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Dear Saltnfire.net,
Hello, I enjoyed your recent article analyzing the Thirsty Beaver case. I’m running a similar style pub, and I’m considering launching a Happy Hour to increase beer sales. (My shop is often empty from 3 to 6 PM.) I’d love to hear Saltnfire.net’s take on this.
Sincerely
Dear Bro
Hello, sir. You’re considering a Happy Hour strategy. To start: Happy Hour is a marketing tactic to attract customers during off-peak hours by offering dramatic discounts. The goal is likely to increase revenue, space utilization, and inventory turnover.
Let’s break it down:
1. Tangible Profitability of Happy Hour
- Assume beer cost is $3, regular price is $9, Happy Hour price is $6 → profit per glass = $3
- Hours of operation: 3 PM to 6 PM (3 hours)
- Hourly labor cost: Chef $15 + Server $10 = $25/hour → $75 total for 3 hours
- To break even:
- $3 profit per glass = need to sell 25 glasses to cover $75 labor
- Assume 2 people per group, each drinking 1 glass → need 13 groups in 3 hours
- That means about 3~4 groups (6~8 people) per hour to break even
Before anything, check if your pub can realistically meet this condition. But generally, it’s tough to be profitable with Happy Hour since few people drink during the day.
2. Intangible Profitability of Happy Hour
Now let’s look at the branding and long-term effects:
(1) Dual Pricing Reduces Return Visits
From a regular customer’s view, if they pay full price at night knowing it’s cheaper earlier, they feel ripped off. “So they still make money even with discounts? Then I must be overpaying.” Even if the discount is justified, they feel like a sucker.
Let me share a personal example. I love tofu. I know that at the end of each month, my supermarket offers buy-one-get-one tofu deals. So I never buy tofu between the 1st and 20th. I wait. This is exactly how customers react to inconsistent pricing. The issue with a dual pricing system is that consumers paying the higher price perceive themselves as being exploited. Even if the lower price is justified by daytime discounts, the perception of paying more than others induces greater consumer dissatisfaction than simply paying fair value elsewhere. Your loyal customers are not insensitive to price differences. The more loyal they are, the more betrayed they feel.
New customers? They came during Happy Hour, paid $6. Now it’s $9? “Why would I come here again? I’ll just wait for Happy Hour.”
Bottom line: time-based dual pricing reduces revisit potential from both new and old customers. If your pub relies on loyal regulars (an ‘endorphin-style’ business), this strategy can backfire badly.
(2) Demand Substitution Effect
Let’s say your Happy Hour brings in daytime beer sales. But if your pub has uniqueness and scarcity value, those customers might have visited at full price anyway. So you’re not expanding demand, you’re shifting it. And losing $3 profit per beer plus fewer food orders. This conflicts with the “Scarcity Premium” strategy emphasized in Toyota Pub. We run small but efficient pubs and maintain exclusivity to improve ROI. Discounting hurts that structure.
(3) Brand Value Dilution
Chanel never discounts. Why? Because price drops = brand damage. Your pub may not be luxury, but customers think in the same way. Discounts may mean: “This place must not be doing well.” Bad for word-of-mouth. Influencer videos brag about sold-out dishes and pre-order queues for a reason. They eliminate uncertainty and send the message: “Look how popular we are. You should come too.” But if someone says, “The place isn’t busy but the bear is cheap”… Would you want to go?
Low beer prices inadvertently signal that the food may consist of poorly reheated frozen products. This approach attracts a clientele with a very low willingness to spend on dining relative to their income. (Food Limit Index). Conversely, if an establishment prepares rare menu items with meticulous care, a slightly higher beer price feels justified. Therefore, rather than discounting beer, it is more strategic to find ways to attract customers by enhancing the premium value of the menu.
3. When Happy Hour Can Work
To be fair, there are conditions where Happy Hour makes sense:
(1) Tourist or beach zones with natural daytime drinking crowds
If your pub is in a work-oriented business district, Happy Hour won’t make sense. But in areas like My Khe Beach in Da Nang (in Vietnam) or Prague’s city center, it might.
(2) Chef labor cost = $0 via finger foods or heat-to-serve dishes
Thirsty Beaver sells no food. Customers bring their own. But you probably have a kitchen. Use prepped finger foods and heat-to-serve snacks. No additional kitchen labor cost allowed during Happy Hour.
If beer is cheap and labor is expensive, the model fails.
(3) Entertainment options: Sports, Pool, Jukebox
Thirsty Beaver and similar venues offer more than drinks: games, music, pool tables. Why? Because people don’t chat over meals during the day — they play and sip casually. The midday vibe is weird. Everyone’s working. The sun’s high. To make beer drinking feel natural, you need “playgrounds” — enclosed spaces with activities.
(4) Few return customers anyway
If your business thrives on new visitors (tourists, viral SNS users), dual pricing doesn’t hurt as much. They won’t come back, so extract max value on the first visit. Also, a busy midday vibe looks good on social media. New visitors might come just because the place looks full. In fact, some American sports bars report 60.5% of alcohol sales during Happy Hour, from 2018 Nielsen data. (Source: Nielsen)
You need to evaluate rationally: Are you a repeat-visit, loyalty-based business? Or a high-traffic, one-shot pub?
4. If Not Happy Hour, Then What?
Food service is labor-intensive. In high-wage countries like the US or Korea, discounting only works if you have:
- Constant inflow of new customers, or
- Unique entertainment appeal.
If you focus on regulars and return visits, preserve your pub’s uniqueness. Don’t dual-price. Be the place that’s honest, consistent, and trustworthy. If your afternoons are dead, consider shop-in-shop delivery with another product line. Reference article here:
Or do side gigs: teaching, R&D, blogging, YouTubing, e-commerce. I run a pub and write articles. Not to promote the shop — I don’t even reveal its name. My true goal was always to be a writer. Hope this helps.
From Saltnfire.net,
Sincerely
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