THE COUPON SHELL GAME
Posted by Tim Bryce on November 6, 2015
BRYCE ON ECONOMICS
– A clever way to conceal inflated prices.
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Our weak economy is cause for concern for just about everyone. It is difficult to avoid the subject in either personal or professional settings. We’re all looking for creative ways to survive in these difficult times.
Recently I was talking to a merchant in my area who complained how the vendors who serviced his store were slowly and quietly raising their prices as if nobody was paying attention. My friend certainly was. When he confronted them about their escalating prices, they all claimed they had to do something to offset the customers they had been losing recently. In other words, they were making the merchant pay for their problems. For my Liberal friends, this is what is commonly called “Inflation.”
Nonetheless, my friend agonized what to do. He had cut costs as much as possible, tried different types of advertising, experimented with changes to his product line, etc. Regardless what he tried though, he still suffered from fewer patrons visiting his shop. Desperate for ideas, he came up with an idea that went against conventional wisdom, he raised his prices. Actually, he devised a rather slick idea whereby he doubled his prices but introduced a coupon program whereby customers could save 25% if they redeemed the coupon within a certain number of days. This worked remarkably well. More and more customers started to frequent his store thinking they were going to save a lot of money. The reality though was they were actually paying 75% more than before.
This hunger by the consumer to “save” money worked so well, my friend couldn’t print coupons fast enough. After awhile, he didn’t even have to print his coupons in the newspaper as word quickly spread customers could pick them up in the store. Then, my friend had a stroke of genius, he arranged a 50% sale on Mondays which were normally his slowest day. This resulted in a tsunami of customers flooding his store causing him to hire some additional help.
As a postscript, I visited my friend not long ago. He claims his store is doing fine now and is able to laugh about it. To hear him tell it, coupons are nothing more than a clever shell game to conceal inflated prices and driven by consumer greed. You know what the scary part is? It works.
Originally published: October 7, 2010
Keep the Faith!
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Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com
For Tim’s columns, see: timbryce.com
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Copyright © 2015 by Tim Bryce. All rights reserved.
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Wayne Brown said
I am reminded of going to Kroger and buying canned peas @ 10 cans for $10. It seemed like a deal until you saw the other brand of peas on the adjacent shelf for 69 cents each–a savings of $3.90 over the gimmick deal.
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Francis Dryden said
Hi Tim… from your piece I query “In other words, they were making the merchant pay for their problems. For my Liberal friends, this is what is commonly called “Inflation.”… Did you mean “customer” rather than “merchant”?
Actually I would say both parties to this could probably use a few years back in school. People in general seem to care about “how much I get off” rather than what they paid for something… not new.
It really burns my butt here in Mexico when I see some well-heeled NOB (north-of-border) “dickering” with a poverty stricken local over a 10 Peso trinket they couldn’t buy in the US or Canada for 10 times the price and beating him for a Peso (about 6¢ US or 8¢ CDN)… imagine how that sows the seeds of inflation here. By the way… most tip in the same parsimonious manner but they are smarter. lol
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Tim Bryce said
Good point Francis. Thanks for catching it. – Tim
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Joan Schoenling said
Yep. . . .
This has been going on ‘forever!’ I typically stay away from “Brand Names” (offering coupons) and stick to the “House Brands,” which are usually much cheaper.
Hope you are well, Tim.
Best,
joan
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Tim Bryce said
A B.H. of Boulder, Colorado wrote…
“Do you recall the point in time where car manufacturers started giving “cash back” or “rebates” on the sale of a car? It was around the time they raised the prices substantially. I always wondered WHY, but in the end, it makes them more money because they end up hiding the increased prices behind a “rebate” that doesn’t really cover the entire raise in prices.
Plus, having some retail background myself, I know that even when a store offers “50% off” or more, they are still making a profit on the item UNLESS they are using it as a “loss leader” to get people into the store where the gamble is that folks will buy more stuff that has the higher markups while they’re there.
Same question with the airlines. They used to provide you with free blankets, pillows, sodas, water, etc., on a flight. Also free bags. So, now, we have higher airline fares, but they’re also charging you for blankets, pillows, and the prices of drinks are almost as expensive as what you find in a bar – for a lot less in the way of ‘service’ associated with the drink. And, they’re charging for bags. They should be charging for people to bring bags into the cabin and allowing checked bags for free – that would stop all the abuses of people bringing bags that are too big, too many bags, and people shuffling around to get on the plane first so they could get the prime overhead spots before anyone else takes them.”
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