Going "Green" to Increase Profits

One of the hottest topics among business people is how to increase profits by being environmentally friendly. There are many ways to achieve this. At hotels, for instance, by not washing towels during a guest’s stay unless the guest asks, the hotel saves both money and the environment. Green innovations can be featured in advertising campaigns to attract customers. Another potential benefit of “going green” is that it makes environmentally minded employees happy, increasing their loyalty to the firm.

A Berlin brothel has hit on another way to use environmental arguments to its benefit: price discrimination. Mary MacPherson Lane writes in an AP article:

The bordellos in the capital of Germany, where prostitution is legal, have seen business suffer with the global financial crisis. Patrons have become more frugal and there are fewer potential customers coming to the city for business trips and conferences.

But Maison d’Envie has seen its business begin to return since it began offering the euro 5 ($7.50) discount in July, Goetz said.

To qualify, customers must show the receptionist either a bicycle padlock key or proof they used public transit to get to the neighborhood. That knocks the price for 45 minutes in a room, for example, to euro 65 from euro 70.

Although the brothel says the reason for the price discount is that it wants to be environmentally conscious, it sure looks to me like the brothel is dressing up some good old-fashioned price discrimination arguments in a green disguise.

Customers who come by bus or bicycle are likely to have lower incomes and be more price sensitive than those who arrive by car. If that is the case, the brothel would like to charge such customers lower prices than the richer ones. The difficulty is that, without a justifiable rationale, the rich customers would be angry if the brothel tried to charge them more (and indeed, how in general, would the brothel know who is rich?). The environmental argument gives the brothel cover for doing what it always wanted to do anyway.

(Hat tip: Daniel Lippman)

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 24

View All Comments »
  1. Eric says:

    “Customers who come by bus or bicycle are likely to have lower incomes and be more price sensitive than those who arrive by car. ”

    Are you certain of that fact? I would say for sure in the United States, but would that fact hold true in Europe ….

    Thumb up 0 Thumb down 0
  2. Brendan says:

    I’m always frustrated by hotels parading a cost saving to them as environmental action from their guests. I’ve worked at high end hotels – their environmental performance was beyond pathetic. And then they flick the green switch to ask the guests not to wash towels, saving their staff time. When every hotel has the same greenwashed message, it’s not an innovation.

    Now the larger subject is a good one though. Surely we cna think of better examples than that.
    B

    Thumb up 0 Thumb down 0
  3. Ray says:

    I would say some wealthier people would certainly take the bus or bicycle, those that do use a car are definitely wealthy, and poorer people would definitely not be able use a car.

    Thumb up 0 Thumb down 0
  4. Andrew says:

    The question is now how much public transportation costs? Because you can easily get a transfer pass (or whatever to show you “rode public transit”), making the entire exchange cheaper, even if you drove. Or just buy/bring a padlock to act like you rode a bike. This is just a hiding of a price drop.

    Thumb up 0 Thumb down 0
  5. Phil says:

    Eric,

    It would be even more true in Europe because the cost of owning and maintaining a car is so much higher there.

    There could certainly be exceptions, but I would be very surprised to see data that contradicts Levitt’s hypothesis about the income.

    However, I also wouldn’t be surprised to learn that the brothel wasn’t thinking of price discrimination by income. They were probably just trying to attract more customers through “green” marketing.

    Thumb up 0 Thumb down 0
  6. Alex K says:

    If you had a high income, would you bother to bear the cost of making sure you used a bike or public transportation and then provide proof just to save 5 euros on an indulgence? It’s a very clever idea, and you can’t argue that there’s at least a moderate correlation between use of a car and income levels.

    Thumb up 0 Thumb down 0
  7. Mike says:

    The argument that public transportation users are mainly poor in Europe is not correct. It is precisly this kind of thinking that discourages public transportation here in the United States.

    Thumb up 0 Thumb down 0
  8. Bobby G says:

    Good idea by the brother, and a very nice analysis. Also this article’s headline makes me think of that IBM commercial with that ANNOYING song and those cartoon animals. I was ready to email them saying if they didn’t stop running those commercials I would vow never to buy anything linked to IBM again, and tell all my friends to do the same.

    Anyhow, carry on :)

    Thumb up 0 Thumb down 0