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The Ethics Behind Discounted Purchases and Other Perks

The Ethics Behind Discounted Purchases and Other Perks

Start a management degree at American Public University.

By Dr. Mark Friske
Faculty Member, School of Business, American Public University

Everyone likes to receive something extra or get something for free. Customers like to think they are getting something they are not paying for or at a bargain price.

Many people still buy the Sunday newspaper just to check the weekly ads, looking for a product at a discount price. Others look online for weekly deals or the special of the day, a marketing tactic many retailers now employ on their online sites to increase business. Some companies issue coupons or advertise lower prices online to increase sales.

Customers Want to Feel Good through Perks and Retailers Want to Foster Repeat Business

Businesses want customers to feel good that they are getting a good price not only to make that sale, but also to win repeat business. Businesses love repeat customers and realize that many purchases will make them more profits than a single sale. Most companies have a strategy to entice customers and foster repeat business.

Most customers might think they are getting special treatment when they take advantage of these marketing tactics. Actually, they are being treated like every other customer.

Let us look at how the Disney Corporation operates. Walt Disney World and its other amusement parks offers reduced rates on park passes when visitors purchase multiple-day tickets. The entertainment giant also offers discounts for multi-day hotel stays. Annual pass holders get other discounts and perks such as free parking and discounts on merchandise, food and hotel stays.

Is Disney really losing money by discounting these items? No, Disney does not lose any money by offering some perks. Granted, Disney might not see as much profit on single items sold at a discount. But what is the net overall effect on customers?

I Receive Discounts Each Time I Visit Disney, But I End Up Spending More Money than I Planned

As an annual pass holder, I know how discounts affect me. Instead of going to Disney World a few times a year, I end up going more often. Each time I go I receive discounts on many things, but the result is I end up spending more money than I planned.

So although Disney might not make as much profit on some items, the park still makes full profits on other items. Disney understands that the better job it does getting me onto its properties, the better chance Disney has of me spending and buying more. Moreover, each time I receive a discount, Disney employees will tell me how much I saved by being a pass holder.

Why does Disney do this? Just like the illusions Disney creates in its parks, Disney is also creating another illusion – that I am saving money. Disney realizes the better I feel about being treated special and cared for as a customer, the more likely I will be to spend more money.

Let’s break down just one Disney discount and see how it unfolds. If I get a discount at a Disney hotel, I won’t pay full price for that room. But I have to eat while I am there. When I pay full price for food and drink, Disney recoups any amount that I might save on my discounted room.

Let’s not forget the merchandise Disney sells at its parks and hotels. By buying something in the park to remember the trip or even something I forgot to pack, that adds to the company coffers. Even though I might receive a discount on these items, Disney is still prompting me to buy and spend more.

Disney is no different from other companies; they really do not worry about the sale of a single item. What companies do care deeply about is their overall profit, not perks.

While they give you the false sense of saving you money, they are actually helping you spend even more money. Companies love when customers end up actually spending more money than they might have planned, but they are happy to foster the illusion that you are saving.

Start a management degree at American Public University.

About the Author

Mark Friske, Ph.D., is a part-time instructor in the School of Business at APU. He holds a M.B.A. in business administration and a Ph.D. in organization and management, both from Capella University. In addition, Mark has a B.A. in pre-law from Bob Jones University.

Mark is a U.S. Navy veteran and has 25 years of management and leader experience with Apple, Citibank, UPS and other companies. He is a management and leadership consultant with Disney.