It’s been an incredibly hot summer and besides having to work the entire time your kids has no school and you had the stress of having to help them with their summer. The local car dealership knows that you will need a new car and they start advertising “buy a New Car and Get a Cruise for Two”. You’re thinking this cruise is worth about $3,000 and you need a new car. This way you can kill two birds with one stone.
In reality the cruise only cost the dealership a few hundred dollars but the perceived value is much higher. rather than the dealership having to discount their cars a lot of money with the cruise they are increasing sales, increasing revenue, and minimizing their cost. The Dealership is using what is refereed to as travel incentives. And it’s not just cruises. I’ve seen Disney vacations, trips to Hawaii, Club Med, Las Vegas, and there probably are a lot more.
I used to sell on EBay and I’ve tried selling at cost and making a profit an the shipping and handling and I’ve also tried raising the price of the item and offering free shipping. With both methods the free shipping always finished first. There are some people who only search for items that have free shipping. I one bought some CaseLogic CD Wallets on a closeout for a couple dollars. I knew they were selling in the stores for $29 and up. I gave these away free with certain items and my sales for those items were always the best.
Rather than take something you would normally sell for let’s say $1000 and discounting it to let’s say $500 why not get one of these travel incentives that cost you less than $100 and bundle it with your item. Doing the math this gives you an extra $400 plus it gives the customer an item that has a much higher perceived value. Basically we are creating a win/win situation. With pricing it’s hard to go up in price. If you normally sell a cup of coffee for a dollar and you decide you want to increase the price to $3 unless you have made some improvements with the coffee the chances of you getting the extra $2 are pretty slim.
I use to sell cars many years ago and the customer is always asking for a lower price. Finally by offering a warranty for free which had a perceived value of $1000 and a cost of less than a hundred I made the sale. I was creating a win/win situation by giving the customer more and not having to give a thousand dollar discount for my dealership. It all boils down to perceived value. Just because you pay $200 for a cruise doesn’t mean it’s only worth $200.