Fable
The monthly pass system and per-pot pricing in the old teahouse
There was a century-old teahouse in town. At first it sold only monthly passes—two taels of silver a month, tea as you please. The more tea drinkers there were, the more the teahouse earned, and the shopkeeper loved the days when people lined up on the street to buy monthly passes. Going from five people to fifty, he did only two things: set out a few more tables and boil a few more kettles of water.
After the fiftieth tea customer, problems emerged. There was a merchant who came every morning to sit for an hour to discuss business, and an old gentleman who sat from opening to closing. For the same monthly ticket price, the old gentleman refilled eight times a day, while the merchant drank only one pot. The shopkeeper did not think much of it at first, but later the clerk found that the end-of-month tea purchasing accounts did not match—tea leaf usage had quadrupled, while the total number of monthly tickets had only more than doubled.
The shopkeeper consulted the accountant. The accountant said the monthly pass has a hidden bet: you bet that the tea-drinking crowd will average itself out—some drink more, some drink less, and on average costs stay manageable. But if a large number of heavy drinkers buy monthly passes in concentration, the books collapse. He did not recommend canceling the monthly pass, but suggested adding a per-pot payment channel.
As soon as per-pot pricing launched, the merchant was delighted—he drank only thirty pots a month, and instead of paying two taels before, he now paid only one and a half taels per pot. The old gentleman looked unhappy—he had to pay three or even four taels, and came angrily to argue with the shopkeeper. The shopkeeper was prepared, brought out ten years of records of the old gentleman's refills, and said, brother, you drink three times as much as others; the old monthly ticket was actually others subsidizing your tea money.
The old gentleman was unhappy but accepted it. He chose a monthly ticket raised to four taels, with an added benefit—he could bring two friends with no pot fee. The merchant was also happy; he chose pay-per-pot, but after thirty pots a month it automatically became a monthly subscription, and any further drinking incurred no extra charge. The teahouse's tea money finally matched the tea's level of consumption.
The cleverest part was that the shopkeeper hung two more signs at the counter. One said: if you are sure you will come every day, the monthly ticket is the most worry-free. The other said: if you are not sure how often you will come, paying by the pot is more cost-effective, and you do not have to worry about paying for nothing. The two kinds of people each looked at their own sign, and no longer fought.
By the end of the year, total tea revenue rose by twenty percent, because those who used to refill eight pots alone began paying the real price. The total number of tea customers dropped from fifty to forty-two, but the shopkeeper's smile was steadier than when there were fifty—every unit of revenue finally had a corresponding cost line.