Error rates: Errare est humanum (get it?)

A fascinating part of any business is the study of error rates.

Human beings are inherently fallible, especially when it comes to mundane, everyday tasks. It has been estimated that for simple tasks, like entering numbers, people have an average error rate of 2 percent – or in other words, try to punch in 50 digits in a row, and you will get one of the digits wrong.

In bars and nightclubs, the error rate is very likely higher. Poor lighting makes visual recognition more difficult. Loud music impedes spoken – make that shouted – communication. And on average, at least one of the parties in any given interaction is either drunk, tired, on drugs, or all of the above. How often does a cloakroom employee hand out a jacket to the wrong customer? How often does the bartender get the order wrong? And how often does he or she give out the wrong change? It probably happens a lot, but my guess is that a lot of bar owners do not know how often it happens, or what it costs them in total. It is probably seen as the cost of doing business.

It doesn’t have to be, though. Take the cloakroom as an example. At closing time, the typical cloakroom turns into a scene of utter mayhem, as armies of drunken, washed-out guests lay siege to the poor employees to get their overcoats NOW. Some guests have lost their ticket stub during the evening. Others are too drunk to remember what their own overcoat looks like, and will happily abscond with whatever they are handed. No wonder that coats occasionally end up in the wrong hands.

Customers, of course, utterly hate when this happens (I know – I’ve tried it). It is also annoying to the club, who has to deal with irate, jacketless customers, some of which may demand compensation for their loss. (As an aside, I’ve seen cloakrooms where a sign said, ‘We can’t be made responsible for your personal belongings when using the cloakroom‘. Now, what’s up with that? Imagine the same thing in a bank: ‘Thanks for depositing your life savings with us. Of course, we are not accountable for what the hell happens with them.’)

One club I visited in London (incidentally, the same in which I was offered drugs with alarming regularity) had found an elegant solution to this problem. When I handed in my jacket, they not only gave me the usual ticket stub – they also asked what my initials were, and noted it on their part of the ticket. When I came to retrieve my jacket, they asked me again what my initials were before handing it over. This simple precaution probably saved them and their customers significant amounts of aggravation on a nightly basis.

Similar to this, there are lots of small tricks or routines which can make your bar or nightclub work better. Simple things that can reduce the error rates of customers and employees alike, and that will improve both the customer experience and your bottom line. Your employees are probably already doing some of them, but is it done systematically? Are the tips and tricks shared? And are you and your employees periodically reviewing the bar’s operations with an eye for your error rates, to track their costs and to see if you can find new ways of reducing them?

If not, maybe it is about time to start doing so. Here’s three quick questions to get you started:

• Which errors are regularly committed in your bar, by either employees or customers?
• What are these errors costing you, in terms of both time, money, and customer satisfaction?
• What could you do to reduce them?

P.S.: Even highly trained professionals commit mistakes, and sometimes with severe consequences. According to an article in New York Times, doctors-in-training suffer an average of eight accidental needle stings during their five-year training period – not a comforting thought, especially in H.I.V. wards. Also, when performing arm or leg surgery, it has now become common practice to draw clear marks on the limb in question while the patient is still awake. This is done to reduce the occurrences of doctors operating on – or ampultating - the wrong limb, something that has happened more often than you want to know about.

P.P.S.: And yes, it is on purpose that the Latin part of the blog title is misquoted. The correct expression is ‘errare humanum est’ (meaning ‘to err is human’).

Online restaurant bookings

Table booking at restaurants is about to go the same way as the airlines – not south, but onto the internet, led by a company called OpenTable.

Interestingly, while making it possible for people to book restaurant tables online, the service also provides the restaurant with salient information about the guests. As it says in the New York Times article about OpenTable:

Doug Washington, a co-owner of Town Hall, said the notes were not just helpful, they are occasionally indispensable. Next to the name of one regular, who has a habit of bringing in women he is not married to, is an instruction to make sure the man’s wife has not booked a separate table for the same day.

Another frequent guest asks the restaurant to send over dessert compliments of the chef but to put the charge on the guest’s bill. Of another, who takes many of his first dates to Town Hall, the instructions read, “Do not treat like a regular!”

Hilarious. And a great idea. The question is, when will someone make a similar thing for cool nightclubs?  

Getting people to eat more (or less)

Interesting blog post on one of my favorite blogs, Collision Detection by Wired writer Clive Thompson, about how the size of plates in restaurants can manipulate us into eating more:

http://www.collisiondetection.net/mt/archives/2007/05/_when_youre_try.html

Of course, it is interesting to consider whether this can be used to reduce the purchasing costs of food in restaurants – use smaller plates, and the customers will eat less. The many initiatives to fight obesity will probably also consider this good news.

