The Economics of Bottomless Mimosas
What’s the business case for bottomless mimosas?
Between flutes, I’ve always wondered whether bottomless mimosas are good business for Minnesota restaurants. The answer appears to be yes.
The Atlantic’s Derek Thompson recently did a great video confirming what we all suspected: free mimosas are an effective loss leader.
A loss leader is a product sold below market cost to get customers in the door.
Loss leaders in bars are typically time-limited drink specials, like bottomless mimosas until 2 p.m.
The Encyclopedia of Consumer Culture offers a good explanation on how loss leaders work:
“Typically, retailers only offer a particular loss leader for a limited amount of time because this tactic was designed to create a sense of urgency in consumers and because retailers typically do not want to incur losses on the same item over a prolonged period.”
The sense of urgency created by loss leaders is why we drag ourselves out of bed for mimosas while showing up late to bars with all-night specials.
Thompson also makes an interesting argument that bottomless mimosa specials are less about sales and more about cheap advertising:
“[B]ottomless drinks really aren’t about the money at all. They’re about marketing,” Thompson says. “Restaurants don’t make that much money off of serving you infinite mimosas. But they do make money off of two other things: first, all the food you eat while you’re drinking, and second, and more importantly, all the food and all the drink you order in the coming months when you return to that restaurant because you had such a good time.”
Add to that the cost of the inevitable post-mimosa drinks.