bottle away and order another glass only if you decide to do so later?