Look around everbody is offering you a great deal. How many offers do I get from credit card companies offering no interest or very low interest on cash advances? Visa, Mastercard and American Express all offer below cost rates to entice you to their lines of credit. Why do they do this? Traditionally if you needed a loan you would go to a bank fill out an application and get either a term loan or a line of credit, which was prime rate plus a percentage depending on your credit worthiness. Today I must get 3 to 4 offers weekly to get rates for a cash advance for prime less 3, 4 or even 5%. Are these credit card companies stupid? I wouldn’t bet on it. Take a look at the annual reports for theses companies and see that their profits are at all time highs. Today we live in a debt-ridden society where access to funds has become very competitive. To attract you they offer ridiculous rates for a limited time. Miss a payment or after your low rate period expires watch the interest rate jump to 2,3 or even 4 times the rate of prime. Coupled with the fact that people are learning to live with debt rather than eliminate it, the credit card companies now have a great long-term client where they get a great return on their investment.
Is it just the banks that play games? No, this week I purchased a new printer for my house. How do they play this game? Canon, HP, Epson and Lexmark basically give away their printers. Why? One reason could be because they are such nice corporate companies who want to give something back to each household. My belief is that they view the printer as a lost leader. Once you buy the printer they will make their profits on their consumables, namely the toner. Look around at the number of no name refill toner companies that sell compatibles at a fraction of the cost. The actual toner costs pennies; add marketing and packaging it probably raises the cost to a few dollars. It's common to find a name brand toner selling for $40.00, $50.00 and even $60.00. How do they get away with it? They market it aggressively and they put a little fear into the consumer’s mind, telling them that the guarantee will not be valid if their competitor’s toner ruins their printer. While the company running out of their basement may have an inferior product, the large generic company probably has a very safe product. Let's go to the extreme and say after using a generic toner cartridge 10 times you get a problem and it ruins your printer. The cost is still cheaper to go out and buy another lost leader updated printer with even more features. OK so I'm on to their practices and so are other people, what can the name brand printer companies do now. They are very smart people and have come out with a smart chip for the new cartridges making it harder and more expensive for someone to copy.
Here I am in my Montreal, with my printing and promotional product company Solutions Ink, listening to my customers everyday asking me for a deal. How can I cut my cost? There are no free lunches out there. Sure we can switch the brand of paper, use a cheaper press, or combine your order with someone else’s. Something's got to give; odds are you'll get an inferior product, a worse delivery date or a product that won't handle your purposes. Budgets are fine and all these consequences are acceptable as long as you know your options upfront. Deal with a reputable company who can explain the differences in price and why there are these differences. For the promotional product choices the bulk of the items are coming from China. Even in China there is inferior quality, good quality and exceptional quality. Find out what your getting and what guarantees the company selling you the merchandise offer. Wearing a t-shirt, then seeing it fade or disintegrate after one washing is not what you were expecting when you saved one dollar on the shirt and were counting on a medium term exposure for your company brand. Worse the negative quality will impact greatly on this customer's quality expectations for your product.
Nothing is for nothing everything is very calculated these days. Whether it is real deals say a pharmacy chain that offers Coke at a great price but limits you to 4 bottles. They know that the time and effort you put in to this lost leader purchase will end up more than 80% of the time leading you to buy one if not many other items at the same time at much better margins. Think a deal is too great, chances are that it is. If you are unsure compare, shop around and ask those with a higher price why this is so.
If you need help or have any questions drop me an email at email@example.com.
Steven Schneidman owns a successful printing and promotional products company in Montreal. He has worked as a finance professor at a Canadian University and has worked for a major Canadian Bank.