"The poster is free. You pay only $5.95 for postage and handling costs. " We know that nothing good in life is actually free. Somebody has to pay, even if only postage and handling costs. It was bad enough when you only heard this kind of stuff on TV and radio ads, not to mention print ads and coupons. Now, it's pretty hard to do much on the Internet without getting blasted with fake give-aways. Loans are offered as interest free (if you pay them off in the first year. If not, you pay ALL interest). "Free" stuff falls into categories:
- Payment by another name. For example, the item is free if you pay shipping and handling. S and H is jacked up to cover the cost of the item plus a profit.
- Free now, pay later. This one is obvious. A free cell phone? Hardly. The cost is added to your monthly service fee. The fee structure for cell phones, automobiles, houses, etc is so complex the cost of "free" items can be noiselessly added in, plus a profit. If you buy your house on a 30-year mortgage, you will pay at least 3 times the cost of the house, so watch out for "FREE" stuff there. It could be the most expensive patio furniture you ever bought. A typical insurance scam is that the insurer will give you some of your premium money back... after it sits in the bank for 6 months earning interest for the insurance company.
- Free for some, others pay extra. If you have cash, you can get a discount on big-ticket stuff. This means interest is a little higher for credit purchasers. You get airline miles, hotel or rent-a-car points, or even "cash back." If you pay interest or fees on your credit card to get these "rewards," your rewards are expensive. If you don't smoke, drink, or gamble there are perks in life that appear to be free -- especially in Vegas. Of course, those who DO indulge pay for your free stuff. And, you can end up paying extra for soft drinks. BTW, it costs restaurants almost nothing for fountain drinks. Most of the price you pay is profit. Therefore, it is easy to offer a "Free" drink and add a pittance to the cost of a hamburger and fries and still break even. Two haircuts for the price of one... only if you can convince someone to go with you. Even if it is totally free, that only means that someone else has paid the freight. Think about the free money you might win gambling. Someone else had to lose. Next time, it may be your turn to lose or pay extra.
- YOU work for free. You unofficially work for a company by selling your friends on a product or service, filling out endless surveys, providing personal information on yourself and others, becoming a walking billboard, looking at endless ads online, wading through email advertisements... Open source software is free, but you can end up paying for it in many hours you work trying to use it... wait, probably no more than if you bought it from Microsoft.
- The Barbie/GI Joe strategy. You get a free plastic doll, but the clothes, cars, houses, etc. are only available at jacked-up prices. BOGO... you get a second pair of shoes free, but only from a special "selection" of shoes the store was going to dump anyway. And look at how they jacked up the price of socks and shoe polish... not to mention the matching accessories you may need (scarf, belt, purse, dress, sash, suit, jewelry...)
You see other variations of this as well. With today's online shopping, you have access to seemingly limitless items at the lowest possible prices. You are lured in by a low price (take, for example, the CD I bought from the Amazon marketplace for 1 cent), then charged an exorbitant amount for shipping (in this case, $2.80). What did it cost them to actually ship it? The stamp tells me about a buck and a half. That's how they make money--they get you in with low prices, but make the bulk of their money through overpriced shipping!
ReplyDeleteGenius.
Correct! As you know, your shipping must either be a cost center or a profit center...too complicated to be entirely cost/profit neutral.
ReplyDeleteSo, guess which option most companies choose? Right. Most find it more profitable to discount an advertised item price (highly visible) and jack up the "handling" cost (less visible). Actually, I would pay an extra dime to get people NOT to "handle" my stuff.