I just saw an advertisement for a teeth whitening product. In an overly enthusiastic manner a woman said something along the lines of, "and the only reason we can give a free sample is because we know you'll love our product!" Ever after I saw the inflated shipping charge that might explain it all, I was still unsettled by what I had just heard.
Two terms I got familiar with earlier today while doing industrial organization work came to mind. The things we buy can be categorized as either 'shopping' or 'convenience' goods. Shopping goods are relatively expensive purchases like washing machines or beds that are made infrequently. These are often classified as durable goods, another way of saying you're stuck with them. Naturally characteristics like speed, color, fashion-ability, and quality are valued more for shopping goods. Convenience goods are things you buy regularly and make up a small fraction of your total spending, like toilet paper. Although, I'd have to say referring to it as a 'convenience' is selling toilet paper a little short.
Whitening systems from my understanding are actually quite expensive and take a long time to see results. However, they are regularly sold in multiple small parts that you have to buy many of over time. Basically this is a shopping good being sold as a convenience good. This is a good part of that funny feeling I got while the bad actress on T.V was telling me why her company was offering a $39.95 free sample.
Experience goods and search goods are another way of classifying the things you buy. Shoes for example, are search goods because you get to try them on in the store and know exactly what you're buying. Store brand chili however, you'll have to stomach the risk and buy to find out if its any good. That's why chili would be considered an experience good. Teeth whitening devices don't claim to work overnight and are a classic example of an experience good. So why else did that teeth whitening commercial's claim leave a bad taste in my mouth? I realized you can't tell if the product works from just the free sample. The company wouldn't count on people liking a sample of a product they don't even get to see work. Maybe economies of scale or a loss leader strategy (selling at a loss to profit on likely subsequent purchases) is really why the company gives free samples. I don't know for sure, but I'm not buying what she was saying or selling.
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ReplyDeleteInteresting. Sounds like they are acknowledging it is an experience good by risking the free trial and betting your "experience" will be positive. I can't imagine the free trial wouldn't be enough to see SOME results. Otherwise they are just throwing away their products for free. I doubt the excessive shipping cost covers the entire product so it seems to me they are acting in good faith. It would be shady if you couldn't buy the product in increments and had to risk it all on one purchase. Seems like a great way to gain market share without putting customers at risk to me.
ReplyDeleteI think they're depending on the satisfaction of just doing something that's supposed to help your teeth and associated placebo effects. It's like whitening toothpaste. When you get a sample you don't really observe what the products supposed to do. You dp get to see if you like the taste, texture, and 'clean feeling' after. You don't get to see the whitening results. Similarly with this system, I admit the user gets some experience with the product. They get to see whether or not they like how to apply the product or how likely they are to stick to the plan. I still stand by the idea that "knowing they'll like it" is more of an attempt to influence the customer than a the business justification for giving the free samples.
ReplyDeleteAnd why doubt the shipping cost's exceed the value of the product? They could be charging much above marginal cost. Also, the biggest goal of companies with products that you stick to and purchase frequently, such as toothpaste, is brand loyalty. There's plenty of very similar teeth whitening products, people often leave their decision to whichever they use first. When you include these benefits, certainly you aren't "throwing away your product" when you give free samples
ReplyDeleteI would contend that there is a significant difference between teeth whiteners and whitening toothpaste. Taste, texture, and 'clean feeling' after are all grounds you judge a toothpaste on. The whitening aspect is just a matter of product differentiation on the side of the company to stand out on the shelf. Nobody buys whitening toothpaste thinking "great this will whiten my teeth'. They buy it thinking "I'm buying toothpaste anyway, might was well give this one a shot because it might whiten my teeth". People buy teeth whiteners with the specific purpose of whitening their teeth and if it doesn't work they shouldn't continue to use it.
ReplyDeleteIt sounds like your problem is more with the irrational decision making process of the consumers. If people are ignorant and lazy enough to just stick with the first product they use why shouldn't the company adapt to the market base it is trying to please?
What marginal cost are you referring to? I agree the shipping cost is probably more than the total cost of shipping but assuming it is more than the total cost of producing, marketing, distributing and shipping the product is an excessively extreme assumption to make. I'm not saying its not possible but its quite a stretch. If the product was that drastically cheap they could undersell the rest of the market and take most of the market share.
I just don't see why this company is any more malevolent than the rest as this is a very common marketing promotion.
An economics major? "Ohhhhh" ::totally upbeat & perky::
ReplyDeleteBtw...I'm all about search goods and teeth whiteners
::Warning:: this comment with be really girly.
ReplyDeleteAs I was reading this cosmetics came to mind. Of course there are stores like MACYS and Sephora that will let you test colors before you buy them but they are also so much more expensive. If you are going to buy your make up anywhere else for a more reasonable price (notice I said more reasonable and not at all inexpensive) you have to take your chances with what you are getting. More often than not I find myself spending $12 on a lip gloss only to find after I have tried it on that it is the absolute wrong color for me. Honestly by the time I have found the perfect color I have probably spent almost $100 dollars searching for it and I probably only have a years worth supply before they discontinue it and the search begins again... fuckers.