Drugspotting: “Do you want pills?”

Yesterday, I went clubbing in London with a bunch of friends. Despite having been in London for six months, it was my first visit to a real techno/house club.

As we arrived in the door of the club, we were thoroughly searched by the security people, who were checking for drugs. They were also taking away chewing gum (which otherwise tends to end up on the floor), and – perhaps a tad zealously – confiscated two highlighting pens that I carried in my coat pocket (I tend to travel well armed with writing utensils). It seems some of the regulars had a passion for writing graffiti on the walls, although I suspect that tagging your name with a cheery green highlighting pen would not necessarily earn you the maximal amount of street cred on the techno scene.

Highlighting antics aside, I was impressed by their thoroughness. I’m new to the techno/house scene, but it seemed as if they were serious about not allowing drugs in the club. I liked that – old-school as it may sound, I am strongly opposed to drugs. So, imagine my surprise when for the rest of the night, I was repeatedly – perhaps every 20 minutes or so – approached by people asking “Do you want pills?”. The plural ending revealed that we were not just talking about happy clubbers trying to share the joy. This was pure business; these guys were walking pharmacies. But it got me to wonder: how had they managed to get all of their pills into the club in the first place?

After a second, as I realised that my speculations were taking me in the direction of grizzly scenes involving sealed packages and bodily orifices, I decided to ask one of my more techno-savvy friends about it. His answers made me understand that I had perhaps been a bit naïve about the whole drug thing.

In essence, drugs are a permanent and ubiquitous fixture of the clubbing experience. The majority of the guests want pills; my friend told me that in his estimation, maybe two thirds of the guests were on some kind of drugs. And of course, where demand is, sooner or later somebody figures out how to get the supply up and running. This begs the question: how are club owners really disposed towards drugs? In a market as competitive as the nightclub scene, are we to believe that club owners wholeheartedly try to keep their clubs drug free, at the risk of disappointing two thirds of their customers?

Well, maybe not; maybe they just chose to turn a blind eye to it. But if that was the case, why the detailed security checks? It might be a cynical view, but I strongly suspect that club owners search their customers for drugs, not because they want to prevent drug trafficking, but because they want a monopoly on it.

On a side note, my friend explained to me that there are typically many different types of drugs in circulation – some hard, some less so. The difference, he said, was that “the soft ones are not mind-altering drugs – they just make you happy.” I’ll let that one stand for a second.

The Economics of Supersizing

Today’s New York Times has an good article on the size of food servings in fast food restaurants – below, a summary of some of the most interesting points (link to article at the bottom):

• When big servings are so ubiquitous, it is because they are profitable for food chains, allowing them to leverage economies of scale. Food comprises about a third of the total cost of running a restaurant, and the costs of spillage – the amount of food you have to throw out at the end of the day – is a key success factor that is easier to keep under control, the more food you move over the counter. Also, restaurants can charge relatively more for supersizing the meals. For this reason, “everybody has a vested interest in trying to make you think that what you eat is more important than how much you eat” (“What to Eat”, North Point Press, 2006).

• When asked, customers may say that they want to have more healthy items on the menu, but when it becomes time to actually buy the food, they tend to skip the healthy option in favour of the big, unhealthy meal. A good example of the dangers of relying on what customers say, especially about their future consumption – “I’ll eat healthier next week” – which may be more like New Year’s resolutions than anything else.

• The amount of food that people eat in any given meal is not just determined by their hunger level. If you serve bigger servings, people will eat more. A study found that consumers who were given 50 percent more of a pasta dish ate 43 percent more than those with a smaller portion.

• Customers see big size as a sign of value, even if they don’t eat it all. This is reminiscent of a fact found in book publishing, where it has been established that buyers are willing to pay more if books are thicker – go below 150 pages or so, and it becomes very difficult to convince the consumer that the book is worth paying the standard price for. (This, of course, punishes the concise author in favor of the verbose one, and leads to the publication of unnecessarily lengthy books.)

Read the whole article: “Will diners still swallow this?”.

Frank and the Hidden Cost of Strawberry Daiquiris

Let’s say that you are the lucky owner of a prosperous bar called “Frank’s Beer and Daiquiri” that sells only two types of drinks, namely beer and (you guessed it) strawberry daiquiris. Interestingly, you have a crazy bartender called Frank who insists on deciding what people should drink. A customer will approach the bar and ask for a beer, and Frank will tell him, “No! You vill be having ze daiquiri, or else!” Besides having seen to many World War Two movies, Frank is a bit of a prima donna, but for some reason, your customers love it, and they actually drink whatever he orders them to.

