In Chapter 3 of my Good Products, Bad Products book, I argued that high quality products should not be insulted by the “40% off for a limited time”, or “buy one, get one free” mentality that seems to be so wide spread in the U.S. Perhaps this mentality, that apparently causes people to line up outside stores on “Black Friday” and other such "sale" days well before the store opens, may be beginning to ebb. J.C. Penney, a store that has had hundreds of sales per year for the past few years (590 last year), has just announced that it is going to lower all of its prices by 40 %, and offer only “monthly value” discounts on selected merchandise each month, and clearance deals called “best price” the first and third Friday of each month. Obviously, the every-day low prices at competitors such as Walmart have hurt them, and although some shoppers seem to love the “oh boy” nature of constant sales, others (me) find this approach to shopping a real pain. And of course, one always wonders where stores get the “full price” from which they cut. Apparently, last year approximately 70% of Penney’s revenue came from merchandise that was discounted by 50% or more.
I for one, am delighted to see this move at Penney’s happen, whether it works or not. It is time to experiment with rational, constant, and simpler pricing (I am also tired of prices ending in 99 cents).
But Penny’s is certainly not the only merchandiser in this “sale” mode. The last time I bought a vehicle, I had found what I wanted, which although relatively low cost, had the high reliability, decent fuel mileage, and lack of feature creep that I wanted. To me the quality for the price was high. Armed with all the pricing information I could glean from various sources, and awareness of all of the strange and arguable fees that appear on window stickers, I approached a sales person at a dealer that had been recommended to me. He was, in fact, both knowledgeable and reasonable, and after dealing with the questionable nature of invoice prices, installed extras I did not want, and various items that were actually kick backs to the dealer, we arrived at a price I thought reasonable. I did not want to finance the vehicle, so I would have happily paid the amount and left with the vehicle. But, at that point, after telling me that it was too bad that I had just missed a sale which would have lowered the price $1500, he told me he could give me that “discount” if I financed the vehicle. I told him again that I did not want to finance it, but now I was not as happy with the price, even though I know that much of the profit in the automobile business is from financing, so it was not surprising that they were trying to talk me into financing the purchase.
He then told me that if I financed it for the minimum loan (also $1500) there was no charge, and I could go right home and send in a check for $1500 and pay off my loan, thus saving $1500 on the vehicle At that point I realized that the U.S. approach to sales was going to triumph, even though the vehicle was a foreign brand . I filled out the forms for a $1500 loan, went home and mailed in my check, and soon got many e-mail messages from many levels of the company thanking me for paying off my loan, buying from them, etc. But a month or so later I started getting letters from banks informing me that I did not qualify for the loan.
After many phone calls and e-mail messages I found out that the company was seeking to sell my loan at a lower rate than I was to pay (standard procedure) and somehow the letters that were supposed to go to the company refusing to buy the loan at the terms the company was proposing were coming to me.
Obviously the negotiation between the company and various banks did not affect me much, since I had already “paid off” the loan. It was due to lags in communication within the system, obviously acceptable if I had taken years to pay off the loan, and confusion between my name and address and that of the dealer. But after I purchased the vehicle, I was also overwhelmed by a tsunami of obviously automatic e-mail messages from the dealer and many levels of the company thanking me for my purchase, asking me to use their service and parts centers, asking me to fill out detailed questionnaires on my satisfaction with my treatment while buying the car and with the car itself, and attempting to sell me more cars.
Did this behavior decrease my perception of the quality of the product? Sure. It took my time and tried my patience. And despite the excellent work of the sales person, I felt that if the dealer and company were playing this strange game with apparent, but not real financing, were unable to channel letters from banks to the right parties, and were unable to do a reasonable job of controlling their promotional e-mail, maybe there might be something wrong with the vehicle also.
Fortunately, it is behaving well. Thankfully, the people who design and manufacture the vehicles have different DNA from those who try to talk you into financing, can't control their correspondence, and send you automatic and unwanted love letters that add to your e-mail load.