Customer loyalty = discounts?

Discussion in 'After Hours Lounge (Off Topic)' started by Michael Varacin, Mar 9, 2005.

  1. Michael Varacin

    Michael Varacin Stunt Coordinator

    Joined:
    May 24, 2002
    Messages:
    210
    Likes Received:
    0
    Trophy Points:
    0
    All,

    I have an interesting question. I have been using a certain company's product for around 10 years now. It's a small company, that has a specialty market of data aquisition products for race cars. (Systems that record car and driver data.) The same people have been at the company since I first started using their systems.

    These are high end systems, with complete packages ranging from $6,000 to over $20,000. I know their prices are very high, due to the niche market and quality they offer. But I also think some of it is crazy...for expample, to upgrade a base recording box from 128k to 512k (yes, that's k, not meg), is $400! Some systems use PCMCIA memory cards that they have priced at $695 for a 4 meg card. Or a simple proximity switch used to measure wheel speed. Their price, $160, available from most electronic stores for $30.

    I have not spent much money with them over the years, other then the purchase of my system about 9 years ago. I have ordered little things and have kept in touch so they know who I am. They have some new sensors out this year I want to use, but I need to pay $1300 to upgrade the firmware and software first. So the total I am spending is around $3000.

    As a long time supporter and user of thier products, I thought they would be willing to give me some discount on the upgrade. No dice. Was it reasonable for me to expect something on this?????

    Michael.
     
  2. Jason Kirkpatri

    Jason Kirkpatri Second Unit

    Joined:
    Jan 6, 2002
    Messages:
    389
    Likes Received:
    0
    Trophy Points:
    0


    Given their limited market size and (guessing) cash sensativity, I would say that the absence of a discount is reasonable, especially since you have never bought in bulk, so to speak.
     
  3. Lew Crippen

    Lew Crippen Executive Producer

    Joined:
    May 19, 2002
    Messages:
    12,060
    Likes Received:
    0
    Trophy Points:
    0
    I think that you answered your own question. Some companies discount everything to everyone—in other words they don’t really discount—their sticker price is just overstated.

    Companies that offer discounts to selective customers do so for a very few reasons—the first and by far the biggest is for customers who have purchased in quantity or have made a large order (say five or ten systems). Other reasons for discounts are typically customers who have made effective referrals to other customers (that is if instead of you ordering five or ten systems the company felt that you had brought them equivalent new business, you could be in luck) and sometimes startup companies will give discounts to their initial customers for a long time—sort of a thank you for getting them started in business, when no one else knew about them.

    In your case a purchase nine years ago and one now would not seem like loyal customer (in dollar terms). In short, it never hurts to ask for a discount, but you really should not expect one.
     
  4. Mike Voigt

    Mike Voigt Supporting Actor

    Joined:
    Sep 30, 1997
    Messages:
    799
    Likes Received:
    0
    Trophy Points:
    0
    What's more, the pricing of the items may also reflect their bench-testing every component to make sure it will work under the circumstances. You're talking pretty heavy-duty service for electronics - not from the processing side, but from the working environment side.
     
  5. Colton

    Colton Supporting Actor

    Joined:
    Jan 12, 2004
    Messages:
    795
    Likes Received:
    1
    Trophy Points:
    0
    I used to be a very loyal Gateway fanboy. Bought all my computers from Gateway since 1995. Two years ago, I coordinated with a big company to order and install desktop computers and suggested to favor the Gateway brand over Dell. They bought several Gateway high-end systems and I was expecting a nice gift from Gateway for sending them a $10,000 business, but no, Gateway no longer values the loyality of their customers. They used to have a "Gateway Rewards" program for sending them business, but their attitude changed and I haven't bought a Gateway computer since.

    - Colton
     
  6. Shane Martin

    Shane Martin Producer

    Joined:
    Sep 26, 1999
    Messages:
    6,017
    Likes Received:
    0
    Trophy Points:
    0
    Lew offers the best advice here:
     
  7. VinhT

    VinhT Second Unit

    Joined:
    Feb 14, 2002
    Messages:
    357
    Likes Received:
    0
    Trophy Points:
    0
    My experience on a smaller scale indicates much the same. I would go as far to say that it is unreasonable to expect a discount. The loyalty discount business practice is antiquated.

    For example, there is a non-local gun store that I have been very loyal to. They have received all of my business since I started shooting. I personally bring in referrals. No discounts.

    Another example is a pricey electronics boutique shop that I am inexplicably loyal to. Thousands spent over the years in a fairly consistent manner. No discounts. (Full MSRP!!!)

    A final example is my parents and their cars. They purchased a vehicle from a salesperson at a dealership. One year later, they purchased an additional identical vehicle from the same person at the same dealership. No discount.
     
  8. DonRoeber

    DonRoeber Screenwriter

    Joined:
    Feb 11, 2001
    Messages:
    1,849
    Likes Received:
    0
    Trophy Points:
    0
    I've been going to the same comic book store for at least 5 years, bringing in lots of other customers as well. I spend about $50/week there. They used to offer a 20% discount to regular, as well as free supplies, but they've had to tighten their belts over the last few years, and those discounts and free supplies are gone. Still, the service is fantastic, which is why I go back every week.

    They do occasionally have one days sales that I can take advantage of on off days, if I'm going to be out of town during their sale. That's nice of 'em.
     
  9. Chris Hovanic

    Chris Hovanic Supporting Actor

    Joined:
    Jan 3, 2003
    Messages:
    545
    Likes Received:
    0
    Trophy Points:
    0
    I think most discounts are for the new customers. Take Cell Phones, Cable and satellite.

    i've been with the same Cell Provider for over 10 years (though the name has changed two or three times) You think they would give me a free upgrade to a phone that costs them next to nothing? No Way!! But if your a new customer "sure have a free this and a free that, In fact let us pay your bill for a month ect ect ect."