Now, you are interested in maximising your revenue from the bar, so you examine which of the two drinks you make the most money on (and hence, which drinks you should ask Frank to ‘recommend’ to people). A brief calculation tells you the following:

• A bottle of beer costs you three dollars to buy from the wholesaler, and you can sell it to your customers for four dollars. Ergo, you earn a dollar every time you sell a beer.
• The ingredients for a strawberry daiquiri are more expensive, costing you six dollars. But the great news is that you can sell it for eight dollars, making you two dollars every time you sell a daiquiri.

From this, you draw the conclusion that Frank should be recommending the daiquiris to everybody. Right?

Well, maybe not. Because once you take a second look at the issue, you discover something else: making a strawberry daiquiri is considerably more time-consuming for Frank than popping open a beer bottle. This is no problem when Frank has lots of time, say, in the beginning of the evening. But when the bar begins to fill up, the picture changes, because now, there is a queue at the bar: Frank’s time has suddenly become the bottleneck, limiting how much you sell (Frank, being a sociopath, will not let other bartenders help him). And by observing the bar carefully, you discover that Frank can sell three beers in the time it takes him to sell one daiquiri. In other words, it seems that you are better off having Frank sell nothing but beer.

So far, so good. But then, another issue comes into play. It turns out that if your female customers are offered nothing but beer, each of them drink fewer drinks over the course of the entire evening. There’s just something about beer that makes them feel bloated and ready to go home after four bottles. And once the girls leave, it is only a matter of time before the guys take off as well, preferably after slapping each other around for a bit. As to the daiquiris, however, the female customers actually think the strawberry is healthy for them, so they guzzle them like no tomorrow and stay up all night, for a total sale of eight daiquiris per customer. Acknowledging this, you once again order Frank to sell only daiquiris. This finally maximises your revenue from the bar, and all seems well.

But of course, a new problem arises: since you no longer serve beer, all the ruggedly handsome coal miners that used to frequent your bar will disappear in search of a less posh place to chug down their after-mining pints. And to your chagrin, you discover that the wealthy and attractive thirty-something women who used to frequent your bar only did so because they secretly fancied the manly coal miners. These women leave as well, and suddenly you are left with nothing but effeminate philosophy students and the teenaged girls that mysteriously fancy them, and neither can afford to drink anything but mineral water, since they spend all their money on mind-altering drugs. Tough luck. You decide to fire Frank and sell drugs instead, starting an illustrious life of crime and passing outside the remit of this blog’s subject.

Now, when I made you suffer through this story, it is because I want to illustrate three things.

• First, detailed numerical analysis can be helpful. It can help you get a precise understanding of the cost structure of your bar, and this can in turn help you make more money.
• Second, numerical analysis should complement, not substitute, your common sense. You need to consider the numbers alongside more intangible factors like your bar’s atmosphere. Steering by the numbers alone is a Titanic kind of move, only without the Oscar nominations.
• Third, try to experiment and notice what happens. Bars and nightclubs are complex systems, and it can be difficult to predict ‘from the armchair’ how to improve them. In such situations, it can be a good idea to run little experiments and look closely at the results. For instance, what would happen if you rearranged the order of the drinks on the menu, or wrote some of them in larger fonts? Could you influence what people ordered? My guess is yes; for every Cosmopolitan aficionado out there, there’s probably a guy who just orders one of the three topmost items on the menu. There are hundreds of small things like this that you can safely and easily play around with, and that could turn out to make a real and valuable difference.

In general, as I have written about in one of my other blogs, Fragments of Knowledge, it is very often the case that the deity is in the detail: for more on this, check out the post called The Death of Complexity and the Rise of Small Things.

Godot, the waiter

The aspect I hate to most about bars is not the queueing. It is the standing in an overcrowded bar, waiting for the bartender to get to me so that I can order my drinks.

When you are queueing, you can at least talk to people. But when making your desperate grab for the elusive attention of the bartenders, you can’t really have a meaningful conversation at the same time. You turn your head for a second to make a pass on the nice girl next to you, and that will inevitably be the split second where you had a chance to catch the bartender’s attention. (Of course, if the girl next to you is actually responding positively to your comment, you may not need the drink. And then again, it could be a ploy to distract you while her friend squeezes in and orders drinks for them).

For me, this is the worst part about the going out experience. And from the bar’s perspective, it doesn’t make sense either. People waiting means people not being served, money not being made. So what can be done?

