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Fake Discounts

Updated: Oct 14, 2022

We live in times where “buyer beware” is the law of a “free market society”. That is why your local hardware store and the 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. The same goes for toilet plungers, clothing, furniture, and everything else made for those who cannot afford to (or else choose not to) seek “professional grade” products. There is no warning on the packaging for most items that are essentially disposable. In most cases, there is recourse, one can return the item for a refund, but many people do not and that is a major factor in the psychology of sourcing those products.

In the service industry, the value provided isn’t a product only, the largest variable of the equation is human labor. Time is not returnable. However, in the practice of business, companies have the option to find what is called “the right price point” within the constraints of their own costs/margins. Still, 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. The Key performance indicator (KPI) “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 used to manipulate the psychology of a certain set of consumers. Human beings have the 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 is patronizing and truly insulting to consumers to inflate sticker prices knowing beforehand that the company is really landing at the predetermined lower price point. If you are not insulted by lies, and if our culture largely deems such deception as harmless, that might be deeper issues at play.

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. The foundation of modern economies as a whole was built with strong durable wares. This has been eroded by short-term thinking and corporate decision-making, But it is never too late to change our minds and habits.

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 savings in traveling costs for both labor and fuel. That savings can then be passed on to the customer. It is fitting and proper to do that. If the company can afford to send a service vehicle and technician to sites that are forty-five minutes distant from one another, the company is capturing a higher gross margin if it consecutively serviced two communicative neighbors on the same day. Asking for such a sustainable deal is the action of what I like to call the sophisticated hunter. This 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 follows the rules of fair trade while enjoying real savings because of good stewardship.

In sum, supporting companies that offer fake discounts send the wrong feedback to the industries. It tells them that lying to their customers is acceptable. More or better regulators are not the answer either, Consumer protection in the hands of governmental oversight often creates unnecessary burdens on companies, inflates prices, and stifles innovation. This leaves us with the present legal situation in commerce commonly known as “Buyers Beware”. A legal framework that puts the burden of action in the hands of consumers. 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.

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