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Friday, November 6, 2015

THE COUPON SHELL GAME

BRYCE ON ECONOMICS

- A clever way to conceal inflated prices.

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Our weak economy is cause for concern for just about everyone. It is difficult to avoid the subject in either personal or professional settings. We're all looking for creative ways to survive in these difficult times.

Recently I was talking to a merchant in my area who complained how the vendors who serviced his store were slowly and quietly raising their prices as if nobody was paying attention. My friend certainly was. When he confronted them about their escalating prices, they all claimed they had to do something to offset the customers they had been losing recently. In other words, they were making the merchant pay for their problems. For my Liberal friends, this is what is commonly called "Inflation."

Nonetheless, my friend agonized what to do. He had cut costs as much as possible, tried different types of advertising, experimented with changes to his product line, etc. Regardless what he tried though, he still suffered from fewer patrons visiting his shop. Desperate for ideas, he came up with an idea that went against conventional wisdom, he raised his prices. Actually, he devised a rather slick idea whereby he doubled his prices but introduced a coupon program whereby customers could save 25% if they redeemed the coupon within a certain number of days. This worked remarkably well. More and more customers started to frequent his store thinking they were going to save a lot of money. The reality though was they were actually paying 75% more than before.

This hunger by the consumer to "save" money worked so well, my friend couldn't print coupons fast enough. After awhile, he didn't even have to print his coupons in the newspaper as word quickly spread customers could pick them up in the store. Then, my friend had a stroke of genius, he arranged a 50% sale on Mondays which were normally his slowest day. This resulted in a tsunami of customers flooding his store causing him to hire some additional help.

As a postscript, I visited my friend not long ago. He claims his store is doing fine now and is able to laugh about it. To hear him tell it, coupons are nothing more than a clever shell game to conceal inflated prices and driven by consumer greed. You know what the scary part is? It works.

Originally published: October 7, 2010

Keep the Faith!

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Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim's columns, see:   timbryce.com

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Copyright © 2015 by Tim Bryce. All rights reserved.

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