Professional bartenders can alleviate the problem. Once you signal your intention to order, a professional bartender will look you in the eye and nod, signalling that you are on his waiting list. Then, you are free to chat to your companions in the bar until the bartender taps your shoulder, ready to take your order. I love professional bartenders. But of course, professional bartenders are expensive, so this may not work from the bar owner’s perspective. The other easy solution – employ more bartenders – is probably not viable either. The problem is that the demand for bartenders vary throughout the evening. Since bartenders normally work a full shift, having the perfect number of bartenders at peak demand time means being seriously overstaffed during the rest of the evening. In this way, many bar owners probably think of it as a binary choice: either good service and high employee costs, or worse service but low employee costs.

Still, I don’t think bar owners are being creative enough in this area. There is no reason why these two things need to be mutually exclusive. For instance, what about fast beer lines? Supermarkets have fast lines for customers with few items. Why not have a similar fast line in bars with the most popular drinks, so that people don’t have to suffer under the specialised demands of other customers? There’s always some discerning woman out there who wants her double-sieved, seven-ingredient margarita, only without the strawberry seeds, because strawberry seeds really aren’t good for her teint. Why do I – wanting to order a simple beer – have to wait in line while her signature drink is being slowly coaxed into existence?

A fast line for beer (or other similarly simple drinks) would solve this problem. You could even make the fast-line beer a bit more expensive – I’d be perfectly willing to part with a little extra to get my drink fast. Put the price at a round number, so you also avoid deling with too much small change. It may also induce more people to order the simpler drinks, which could increase the serving speed further. A simple order like beer takes up far less of the bartender’s time, freeing him to serve other customers. Similarly, you sould also imagine a line where you could only pay with cash, to avoid the hazzle of time-demanding credit card payments.

Of course, in these internet-enabled times, it is tempting to conjure up the idea of automatic ordering systems. Customers would sit at their table, entering their orders on a touch-screen embedded in the table, and would receive their drinks a little later. But I am quite sceptical about this sort of thing. It may sound good on paper, but such systems always hold more potential for trouble than their creators imagine, especially once they are implemented in a room full of inebriated people. For instance, a screen embedded in a table would have to be both spill-resistant and capable of supporting the weight of impromptu table dancing bargoers in stiletto heels. And the implementation issues only get worse if it is a system that people are not used to interacting with; I’m sure it can be done, but it will probably take a lot of experimentation, and may not be worth the cost and effort.

But there may be a more simple solution: what about having beer-o-mats? Like cigarette dispensers, you could have Heineken or Budweiser dispensers, alleviating the pressure on the bartenders. A vending machine is a simple solution that people are already familiar with, and that could significantly reduce the pressure at the bar. At the same time, it would probably reduce the incidents of stealing. In Denmark at least, one of the biggest problems for bars is employee dishonesty: the bartenders hand out free beers to their friends, or simply pocket the money, never entering the purchase into the register. Vending machines don’t suffer from this issue (depending on who empties them, of course).

A related problem is the bar’s challenge with predicting the demand for different kinds of liquors. The demand for specific drinks varies, and a bar may well risk to run out of gin, while sitting on unnecessarily large amounts of vodka. The issue is being exacerbated by the fact that within each type of alcohol, there are many different brands; having lots of normal Absolut vodka is no good if your discerning customers strongly prefer Absolut Cranberry.

I saw a bar in Barcelona that had a clever solution to this issue. All over the bar, they had electronic screens showing the prices of different types of drinks. The point was that those prices fluctuated throughout the evening, so that if they weren’t selling enough gin tonics, they would instantly lower the prices for gin tonics until people started ordering them (and vice versa with the stuff they were running low on). I don’t know if the system worked well for them, but I liked the idea.

Also, there may be a market for temporary bartenders, working in increments of one hour. Imagine a corps of temp bartenders that you can call upon for an hour, whenever the peak demand hits your bar. The problem with this, of course, may be that bars often have peak demands at the same time. Also, the above-mentioned risk of stealing could potentially increase, since the bartenders would not have a regular relationship with the single bar. But still, it may be worth considering.

Finally, I want to relate a story that shows how bar owners can sometimes have their own reasons for providing slow service. While I was studying my MBA in Barcelona, we had a Christmas party at a rented location. As part of the package deal we had negotiated, the owner would include free bar for the entire evening – from midnight till the party ended, we were free to drink as much as we liked.

So, what does a clever (if dishonest) bar owner do, in order to make sure that he doesn’t lose too much money on the free bar? He hires only three bartenders. The evening got slightly surreal, as 250+ people crowded around a small bar with bartenders that were obviously not in any hurry to serve us. And of course, the waiting time got even worse as people resorted to ordering eight or ten drinks at the time. This, of course, is not an example of honest business practices, and would not have worked with regular customers. But the point is that there may be situations where it makes sense for bars to limit the capacity of their bars – perhaps even for honest reasons.