Intelligent Promises

I remember a famous joke that is often written.

The shop owner teaches the new joinee about two business mantras:

1. fulfill any promise made to customers
2. refrain from making promises

I have never seen a starker example of how a business house can make intelligent promises based on pure mathematical probability and make huge profits.

The E-Zone is a popular consumer durables and electronics retail outlet. The outlet is large spacious well maintained and attracts affluent crowds very easily.

Their Promise :

" If you find a better bargain, we pay you double the difference in price"

Sounds very reassuring. I bet not many will then take to determining the true market price of a good. since it is a format of the big bazaar and other stores, customers are completely sure it has to be the cheapest. is it so really?

i went for a refrigerator purchase recently. i decided to scan the market and searched in around 7 well known outlets. and the ezone. the price difference? Rs 800 higher in ezone. while they did promise to fetch the lowest price.

now that its not the lowest price, customers can take the invoice of teh lowest price in market and claim double the difference from ezone and purchase the refrigerator.

Now The beauty of the strategy:

1. having such a scheme eliminates the need for market research for determining competition prices in market. if there are huge price variance, intelligent customers will try to make ezone pay double the difference. so that can correct the skewed price levels in a more dynamic manner. and they don need to spend good money for determining market info which they can very eficiently gather from customers and that too more faster!!!!

2. now the catch is : will ezone really correct the prices? they don need to! for the crowd coming into ezone, they will not spend a whole day in retail outlets searching for a refrigerator. they wd rather spend it in a holiday outing or a hotel or a movie! so there would be no need to correct prices. if very less customers are claiming double the difference, they wd do well to keep the prices as usual and pocket the huge margin they can get from less intelligent or lazy customers who wd rather pay than slog. that way, the probability of somebody trying to claim from ezone is very less. when the claim s are high indeed, they can correct prices.

So they have not only eliminated effortts for researching into market prices but also use probabilities to make good profits.

and thats the most smartest business model i hv ever seen.

if there can be any oversight from my part, it could only be that i researched the market when a price promotion was on....it might also be the case..but the above hypothesis could also be true. and that is for you consumers to check!

Wonder how efficient our markets are in adjusting to such variances....