6 ms·

I wonder how often managers forget that you can often make more money and profit by lowering prices.

jonas21 3y ago
I think you mean: you can often get more users by charging less than what it currently costs to provide a service. I doubt managers forget this. It's just that you need backers with very deep pockets (the government in this case, VCs in Uber's case) to make it work.
- baron816 3y ago
  That’s not what I mean.
  - qwytw 3y ago
    You can't imagine this could ever be profitable though?
    - baron816 3y ago
      I just mean that when you lower prices, more people will buy it, and they’ll buy more of it. That can more than offset the lower margin on a per item purchase. If your train has 200 seats, it’s better to sell 200 tickets at $65 per ticket than it is to sell 100 at $100 per ticket.
      - qwytw 3y ago
        Of course, but if operating a train costs you $10 per seat and you start charging $5 it will never break even.. And the article says: "€49 a month ‘Deutschlandticket’ has led to a 25 per cent rise in passengers on national railway company Deutsche Bahn's regional services" and a daily (regional) ticket costs about €20-50 depending on area. I mean obviously it might very well be worth doing this for other reasons but somebody will have to subsidize the lost revenue for various transport companies.
    - hyperhopper 3y ago
      Anybody that has ever taken a 101 economics class knows this is true. Look up elasticity of demand.
      - qwytw 3y ago
        > Anybody that has ever taken a 101 economics class knows this is true. The first 20 minutes of one? i.e. before arriving at concept of 'marginal cost' also I doubt demand for public transport is necessarily that elastic, short term anyway. As the article says traffic for regional trains only increased by 25% despite the price decreasing much more than that (e.g. a single day ticket previously cost 20-50 euros depending on area).
    - constantcrying 3y ago
      It can not be. Unless you think that transport agencies suddenly figured out how to make everything work for half the price. The government just subsidizes the losses. That is the explicit plan, profit is not intended to happen.
- hef19898 3y ago
  DB is not VC funded like all those food delivery shops so.
  - fantyoon 3y ago
    Instead its owned by the Government which can borrow an infinite amount of money and does for all kinds of reasons. Right now they spend 1.5 billion Euro each year for the Deutschland Ticket[1]. I am super happy about the ticket and think its a good thing. But lets not pretend its financing would be possible without heavy government spending. [1] https://www.bundesregierung.de/breg-de/aktuelles/deutschlandticket-2134074 https://www.bundesregierung.de/breg-de/aktuelles/deutschland... (German)
    - Moldoteck 3y ago
      Just like financing road infrastructure
zwieback 3y ago
The article says that they are losing so much money that it's not sustainable.
- lesuorac 3y ago
  Where? The only actual claim of losing money was about the 9 euro ticket.("the ultra-cheap pass cost the state too much for it to be extended.".) The "unsustainable" comment was a theory from May which should be trivial shown (or not) by now but definitely not a claim by the article. ("There’s a question mark over how long this year’s €49 pass will last, with transport bosses warning in May that it may be unsustainable too.")
- PartiallyTyped 3y ago
  It's a public utility, it doesn't have to be self-sustainable if it is already covered by taxes, and provides mobility in other ways, e.g. cheap transportation means more to spend on holidays locally. Furthermore, a reduction in car emissions means lower healthcare costs. Not everything has to make money.
  - robertlagrant 3y ago
    Well, everything needs money. You're right that some of the money here is extracted from people whether they use the service or not, but it's not great. > Furthermore, a reduction in car emissions means lower healthcare costs. Not necessarily - imagine a pandemic where people could only use public transport.
    - s1mplicissimus 3y ago
      he says "reduction", you respond to "removal". i think that is called a strawman :) but you are right, everything needs money. so it ends up being a political issue where ideally we democratically figure out how much tax money we give to the train operators
      - robertlagrant 3y ago
rasz 3y ago
Except they are still losing money on this scheme, and what you propose works only in case of huge demand and competitor. Without competition limiting supply and rising prices makes more business sense in the short to medium term. In this instance its not about profits, even approaching even would be a huge win to environment, labor market, local industry and infrastructure.
- hutzlibu 3y ago
  There are competitors to the train, buses and private cars.
constantcrying 3y ago
It is literally kept in existence by government funding. My local transport agency (state owned) effectively charges a third of what it did before. Obviously they are taking enormous losses on this, which are financed directly by the federal government.

