Thursday, June 11, 2009

Well, that's mighty nice of them

I periodically receive letters and e-mails from companies that would like to sell me an extended warranty on the wife's car. They have no interest in my old "field car." Now, I'm not a financial genius. I can generally recognize a good deal on steaks or a lawn mower, but the cost-benefit factor involved with insurance policies has always baffled me. Nevertheless, it has always seemed to me that the price they quote for such coverage on the wife's car is a bit steep. But wait! I just got an e-mail from one of those companies offering me 60 percent off if I sign up now. Is it just me, or do you think maybe the people they duped into paying full price were the consumer equivalent of prison-rape victims? I mean, if they can still make money by cutting their price by 60 percent, they must've been making quite the profit at the 100-percent rate. Buyer beware.

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Blogger PRIguy said...

An episode of the Simpsons has Homer discover that for most of his life, he had a crayon stuck in the front of his brain. He had it removed and suddenly got smarter. However he quickly learned that he liked things better the other way, so he had Moe the bartender shove the crayon up his nose and back into his brain.

As Moe pushed the crayon deeper, Homer said things like, "Lottery? That sounds like a good investment." Moe hit paydirt when Homer exclaimed, "Extended warranty! How can I lose?"

We have a chain of furniture stores here in VA that offers their products at 65% off the normal price from Monday through Thursday. Wow. Then come the weekend, they manage to mark the prices down to "35 cents on the dollar." This sale is on every weekend and has been for the 24 years I've been living here.

And what about those jewelry kiosks in the malls that always have gold chains, earrings, etc. at 70% off? It's not a sale if the price never changes. And why don't you just list the low price to start with?

June 11, 2009 at 12:48 PM  
Blogger Ellipses said...

I have been running ad campaigns for a furniture store in our area and it's the same way... there are two big players in the market and they stack on the gimmicks like nobody's business...

On any given day, you can get some combination of the following:
15% off already 50% reduced sale prices
No payments until 2011
Free financing for 5 years
Scratch off ticket sale, up to 60% off
20% free furniture
Buy 699 dollars worth of furniture, get 500 dollars in free groceries
Buy 1299 in furniture get 4 day, 3 night luxury vacation in Cancun, Aruba, or Dominican Republic
Free mp3 player with purchase
Doorbuster 8am to 11am, an extra 200 dollars off a purchase of 500 or more (sale prices up to 65% off)

You'd think they were really making out when prices were "normal"... and you would be right... They have a metric that they follow for how much profit they make on each sale... if it was 50%, they could "give away" more on one week, and then have a less valuable sale the next week and end up near where they want to be...

With sales getting harder to achieve, they are going full-bore every week...

The interesting thing, though... is that they use third party promotions companies... that vacation deal "costs" the furniture store 100 bucks... so they figure a 4 day vacation as being a 100 dollar markdown on a couch... the 500 dollars free groceries sale costs 20 dollars per sale...

It's incredible on some levels... and absolutely ridiculous on others.

June 11, 2009 at 12:57 PM  
Blogger PRIguy said...

Amazing stuff. The chain here in VA also has a store it calls The Dump. The idea is that it's not fancy (it's a remodeled grocery store), that it's a big warehouse. The ploy is that the Dump's managers "screwed up" or "bought too much" or "the biggest recliner company in Italy has gone belly up!!!" and there's nowhere for the furniture to go so the Dump buys it, drastically drops the price so low that they "can't even say it on the radio." And the prices start at 65% off, and occasionally they're 35 cents on the dollar.

June 11, 2009 at 1:43 PM  
Anonymous Anonymous said...

A year or two ago, I received a telephone call from some marketer wanting to extend the warranty on my car. When I asked to think it over and look over some material, she was like, no, it has to be done NOW. At that point I bailed out and hung up. I don't cotton too well to that gun-to-your-head form of salesmanship.

--Brad Hundt

June 11, 2009 at 3:46 PM  
Blogger Ellipses said...

Priguy, I distinctly remember "The Dump" from some of our research studies in your market... In fact, when people in your neck of the woods say "The Dump," people in my neck of the woods hear it as "Dadump"...

Which means that I get to manually fix that response every time someone mishears it...

I wish they'd change the name of that You Crops (Ukrops) grocery store to something easier for dumb washingtonians to understand.

June 11, 2009 at 4:09 PM  
Blogger PRIguy said...

Sorry, Ellipses, but the Ukrop family runs this town behind its puppet regime of city council. They're old Richmond money and practically royalty here. So we can't change anything in which they are involved.

Have you ever heard the voice talent on Dadump commercials? Imagine hearing that every week in heavy rotation from Wednesday through Sunday for 24 years. And then there's "Big Monday" at The Dump. Prices are often either 65% off or 35 cents on the dollar.

One day, I plan on going into either Haynes or The Dump, negotiate about $10,000 worth of furniture, bait them along, and then start hemming and hawing about whether I should wait until the Wednesday red tag sale, or Big Monday, or the coming weekend when the prices will be reduced lower than they've ever been before. And then tell them to stick it...just like their own carefully disguised bait and switch.

June 11, 2009 at 7:03 PM  
Anonymous Anonymous said...

If the groceries would cost you $500 to buy yourself, it doesn't matter what the furniture store got them for. To YOU, it's $500 in groceries. What's the problem?

June 12, 2009 at 10:27 AM  
Blogger Ellipses said...

Right, but the perception is that the furniture store is paying 500 dollars for groceries, thus only making 2 hundred bucks on the furniture sale... but in reality, you have to send your grocery receipt to the redemption house, and they send you back a 25 dollar visa gift card (as good as cash)... you do that for 20 months, and you essentially have gotten 500 dollars in return for sending your grocery receipts in...

Meanwhile, the redemption house enters all your grocery purchases into a database and then sells that data to food companies... They will get frequency of purchase, shopping patterns, and even loyalty information... so if you suddenly stop buying Jiff peanut butter, you will get a Jiff coupon in the mail to get you back on the peanut butter train...

And that vacation sale... the redemption house has already determined that a percentage of people will pay the 99 dollar booking fee without ever actually taking the vacation... So, everybody makes money, but it's not like the furniture store is giving anything away.

June 12, 2009 at 10:37 AM  

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