sure, you could lower your prices (reducing your profitability on a per item basis) but increase your overall profits through volume... If you reduce your profit margin by 50% - but triple your gross sales... you've increased your bottom line/profitability... (I tried to find a good video of The Change Bank from SNL - but no good versions on youtube... "People ask us how we can afford to stay in business just making change... the answer - volume!" lol ) also, you can lower the prices of some items (as i mentioned loss leaders earlier) to drive traffic which hopefully results in increased sales on items that you have maintained a solid profit margin (items you havent reduced)... basically make up any margin you lost on your reduced items through increased sales of full priced items... but that's not what the article says... it says they lost money on concessions... but made up the money elsewhere... He's straight up saying "Yea, we'll give you a cheap weinie so you feel good about the food - but we're gonna get your money elsewhere... look at what they get away with charging for polos and badges at the Masters" ...shell game... Also you could potentially lower prices and still increase profitability by working your overhead/operating expenses... reduce cost of goods by sourcing elsewhere.. reduce payroll by having fewer employees... reduce other employee related costs like benefits...
Something no one has mentioned with food is sunk cost. If you have 25 shops that list hotdogs as one of their goods, you probably have to have at least 4 hotdogs at each station to run efficiently. That means you have 100 hotdogs overall. Lets pretend that you overprice your hotdogs at 11 dollars a piece so you can get a whole bunch of profit on each one sold. The total cost of all the hotdogs together comes to let's say 20 bucks. So you just have to sell 2 hotdogs to make a profit, but no one in their right mind thinks it's worth the 11 bucks except for Dwight Howard. So Dwight eats one dog and now you have 9 dollars of sunk cost wasting away. Let's say you reduce the price of one of the cheapest items America has ever come up with to reliably feed its population to just 3 bucks. That's 3 dollar hotdogs ya dig? You sell out all 100 hotdogs and and you've made a profit of 280 dollars instead of losing 9 dollars. BUT let's say that some kid at each station eats all 4 hotdogs at their station then goes to their seats and throws up all over the place. Here's the kicker, you were selling nachos like gang busters but the throw up from all 25 hotdog kids resembles the nachos. Everyone in all 25 sections is now no longer buying any nachos and you were killing it on nachos. What do these nacho people do? They leave their seats, go get some expensive jerseys, shorts, Rockets posters and walk out the front door. The stadium is empty now because of the hotdog throwup, but basketball is still being played and the tickets are not being refunded. Rockets of course win the game because they're the best. That's not really in play here. What is in play? Lights and air conditioning. So custodial engineers are in 25 locations that night, but Pete the throw-up-expert volunteers to clean up because he needs the extra hours. Tilman says go ahead buddy and sends the other 24 hourly employees home. He says to Pete, 'clean those dogs up, just shut the lights when you leave'. Tilman leaves the AC on until he leaves because he hates the heat. Perfect, but the AC hasn't been fighting the creation of heat by 20,000 people in the stands anymore because of the emptying of the stadium so it didn't cost near as much. So you could jack up hot dog prices and not get thrower uppers OR you could lower the price and make a kid's day. Either way you're making money because it's basketball and people love that ****. It's all sunk cost. That being said, water is pretty easy to sell if it's cheap. It's good for people, gives people energy that they'll inject into the stadium making for an awesome atmosphere, it makes you have to pee and what's near the bathroom? Concessions. Personally, I'd have people walking the isles to sell water for cheap so fans who drink it have to eventually get up and look at the other concessions. Keep the water more expensive at concessions though. You want folks considering getting nachos... but you gotta stop putting white cheese on the nachos... it's weird and tastes odd with the meat on them. Water & Change the nacho cheese. That's all I've got.
