I witnessed another very annoying “deal” being offered last week from a major retailer that I couldn’t ignore. Sears sent me an email touting a great spring deal on lawn and garden with the following terms:
“Online only. Buy More Save More on Lawn & Garden. $10 off orders of $100-$149, $15 off orders of $150-$249, $25 off orders over $250. Discount reflected in cart. Excludes: Clearance, Kmart products, Great Price Items, generators and snow removal equipment. Offer good thru March 11th, 2011.”
OK, so this is kind of moronic to have tiered pricing discounts where the higher tiers requiring a consumer to part with more money don’t actually result in any greater benefit to the consumer. In fact, it’s even WORSE to spend more money in certain cases depending on how much you spend – more on that below.
First off, the tiered pricing principle is simple. I used to negotiate this with contract manufacturers in a prior role. If we spend $1-5 Million in services this year, we get a 2% discount. If we spend $5-8 Million, we get a 3% discount and so on up to maybe a peak 5% discount for a huge spending year. This is a win-win for both parties. We end up saving more money if we needed increased spending while the manufacturer can benefit from economies of scale and efficiencies and make out even better, net of the discounts offered to us. This is the same with Sears. To cover overhead, salaries and fixed costs, they would be way better off offering say, a 15% discount on $1000 than a 10% discount on $100. So, they try to trick consumers into thinking they’re getting a “deal” in saving $25 on spending over $250, which it’s really kind of…weak. Whether selling products online or in person, this is just insulting our intelligence.
Here’s the other rub. In the tiers quoted, if you spend $100, you get $10 off which is a 10% discount. However, if you $225, you get $15 off, which is only a 6.7% discount. Wait a minute!
WHY WOULD I GET A SMALLER DISCOUNT FOR A LARGER ORDER?
This is playing to people’s stupidity, impulsiveness and the inability to pass up a “deal”, even when the joke’s on the consumer.
In order to really get savings anywhere you shop, I like to STACK MY DISCOUNTS. Here’s how:
- Step 1 – Use a cash-back credit card. For instance, you can save $100 and get 1% cash back with the Chase Freedom MasterCard – $100 Bonus Cash Back.
- Step 2 – Have Discount Gift Cards On Hand – I save 10% or more on common stores like Starbucks, Lowes, Gap, etc. by buying cards others don’t want. See this full review of various retailer discounts and how it works.
- Step 3 – Then wait for the sale. A real sale. Holidays often offer better sale prices than the one I just complained about, see how I saved over 50% on a new fridge!
With an offer this dumb, do you actually feel enticed to spend MORE money for a Smaller % Discount?