Fake Discounts

We live in times where “buyer beware” is the law of a “free market society”. That is why your local hardware store, a specialty retail establishment, and big box stores have gone down the path of selling you a rake that has been manufactured so poorly that the handle might break the very first time that you use it. Same goes for toilet plungers, furniture, and everything else made for those who cannot afford to buy (or else choose not to seek “professional grade” products). There is no warning on product labels for most items that they are essentially disposable. In most cases you can return the item for a refund, but many people do not and that is another factor in sourcing those products.

In the service industry the value proposition isn’t a product only, the largest variable of the equation is human labor. In the practice of business, companies have the option to find what I call “the right price point” within the constraints of their own costs. However, it has become all too common for companies to inflate price points and then offer fake discounts. A discount is fake when the company is aware of the actual number that they intend to capture by a given transaction. In either case, margins relate to what people are able and willing to pay for a service and are controlled by market forces. Price point manipulation is a very real and measurable thing. Something known as “customer conversion rate” is a major factor in setting price points. Still a service company must operate within the forces mentioned to sustainably deliver value to customers and retain some portion of value for themselves.

Although dishonest, fake discounts continually prevail in the bottom end of the service industry because of the manipulated psychology of a certain set of consumers. Human beings have a drive to hunt and gather things. In marketing curriculums business majors are taught that people find gratification in “bargain shopping”. So inflating prices to offer fake discounts is rationalized as fulfilling that primary drive. Fake discounts are merely a form of flattery. It seems patronizing and truly insulting to inflate sticker prices knowing that you are really landing at the predetermined lower price point. If you are not insulted by lies, maybe that is a problem.

Fortunately, there are ways in which companies can save their customers money without having to deceive them. One such route to achieve that is “optimizing efficiency”. The division of labor and specialization is what has created the wealth of western civilization and is a cornerstone of economics. One way that services companies can optimize their operations is to offer real discounts for bundling services together or servicing two or more customers that live in proximity on the same day. In those circumstances the company is realizing a savings in travelling costs for both labor and fuel. That savings can be passed on to the customer. It is fitting and proper to do that. If company can afford to send a service vehicle and technician to sites that are thirty or forty-five minutes distant from one another, the company is capturing a higher gross margin than if it is possible to consecutively service two communicative neighbors on the same day. This is what I like to call the sophisticated hunter and works especially well for services that can be completed in a matter of minutes or a few hours, like cleaning and gardening services. Rather than asking for a discount, the sophisticated hunter calculates things like which way the wind is blowing.

In sum, supporting companies that offer fake discounts sends the wrong feedback to the same companies. It tells them that lying to their customers is acceptable. Consumer protection in the hands of governmental oversight often creates unnecessary burdens on companies, inflates prices and stifles innovation. This leaves us with “Buyers Beware”. It has been said that the hardest thing in business and in life is communication. It seems that the best place to start to improve our communication is to esteem honesty and stigmatize all things that are demonstrably fake.