By John Prince
This holiday season I have received a spate of emails from companies promoting “Our GIFT to You!”
It was a discount off all/some/one of their products. 20% OFF our regular retail price. So, if I bought an item regularly priced at $100, it only cost me $80. Some gift!
Let’s look at this carefully.
It’s not a “gift” if it costs me money. Merriam-Webster (my choice of dictionary) says that a gift is “something voluntarily transferred by one person to another without compensation.”
It’s not “FREE” if it costs me anything. Free means “free”—like as in no charge whatsoever. Nada coin! Nothing!
I learned three maxims a long time ago when my marketing agency worked with an airline.
Maxim #1: If you’re a business and you sponsor a contest, don’t give away money. Consumers use the money to buy a refrigerator which breaks down in a few years and is left at the curb with the door off. They won’t remember you (which is the point of the contest) or the appliance.
Maxim #1A: If you sponsor a contest make the prize a trip to somewhere interesting. The winners will go somewhere, have a time (good/bad), remember you forever, and brag about the trip in their dotage.
Travel makes forever memories; refrigerators make ice cubes that melt quickly.
Maxim #2: If you have a contest and give people a prize, don’t give them a bill for it.
Our airline client was besieged with requests for free seats to somewhere as contest prizes and they asked us to look into the process. What we found was that prize winners often couldn’t take the trip because of the cost.
What cost? Getting to and from the departure airport, getting to and from the arrival airport, accommodation at the destination, food, cab fares, entertainment, and miscellaneous expenses. To add insult to injury, they could also receive a 1099 for the “income.”
The result was a new policy for consumer contests was instituted by the airline that ensured that (with the exception of the 1099) the winner actually got a free trip. Everything, including a few hundred dollars in cash, was part of the prize.
Since we’re on the subject, here’s another lesson I learned at some cost.
Maxim #3: Discounts cheapen your product. Added value enhances your product.
Human psychology is weird. People believe that if you discount your $100 product by 20%, then it was really only worth $80 in the first place, and that everybody that bought it at $100 were ripped off. So, the next time you try to sell the product at $100 your customers will howl that they bought it for $80 last time, and now you’re robbing them.
Added value means that you offer your customers something extra when they pay full price for the product. “Gift with purchase.” Buy a fridge, get a “free” pressure cooker.
They equate the value of the pressure cooker at the retail price, so the merchant gets increased perceived value. Then, down the road, you can still sell the original product at full price and explain that the “gift with purchase” promotion was over last month.
For some odd reason human psychology accepts this reasoning.
A few years ago, the auto companies got caught up in a discounting frenzy until discounts were continuous and brutally competitive. Now we have promotions like “Employee pricing” where “everyone is family and gets the employee price.” It’s not a discount, folks. It’s a nice, friendly promotion where we want everybody to be part of our happy family for a limited period of time. Then it’s over. You’re on your own again.
The next time a merchant offers a free gift that’s going to cost you money, ask them to just send you a check for the discounted amount and they can keep the product. Then send me half for suggesting the idea.
What do you think? Let me know. BTW, there’s no free gift for responding. Sorry.