Summary of Key Points
The offer of the second cup at half price is not a generous concession by the business; rather, it is a sophisticated profit-making strategy designed to take advantage of consumer psychology and cost structures. The first cup is used to cover fixed costs such as rent and labor, while the second cup, with its extremely low marginal cost (only covering the cost of ingredients), generates pure profit. By implementing “price discrimination,” the business ensures profitability from the first cup and offers a discount to those willing to buy more. Social sharing mechanisms are utilized to encourage customers to bring friends along for a deal, effectively attracting new customers for free. Even when prices are increased, the strategy of raising the price of the first cup first followed by offering the second cup at half price allows consumers to feel they are getting a bargain, resulting in maximum profits for the business. However, this approach also comes with social consequences, such as waste.
Detailed Analysis
Why Can’t the First Cup Be Sold at Half Price?
The price of the first cup of milk tea includes “fixed costs” that must be covered regardless of sales: rent, employee salaries, and the depreciation of equipment. For example, if a milk tea shop has monthly fixed costs of 40,000 RMB (20,000 for rent, 12,000 for salaries, and 8,000 for utilities), and each cup costs 15 RMB with only 3 RMB in ingredients, the shop would need to sell at least 111 cups per day to break even (40,000 ÷ 30 days ÷ (15 - 3) RMB/cup). If the first cup were sold at half price (7.5 RMB), the remaining 4.5 RMB after deducting ingredients would not even cover rent, undermining the profit structure. Therefore, the first cup is essentially a “survival expense” and cannot be discounted.
Why Can the Second Cup Be Sold at Half Price?
The cost of the second cup is much lower due to its variable costs (only additional ingredients). For instance, if each cup originally costs 15 RMB and is now sold for 7.5 RMB with a 2.5 RMB profit margin, this extra revenue does not need to cover fixed costs, resulting in pure profit.
Why Not Just Offer a 25% Discount?
The business avoids a direct discount to target two different customer groups precisely: those who buy only one cup and those willing to buy more. By offering the second cup at half price, the shop earns more from each additional purchase. This strategy takes advantage of psychological factors such as the “anchoring effect” (the first cup’s higher price makes the discounted second cup seem even cheaper) and the loss aversion (the perception of missing out if you don’t buy).
How Does Social Sharing Help?
The half-price offer encourages customers to bring friends, acting as a free marketing channel. Research shows that this strategy significantly increases sales: the return on investment is twice that of regular discounts, and the proportion of customers buying more than one cup rises from 15% to 40%, leading to an 80% increase in daily traffic. Additionally, 60% of new customers would have otherwise bought only one cup. The business saves on advertising costs and even benefits if some customers (such as singles or socially anxious individuals) decide not to buy.
How Does Price Hiking Work?
In 2026, when milk tea prices increased nationwide, the half-price offer for the second cup remained in place. The strategy works by first raising the price of the first cup to set a new psychological benchmark (e.g., from 12 RMB to 15 RMB), then offering the second cup at half price, making the increase seem less significant. This trick makes customers feel they are getting a discount while actually covering costs and retaining existing customers.
The Social Cost of This Pricing Strategy
Despite appearing cost-effective, this strategy leads to waste: 45% of customers who buy two cups end up discarding the second one. Millions of cups are wasted daily, consuming resources such as tea leaves, milk, and plastic cups. Consumers feel they are getting a deal, but in reality, they are being influenced to buy more beyond their actual need.
The Real Way to Save Money
The best way to save money is to avoid buying unnecessary items, even if they are on sale.
(Overall length: approximately 1,500 words)