    I subscribe to Dish Network and have a 3 year old PVR that I would like to upgrade. "No sir you will have to pay full retail + for the new PVR with dual tuners and a gagillion hours recording time." But if your a new subscriber "here you go take two their small."

    Makes me wonder why I am so loyal [​IMG]
     
  10. Michael Varacin

    Michael Varacin Stunt Coordinator

    Joined:
    May 24, 2002
    Messages:
    210
    Likes Received:
    0
    Trophy Points:
    0
    So it sound's like I'm not the only one who has noticed. I was dissapointed becuase I have always spoke highly of the company, and reccommended them to others. I'm sure I helped in a few sales over the years.

    But I just sent payment for their invoice, with a big goose egg in the discount line. And I'm sure I'll do it again next time as well.
     
  11. DaveF

    DaveF Moderator
    Moderator

    Joined:
    Mar 4, 2001
    Messages:
    18,263
    Likes Received:
    1,643
    Trophy Points:
    9,110
    Location:
    One Loudoun, Ashburn, VA
    Real Name:
    David Fischer
    [​IMG] That's what, five desktop computers? That's a very modest business order, especially for Gateway. What sort of payback did you expect?

    What I dislike is when a business increases the cost for loyal customers. I had been going to a hair salon, using the same stylist, regularly for several years. Then, they implemented a new policy where they made walkins cheaper, so it was more expensive to you wait for a specific stylist. Thus, they penalized loyal customers.

    I haven't been back since.

    As for treating new customers: it makes perfect business sense. Existing customers are captured, and despite all the grumbling, continue paying for the service. The important thing, then, is to entice new customers with initial discounts. Once they are captured, the costs can increase with little risk of them leaving.

    If you want a discount, threaten to take your business elsewhere. I got a 20% reduction in my cable modem bill by suggesting DSL was a better option at the new rates.
     
  12. Aaron Reynolds

    Aaron Reynolds Screenwriter

    Joined:
    Feb 6, 2001
    Messages:
    1,715
    Likes Received:
    1
    Trophy Points:
    0
    Location:
    Ottawa, Ontario, Canada
    Real Name:
    Aaron Reynolds
    Back when I had lots of disposable income, I used to purchase a minimum of one LaserDisc a month, plus lots of CDs, at a local mom&pop place that I really liked. The people who ran it were nice, they had a real handle on my tastes in music and movies and often made fantastic recommendations, they gave me old record company promo samplers on my birthday every year and after I started bringing new people with me every time I came in, they gave me a 5% discount all the time. It encouraged me to buy even more.

    Hell, one time I waited for the truck carrying the Star Wars THX LDs to show up, bought them as soon as they could cut open the boxes (to the tune of $210), and then they gave me a lift to work AND their spare Darth Vader advertising standup.

    But I spent a lot of money, constantly, at this shop, and brought in a lot of new customers, some of whom also became regulars.


    See, I don't get this. You're saying "I spent a lot of money a decade ago, they should give me a discount!" I have customers who feel the same way, and it drives me up the wall. I have a guy who comes in once a year and demands a regular customer discount.

    Unless you feel that their product is not worth buying, I don't see a complaint to be made here. And what's stopping you from buying that small part at the electronics store for a lot less money if it's identical?

    I frequently am told that Wal-Mart is cheaper than I am. Well, of course they are. And when I suggest that the customer should go to Wal-Mart and take advantage of that cheaper price, they whine about how bad the printing work is. Well, you have two choices: cheaper and crappier, or more expensive and better. Why would I match prices with a lower-quality service?
     
  13. Michael Varacin

    Michael Varacin Stunt Coordinator

    Joined:
    May 24, 2002
    Messages:
    210
    Likes Received:
    0
    Trophy Points:
    0


    I do. I have several sensors on my car the I purchased from my own suppliers, rather then paying the huge markup they have.

    I should also mention, even though this company is small, it is not like other mom and pop stores that need high markups to survive. I can assure you, the people of this company are living large.
     
  14. Jason Kirkpatri

    Jason Kirkpatri Second Unit

    Joined:
    Jan 6, 2002
    Messages:
    389
    Likes Received:
    0
    Trophy Points:
    0


    No disrespect, but these two statements taken together imply that you are not as significant of a customer as you would believe. It's pretty hard to cast an accurate judgement on a privately held operation. Without access to the books, one would have no idea as to the scope and size of the operation. In that light, significance is all relative.
     
  15. Lew Crippen

    Lew Crippen Executive Producer

    Joined:
    May 19, 2002
    Messages:
    12,060
    Likes Received:
    0
    Trophy Points:
    0
    The point I think is if the company knows that you have been a source of business for them over the nine years. And if so, how much?

    If they don’t know and can’t attribute sales to you, you are out of luck.

    And even then it depends on the dollar volume.

    Even if they make 20% pretax profit (a pretty generous estimate), if the more than one person is ‘living large’, they must have many, many more significant customers than you. I’m not being disrespectful to the amount you spent, only pointing out what it takes to make a lot of money in a small business).

    I think that one needs at least a six-figure income to ‘live large’. In order for three people to make six figure incomes, the business needs to generate $1,500,000 each year (20% of $1,500,000 is $300,000). So the company needs to have sold $13,500,000 worth of product over the nine-year period in question.

    I don’t know your background, but if you are not aware most small business would be ecstatic to make 20% pretax profit every year for nine years.

    So if you really think that you have made a significant contribution to that $13.5M, you might expect some discount.

    Personally, my definition of ‘living large’ would be a lot more than $100,000 per year. YMMV.
     

Share This Page