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August 28, 2011

Smooth talking Salesmen!

I was traveling to work and got stuck in the traffic. Out of sheer boredom I turned into the local FM channel "Radio Mirchi" the radio channel that prides itself as being very spicy and hot. I heard the over exuberant and over the board radio jockey getting exited about a very trivial issue. Luckily for me there was a commercial break. 

I heard the voice over blaring " once in  a life time offer. XYZ realty is offering something unbelievable. Come and book your flat at Hi-tech City ( a posh downtown in Hyderabad) and get a cash discount of Rs 5,00,000/-". This was what alerted me "one out of every three lucky buyers will get this offer. The other two will get cash discount of Rs 75,000/- and Rs 50,000/-. The offer will end soon. Hurry up flats starting from a price of Rs 30,00,000/-".

As the innately boring chatter of the RJ started again I got thinking about this sales promotion. On the face of it, it looks unbelievably exciting. But the marketer and academician in me kicked in. If anyone give you an unbelievable offer most probably it is true. Don’t believe it. There is a catch some where!

In the face of it the offer is very good but the catch. The offer says buyer. Which means that it is not for everyone and the buyer has to commit himself/herself by paying some token advance amount (and as we all know advances are never returned). That way the buyer is captive and he/she has no escape route. 

One in three will get that Rs 5,00,000/- wonderful. On a base price of 30,00,000 rupees that is a whopping discount of nearly 17%. In the depressed economies that is a great savings. But the second buyer gets only 75,000 rupees off. And that is a discount of only 2.5% and the third gets a discount of 50,000 rupees and that amounts to less than 2% of offered price. That much discount can be had by anybody who asks for a discount. And second and third buyers are captive and they cant wriggle out of he deal. They will have to take it or lump it.

The total outlay for the realty company is only Rs 6,25,000/- (5,00,000 + 75,000 + 50,000) and that is on the total list price of 30,00,000 x 3  which is 90,00,000/- rupees. This works out to less than 7%. This way the company is not shelling out a major discount but is getting captive customers at a very low acquisition cost. Good for the company but is it good for the buyer?. Caveat Emptor (Buyer Beware).

So the next time someone offers a unbelievable deal, don’t believe them. There is no free lunch in this world. The discount that is being offered has to come out of someone’s pocket and that pocket is inevitable the customer’s. Even in the above deal the company has no real issue as the quoted price is only the list price and the realtor will invariably add cost of common spaces, lift cost, parking fee cost and cost of the lift and the generator on to the customer. This way the company laughs its way to the bank and the buyer is not wiser as he does not know how he was swindled. Ignorance is bliss.

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