Latest / Small Business Success with Fexingo: Local Companies, Main Street Stories, and Community Commerce / How a Local Bakery Used a Sliding Scale to Feed Everyone
Transcript
- Lucas: Luna, have you ever walked into a bakery and seen a sign that says 'Pay what you can'? Luna: I have, but I always wondered — does that actually work? Doesn't everyone just pay the minimum? Lucas: That's what most people assume. But there's a bakery in Portland, The Daily Loaf, that's been running a sliding-scale model for two years. And the data tells a different story. Luna: Okay, I'm intrigued. What's the setup? Lucas: So, their classic sourdough loaf — the sticker price in most bakeries is around six or seven dollars. At The Daily Loaf, there's a suggested price of $5.50, but customers can choose to pay anywhere from three to eight dollars. No questions asked. Luna: And people actually pay above the suggested price? Lucas: More than you'd think. The owner, Sarah Chen, shared their numbers with me. The average transaction is exactly $5.50 — right at the suggested price. But here's the interesting part: about 30 percent of customers pay more than the suggested price, usually six or seven dollars. Another 20 percent pay less, often the three-dollar minimum. And the rest pay right at $5.50. Luna: So the people who pay extra essentially subsidize those who can't afford the full price. That's kind of beautiful. Lucas: It is. And it's not just altruism — Sarah told me that regulars often say they feel good knowing their extra dollar covers someone else's loaf. It creates a sense of community ownership. Luna: But does it actually pencil out? I mean, if 20 percent are paying only three dollars, that's a huge discount. Lucas: Sarah crunched the numbers. Before the sliding scale, they sold a loaf for a flat $6.50. Their margin was about 45 percent. Now, with the sliding scale, the average revenue per loaf dropped to $5.50 — that's a dollar less. But their volume increased by 22 percent, and their unsold bread — which was a major cost — dropped by 40 percent. So overall, their profit margins actually improved slightly. Luna: Wait, the unsold bread dropped by 40 percent? How does pricing affect that? Lucas: Great question. Sarah explained that when you have a fixed price, you're guessing demand. You bake a certain number of loaves, and if you're wrong, you eat the cost. With the sliding scale, more people come in because the barrier to entry is lower. And because customers feel they're getting a fair deal — even if they pay more — they buy more frequently. The predictability of demand improved. Luna: So it's not just a pricing model, it's a demand smoothing tool. That's clever. Lucas: Exactly. And Sarah also added a subscription option — you can prepay for 10 loaves at the $5.50 rate, and that gives her even better cash flow forecasting. About 15 percent of her customers are on that plan now. Luna: I love that. It's like a CSA for bread. But I have to ask — what about the psychology? Don't some people feel awkward choosing a price? Lucas: Sarah said that initially, yes. Some customers would hesitate, almost apologizing when they paid the minimum. So she redesigned the signage. Instead of a list of prices, there's a simple wooden board with three icons: a loaf with one ear of wheat, two ears, and three ears. One ear means three dollars, two means five-fifty, three means eight. No dollar signs, no pressure. Customers just point. Luna: That's a brilliant UX fix. It removes the social awkwardness entirely. Lucas: It does. And the results speak for themselves. Revenue is up, waste is down, and customer satisfaction scores — she measures those with a simple tablet survey at checkout — went from 4.2 to 4.8 out of five. Luna: So what's the catch? Is there a downside? Lucas: Sarah mentioned two challenges. First, some customers abuse the system — she estimates about 5 percent of transactions are people who clearly could pay more but choose the minimum. But she's okay with that because the overall system works. Second, the model requires more staff training. Cashiers have to be comfortable with the pricing flexibility and not judge anyone. Luna: The trust-based approach only works if the staff genuinely buy into it. If a cashier gives a side-eye to someone paying three dollars, the whole thing falls apart. Lucas: Exactly. Sarah holds a monthly team meeting where they talk about the mission. She frames it as 'we're in the business of feeding people, not maximizing profit on every transaction.' And that culture trickles down. Luna: I wonder if this model could work for other types of small businesses. Like a coffee shop, or a bookstore. Lucas: I think it could, but the key is having a product with a low marginal cost. For a bakery, the extra loaf costs maybe a dollar in ingredients. For a bookstore, the marginal cost of a book is higher — maybe 50 percent of the retail price. So the math gets tighter. Luna: True. But a coffee shop? A cup of coffee costs maybe fifty cents to make. You could easily do a sliding scale on drip coffee. Lucas: I've actually seen a few coffee shops try it. One in Seattle, called Sliding Rock Coffee, does a similar thing. Their average price is $3.20 for a drip, but they let people pay $1.50 to $5.00. They say it's been a net positive. Luna: It feels like this is part of a bigger trend — small businesses moving away from pure profit maximization and toward community stewardship. Lucas: I think that's right. And it's not just about being nice — it's a strategic moat. When a big chain like Panera opens nearby, they can't compete on price alone. But they can compete on relationship and trust. Luna: Speaking of trust and community — it reminds me of something I've been thinking about with our own show. We keep this podcast ad-free, and the only reason we can do that is because listeners like you chip in a few dollars a month. If these conversations have helped you in any way — maybe you tried a new pricing model at your shop, or you just felt less alone in running your business — buying me a coffee dot com slash fexingo is where you can throw a couple bucks in the virtual tip jar. It genuinely makes a difference. Lucas: Yeah, it's the same principle as the sliding scale. A few dollars from people who find value in what we do keeps the whole thing sustainable. And we're grateful for every single one. Luna: Alright, back to bakeries. Lucas, what's one actionable takeaway for a small business owner listening right now? Lucas: I'd say: test the sliding scale on one product, for one month. Pick something with a low marginal cost. Track your average revenue, your volume, and your waste. If you see the same patterns Sarah saw — higher volume, lower waste, stable margins — then you've got a winner. Luna: And if you're nervous about it, start with a 'pay what you can' day once a week. That's what Sarah did initially. She called it Community Wednesday, and after six months, she had enough data to go full time. Lucas: Exactly. Small experiments, real data, then scale. That's the small business way. Luna: To Sarah Chen and The Daily Loaf — thanks for being transparent with your numbers. It's rare, and it helps the whole ecosystem. Lucas: Absolutely. And if you're in Portland, go buy a loaf. Maybe pay the three-wheat price. Luna: I know I will next time I'm there. Alright, that's our show for today. Until next time, keep building something local.