stimulate thought

Blog

Dealing with Pitfalls

How do companies continue to use price lowering and promotions? Not very well, overall.

For some, they simply begin using the clever scheme of “mail-in-rebates,” offering costumers money back through the mail at a later point if they pay full price in the store and follow a few instructions. If you’ve ever tried to receive a mail-in-rebate then you know it’s a hassle to collect full of difficult, unclear instructions. This, of course, is on purpose. Companies rely on what they call “breakage” and “slippage” to increase their profits. With the feeble instructions, people often fail to meet the standards laid out and are denied their rebate. For example, companies may request you to fill out a form, mail in your receipt and mail in a barcode from the box. The small print on the form may have specific directions which are often overlooked by costumers (like proper abbreviation) or the box may have 4 different barcodes without a clear description of which one is needed, both leading to a denial of the promised rebate. Some people know the difficulty involved and will often not bother to apply for the rebate & some people upon reviving the rebate, never cash the check. All of these ensure that the company keeps their profits while appearing magnanimous.

Some companies, on the other hand, have accepted the spiral of price and promotion and have worked it into their company model. They will release a product at a full estimated price, and when sales begin to drop they will begin reducing the price or “adding value.” They will effectively promote the product out of existence and then simply add a feature or release a new product at a now slightly higher price, starting the cycle all over again.

 

Concepts & Ideas from
Start with Why by Simon Sinek