The Hidden Truth in Advertising
I’ve spent my career in the area of Business to Business (B2B). When a business is looking to buy something, they often look at the Total Cost of Ownership (TCO). This includes the purchase price, the installation cost, the costs to maintain. In the case of trucks, it heavily includes the resale value of the used truck in four to five years. In fact, most businesses have a process for capital purchases that includes special forms and various approvals. Lots of people review the purchase before a decision is made. In the personal purchase realm, things can be a bit more emotional than logical. I use the term “logemotion” that combines the three words LOGic, EMOtion and acTION.
I have two interesting purchases recently that are very different than B2B purchase decisions. My wife and I bought some eyeglasses this year. We selected some frames for my wife and the lenses were intended to be the same materials and coatings as the last time she bought glasses at the same place. They had all that information in their computer. After various checks of prices and costs and reimbursements from insurance, we were quoted a price. We plunked down one-half on our credit card and left to wait a couple of weeks while the lenses were made. When they came in, my wife went to pick them up and found a problem with one pair. She decided to keep it and buy another pair as originally intended. She chose not to pay for anything up front since they had messed up the order to some extent. Those came in and she picked them up with no problem. Somehow, they did not get paid for when she picked them up. And, I don’t think the other half of the others got paid either. We started to get notices of past due amounts and we were sure we had paid for everything. Once work allowed time for me to investigate, it was pretty clear that we had not paid for everything. But, it was also extremely confusing to determine what had been paid. The invoices now were not in terms of the finished eyeglasses, but with individual charges for lens one and lens two, coating one and coating two, etc. I thought we were buying a finished pair of eyeglasses in a frame. The optical people were selling me individual processes. It would have been “logical” to me, if they had simply listed on the invoice Pair of Eyeglasses One and indented the items that were part of that purchase, much like a factory would have an indented bill of material rather than a single level. Why do they go through this? I suspect it’s so that “emotion” can be part of deciding you really want that anti-glare coating and you really want those extra light plastic lenses and that really cool looking transition lenses. They certainly got me to take “action” and purchase the assembly of custom processes and parts.
Another example of a different approach to advertising and pricing came this week when I went to have a slow leak in my left front tire fixed. After working on my computer for a while and waiting for two other vehicles ahead of me, the young man called me up to the counter. Turned out I had not noticed a bulge in a rear tire that was actually quite significant and needed to be taken care of. You’d think it would be just a patch on the left front and one new tire on the rear. That’s the logical part of it. But, logic also suggested that I needed to change all four tires because of the age and the the all wheel drive aspect of the vehicle and the need to match the tires. Since I happen to be an engineer that does know something about tires, I did some some logic in his approach. Okay, the tires are more than half way through their life, let’s change them all. That’s when it got a bit more complicated and emotional. The cost of 4 new tires was crazy costly it seemed. Turned out it was because I had these cool looking, oversized sport rims. Now emotion kicks in which you would not expect. After five years of driving this vehicle, I’ve done a bang up job of scratching the nice looking aluminum wheels. I had previously checked into having the ground and polished to make them cool and good looking again. Another emotional issue, was that those cool looking wheels and tires, rode like crud, especially when going over the numerous speed bumps around town and in parking lots. So, I checked into getting new wheels and new tires, but not sport wheels. It worked out pretty well with an inexpensive new wheel, tires that are on sale that fit the new wheels, etc. But, that’s not the end of the price quote. Then there was the small credit for the damaged tire under warranty, a charge for recalibrating the legally mandated tire pressure monitoring system, etc. Not much logic to that part of the sale, other than that it is required for safety.
So, the tire company gets to advertise that the tire is only say, $99 each. Yet, by the time you replace all four tires on your vehicle, you’ll be paying in excess of $600 to get everything done properly. Instead of advertising a full price which would drive people off, you start out low and incrementally increase the price using a combination of logic and emotion until the purchaser finally takes action. LOGEMOTION.
It starts out “as low as” and goes up from there. I guess it IS what it IS–Incremental Sales and the Total Cost to Own upfront.