I think you mean: you can often get more users by charging less than what it currently costs to provide a service. I doubt managers forget this. It's just that you need backers with very deep pockets (the government in this case, VCs in Uber's case) to make it work.

baron816 3y ago
That’s not what I mean.
- qwytw 3y ago
  You can't imagine this could ever be profitable though?
  - baron816 3y ago
    I just mean that when you lower prices, more people will buy it, and they’ll buy more of it. That can more than offset the lower margin on a per item purchase. If your train has 200 seats, it’s better to sell 200 tickets at $65 per ticket than it is to sell 100 at $100 per ticket.
    - qwytw 3y ago
      Of course, but if operating a train costs you $10 per seat and you start charging $5 it will never break even.. And the article says: "€49 a month ‘Deutschlandticket’ has led to a 25 per cent rise in passengers on national railway company Deutsche Bahn's regional services" and a daily (regional) ticket costs about €20-50 depending on area. I mean obviously it might very well be worth doing this for other reasons but somebody will have to subsidize the lost revenue for various transport companies.
  - hyperhopper 3y ago
    Anybody that has ever taken a 101 economics class knows this is true. Look up elasticity of demand.
    - qwytw 3y ago
      > Anybody that has ever taken a 101 economics class knows this is true. The first 20 minutes of one? i.e. before arriving at concept of 'marginal cost' also I doubt demand for public transport is necessarily that elastic, short term anyway. As the article says traffic for regional trains only increased by 25% despite the price decreasing much more than that (e.g. a single day ticket previously cost 20-50 euros depending on area).
  - constantcrying 3y ago
    It can not be. Unless you think that transport agencies suddenly figured out how to make everything work for half the price. The government just subsidizes the losses. That is the explicit plan, profit is not intended to happen.
hef19898 3y ago
DB is not VC funded like all those food delivery shops so.
- fantyoon 3y ago
  Instead its owned by the Government which can borrow an infinite amount of money and does for all kinds of reasons. Right now they spend 1.5 billion Euro each year for the Deutschland Ticket[1]. I am super happy about the ticket and think its a good thing. But lets not pretend its financing would be possible without heavy government spending. [1] https://www.bundesregierung.de/breg-de/aktuelles/deutschlandticket-2134074 https://www.bundesregierung.de/breg-de/aktuelles/deutschland... (German)
  - Moldoteck 3y ago
    Just like financing road infrastructure

zwieback 3y ago

The article says that they are losing so much money that it's not sustainable.

lesuorac 3y ago
Where? The only actual claim of losing money was about the 9 euro ticket.("the ultra-cheap pass cost the state too much for it to be extended.".) The "unsustainable" comment was a theory from May which should be trivial shown (or not) by now but definitely not a claim by the article. ("There’s a question mark over how long this year’s €49 pass will last, with transport bosses warning in May that it may be unsustainable too.")
PartiallyTyped 3y ago
It's a public utility, it doesn't have to be self-sustainable if it is already covered by taxes, and provides mobility in other ways, e.g. cheap transportation means more to spend on holidays locally. Furthermore, a reduction in car emissions means lower healthcare costs. Not everything has to make money.
- robertlagrant 3y ago
  Well, everything needs money. You're right that some of the money here is extracted from people whether they use the service or not, but it's not great. > Furthermore, a reduction in car emissions means lower healthcare costs. Not necessarily - imagine a pandemic where people could only use public transport.
  - s1mplicissimus 3y ago
    he says "reduction", you respond to "removal". i think that is called a strawman :) but you are right, everything needs money. so it ends up being a political issue where ideally we democratically figure out how much tax money we give to the train operators
    - robertlagrant 3y ago

rasz 3y ago

Except they are still losing money on this scheme, and what you propose works only in case of huge demand and competitor. Without competition limiting supply and rising prices makes more business sense in the short to medium term. In this instance its not about profits, even approaching even would be a huge win to environment, labor market, local industry and infrastructure.

hutzlibu 3y ago
There are competitors to the train, buses and private cars.

constantcrying 3y ago

It is literally kept in existence by government funding. My local transport agency (state owned) effectively charges a third of what it did before. Obviously they are taking enormous losses on this, which are financed directly by the federal government.