How To Avoid A Bargain Trap
(An original article from Money Is Not Important)
The following is a description of upselling (via Wikipedia):
Upselling (sometimes ‘up-selling’) is a sales techniquewhereby a saleperson induces the customerto purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale. Upselling usually involves marketing more profitable services or products, but upselling can also be simply exposing the customer to other options he or she may not have considered previously. Upselling implies selling something that is more profitable or otherwise preferable for the seller instead of, or in addition to, the original sale. A different technique is cross-selling in which a seller tries to sell something else.
Recently, my wife and I decided that we needed a new laptop. Our desktop computer is five years old and sounds like a jet engine when you start it up. After completing my research, I finally decided on a MacBook Pro that I found for $999 at a local computer store. They’re listed for $1,199 at the Apple Store, so I was pretty excited to find such a sweet deal. Several stores listed these computers for $1,099, but Micro Center was the only one that had it for under $1,000.
If you’re not familiar with Micro Center, it’s basically a computer geek’s wonderland. Unlike Best Buy, which carries appliances and car audio, this place only carries computer stuff. You can find anything from new computers to miniature Christmas trees that plug into your USB port.
Now, when I see a deal like this, I always ask myself, “Why is this place selling this for less than any of their competitors?” It could be a variety of reasons, and you need to identify it before you make your purchase.
First, it might not be the same product. Be sure to check the specifics of the item you intend to buy, and make sure they aren’t selling last year’s model or a refurbished version. Next, there may be hidden costs. If you are buying online, be on the lookout for inflated shipping costs or membership fees that may apply. Third, they may simply be a company that is struggling to keep up with the big boys, or they’re new to the market and looking to attract customers.
This last reason is obviously the most advantageous for us, but we still need to be careful. Unless a store is a single-location, mom and pop type store, they are probably using this tactic to try and sell you the item you want, plus 10 other accessories that you didn’t even know existed. Once you tell the salesperson that you’d like to buy something, you’ll find yourself in the Upsell and Cross Sell Gauntlet.
Think back to my description of Micro Center. They sell new computers, but they also sell anything and everything else computer related. Their goal isn’t simply to sell me a computer and send me on my way. They want to sell me a computer, and a ton of other junk to go with it.
So there I am, standing at the counter with the salesman that thought he had just “talked me into” buying this computer. Little did he know, I’m an informed consumer and I knew I was going to buy it before I even walked in. I also discovered that this guy earns a commission on anything I buy. Once he exposed that little tidbit of info to me, I knew that I had to take any of his recommendations with a grain of salt.
However, this guy was good. You can typically tell that a sales rep isn’t on your side when they try to talk you out of the item you want in order to sell you something that costs more. He didn’t do that. Instead, he told me how great of a decision I was making, and I didn’t need to go with a bigger screen or a bigger hard drive. But, before I could even get my credit card out of my wallet, he starts trying to upsell and cross-sell me. First, he asks if I need a firewire cable to transfer stuff from my old computer to the new one. “Nope.” Next, he asked me if I needed a case to protect it. “Nope.” How about an HDMI cable to connect it to my TV? “I’m good, thanks.”
Once he realized that I wasn’t interested in playing this game, he pulled out the big guns. That’s right, the service plans. Doug Jones, a professor of computer science at the University of Iowa, explained these in an interview for Bankrate.com:
"It’s like any insurance policy. The insurer wants to make money selling the insurance, and you can bet that they do on that $249 plan. On the other hand, you want the protection. If your machine breaks, you’re going to be out far more, not just in the cost of replacement, but in the inconvenience and hassle."
Assuming that the service plan is offered on a not-for-profit basis, which is very unlikely, and assuming that they simply give you a new machine instead of trying to fix anything that breaks, which is not uncommon, you can figure that a service plan costing $250 on a machine costing $1,000 is a prediction that one in four of those machines will require replacement.
The numbers are actually skewed toward computer vendors, which is no surprise. My understanding is that the normal failure rate for consumer electronics is closer to one in six.”
Apple has a service plan called Apple Care that he initially suggested, but then the salesman went into how Micro Center has their own service plan that is much better and only costs $100 more (it’s not surprising that he pushed this, considering the fact that he works on commission). Their service plan would cover me if I ever dropped the laptop or spilled coffee on it… supposedly. The sales rep will be quick to tell you that anything is covered to make the sale, but if you actually need to use the plan, they will probably reveal something in the fine print that disqualifies you. You can make your own judgment, but I personally don’t ever buy the service plan. Think about how much money you spend if you get a service plan on every piece of electronic equipment that you own. At $100 - $300 per plan, you’re going to end up spending a lot more money on “coverage” than you would if something were to break. Keep in mind that most manufacturer warranties cover you for a year if something goes wrong that wasn’t your fault. Also, your credit card probably provides you with some sort purchase protection as well.
I almost burst out laughing when I saw the shock and awe on the salesman’s face. Not only was I not buying a fancy cable or screen protector, but I had ACTUALLY REFUSED THE SERVICE PLAN. Seriously, he looked at me like I was from a different planet. In a last ditch effort to get me to buy something, he actually offered me a miniature USB Christmas tree. I smiled politely, laughed a little to myself, and walked out of the store knowing that I had beaten them at their own game.
Feel free to share your thoughts in the comments section. Have you ever run through the Upsell Gauntlet and made it out alive?