Friday, August 31, 2012

Chump change, but a clever way to make more bucks

This reminds me of a tactic that UPS adopted several years ago. It didn't involve pennies...just time. A study revealed that it would be better for UPS  drivers not to make left hand turns at intersections...time was wasted and that was money lost.
"Chipotle’s Fuzzy Math: Why They Stopped Rounding Customers Out of Change"


Josh Sanburn

August 30th, 2012


The next time you’re in Chipotle, check your receipt. That’s what one guy in New Jersey did, and he discovered that the fast-casual restaurant was rounding up to the nearest nickel — and it was costing him money.

Jayson Greenberg of West Caldwell, N.J., noticed something funny on his Chipotle receipts recently. The numbers just weren’t adding up. One receipt showed several items adding to $35.24, but the “total” came up as $35.25. It happened again with another purchase that was $9.24 but was totaled $9.25, and another that was rounded from $18.99 to $19.00. So Greenberg contacted a Chipotle manager.

“He said, ‘Oh, it’s a computer program. It is just rounding numbers. It takes a little from certain receipts and gives a little to others. What do you want? A few pennies?’” Greenberg told The Star-Ledger.

It turns out, Chipotle was rounding totals — both up and down depending on the price — in high traffic restaurants in New Jersey, New York, locations in Boston and elsewhere. The rationale: counting pennies takes time, and in restaurants that often have people lined up out the door, why not just round to speed the line along?

There is actually research on this very issue. MIT physicist Jeff Gore has become a de facto spokesperson for getting rid of the U.S. penny, not just because it’s lost so much value over the years, but because it actually wastes everyone’s time in line. About a decade ago, Gore estimated that we waste $5 billion a year just fiddling around with pennies to make change at a cash register. While Chipotle’s reasoning was a bit different, it appears they believed they could get more people in the door if they could decrease time at the register.

Since The Star-Ledger investigated Chipotle’s penny-pinching, the restaurant now says that the restaurants that do round will only do so to the nearest nickel rather than rounding up. Greenberg told The Star-Ledger that after he complained to Chipotle, he returned to the restaurant and discovered a new line on his receipt: “Round -0.02.” His bill should’ve been $19.02, but he only paid $19.00. Similar receipts have shown up on Consumerist.

Chipotle’s “hidden fees” bring to mind Starbucks’ shadowy “bean fee” that was disclosed last year after a Massachusetts consumer affairs bureau fined Starbucks for secretly adding $1.50 to an order of beans that weighed less than a pound.

But if Chipotle decides to round at all of its restaurants nationwide, it could make the idea of rounding to the nearest nickel more acceptable to Americans, something that has been talked about in the ongoing debate over whether we should keep the wildly out-of-whack U.S. penny, which costs more than 2 cents for the U.S. government to make. Our neighbors in Canada will take their penny out of circulation next year, meaning every Canadian business will basically be doing what Chipotle is doing — rounding to the nickel.

1 comment:

Candy said...

Thanks for the shout out for UPS! Nice article.