The allure of “great” deals...
Build-a-Bear ran a great promo deal yesterday for kids – stop by a store and you can get a bear for the price of whatever your age is. Of course, the whole theory is to get people in the store buying more accessories for those bears.
The promo was such a smashing success the Company couldn’t fulfill the promise of the promo for everyone who wanted it. Lines snaked around buildings and a good number of kids ended up not getting their bear for the price of their age.
On one hand, it was a great promo – the Company got a lot of attention yesterday. On the other hand, the promo left people unhappy and not getting what they wanted. From a customer satisfaction perspective, this isn’t a great position to be in.
As a parent who cares about personal finance, I am fascinated by this promotion. We didn’t stand in line for the bear but it was a topic of discussion between my wife and me on Wednesday night. Fortunately, our kids weren’t aware of the promo. Had they known they would have wanted a bear.
On the surface, this promo sounds like a great deal – get two bears for really cheap (the sum of my kids ages). But the reality is the deal isn’t as sweet as it sounds – there is no way we would have walked out of the that store with just two bears. We would have spent money buying at least some basic accessories for the bears as I'm sure most customers did. So suddenly what sounds like a good deal quickly adds up to something more.
On the personal finance front – this can be a problem for people who are committed to maintaining a budget, but get pulled into the “really good deal” promo space offered by so many merchants. Costs always seem to add up to more than what they seem on the surface. First, you have the cost of the bear, plus the tax on the top. And then you buy other stuff to accessorize the bear. Not to mention anything about the cost of driving to the store and the value of your time standing in line and waiting.
The goal of the merchants isn’t simply to give you, the customer, a good deal on the promotional product. The hope is you will buy some other things while you are in picking up your promotional item. And the psychology of the marketing theory behind this is sound. Playing to human nature, we intend to buy item A, but then we see item B and C and figure, “why not, we are here, and it won’t add THAT MUCH to our bill.”
That is the real rub. We intend to spend $6 or $10 and we end up spending $15 or $20. It doesn’t sound like much sometimes, but it adds up over time. The merchant is happy – because they’ve sold more products than they otherwise have sold, and you are somewhat pleased initially because you feel like you got a good deal.
But then you get that credit card bill, or you go to reconcile your checking account – and you realize that you have done this several times over the course of the month. Your budgetary controls were thrown out the window because it felt like a good deal, and you don’t have anything left over at the end of the month – or even worse, you end up carrying a credit card balance over to the next month because you spent more than you should have.
As you attempt to think through your budget, here are a couple of tips to remember when you see that deal that feels too good to pass up:
- Ask yourself if you really need the promo item. So often we're convinced we need something because it’s on sale, not because we really need it.
- Does the promo item have value over the long haul to you, or will it just add to the clutter to your home. If you will use it only a few times, and then set it aside and forget about it, do you really need to spend the money and buy it?
- Don't be fooled by fancy marketing. Promo deals are about getting you into the store or on the website with the hope you will buy more. Human nature is such that once you are in on the promo deal, you very easily may be tempted to grab that other item or two you weren’t planning to buy, well, just because you are there so why not?
- Be very aware of what your budget is. If you go to buy the promo item, and that is what is in your budget, stick to it, don’t buy more.
So next time you hear about that good promo deal, think twice about it. Add up all the costs associated with it (time, money, gas, etc.) - not just the cost of the item itself.