A Story About Discounts

January, cold, windy, the snow still is pretty and not yet turned black from traffic.  Walking across the tiled foyer in socks I discover the rock salt the vacuum left for a cheap laugh at our expense. The mailbox sits an arm’s length beyond the front door so there is no need to bundle up. This afternoon the mail is the normal collection of litter destined for the attractive black wrought iron recycling basket that resides behind the love seat. 

One oversized postcard catches my attention. It exhibits a photo of a stately two story home, snow-covered, announcing a limited time offer on products to protect me from the harshest winter in thirty years.  The reverse displays the smiling image of the owner of the company I worked with for years. A wave of contrasting emotions and memories always battles within me when I see his photo. He is declaring I am eligible to save $200 off a window, $400 a patio or entry door. In contrasting color the words ‘no interest for 12 months*’ is highlighted below the headline; again, available for a limited time.

I search the fine print to read the obligatory restrictions. Yes if I have already purchased the offer is null and void. In the past when a customer called asking for this new sale and discount I could easily convince them the price they paid was a better deal; always.

The rules specifically state I cannot use the twelve months no interest along with the $200 off.  It is either one or the other. The rule establishes the groundwork for a brilliant sales manipulation technique. I imaging the salespeople I trained at that company saying something similar to ‘Remember, as I shared before, the company gives me a little leeway in order to keep a smooth flow of business for the factory and installation teams. I am authorized, for a very limited number of qualifying customers only, to give you the $200 off and set it up so there is no interest or payments until 2015. I have to have a yes or no tonight.’ This is the principle of the norm of reciprocity, or rule reciprocity of sales, I do something nice for you, and you feel an obligation to do something for me. Cialdini R.B. (2001) Influence: Science and Practice (4th ed.) For further information see Kendra Cherry’s article at http://psychology.about.com/od/socialinfluence/f/rule-of-reciprocity.htm

Since they worked so hard for me I feel this must be the best deal I can get. I do not have to shop around anymore.

There are times when discounts and finance offers are not compatible.   If the offer is legitimate, (this $200 is a sales gimmick, I’ll tell you how I know in a later post) then many businesses cannot afford it. You probably know that a business has to pay a processing charge to a credit card company when they redeem their sales. A company with a large ticket may have to pay 3 percent or more. Credit card companies make money even if you never pay a penny of interest. When you see delayed interest or payments the business usually is paying a processing fee to the finance company. This company used GE Credit (a good company) in the past and that is how they operated. They are in the business of loaning the money and they need to be paid for their services.

Now sit down because here is the bottom line on how this affects you. Normally when you are paying for the tires, furniture, or plumbing repair and you use delayed payments, the processing charge is already in the price of the product! For a one year same as cash program we had to pay seven percent to GE Credit. One company forbade us to inform customers of this practice or offer a cash discount in lieu of financing. In the case of our $200 off a window coupon it would not be a wise financial decision to use the financing because you can receive a better price without it. Home improvement salespeople want you to use the financing in order to convince you to buy at the time of the presentation. Which is less, $8,500 for windows and a door or $99 a month?

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Jerry Hartman is an expert in fenestration, a 25 cent word for windows and doors, but a novice at life. He is the owner of American Renovations Ltd. a remodeler specializing in windows, doors, insulated siding, home restoration, energy inspections, metal roofing, and walk in baths in Cincinnati Ohio. He may give you a better discount if you shared your LEGO brand blocks.