May 10, 2008


How much discount did you receive?

While we always notice the extra cost attached to a service with fine print (always looks suspiciously at the number which has a star with it), the fine print with benefits is hardly noticeable.

I shop at More, the retail chain from Birla group, for groceries and other essential stuff. Occasionally, they provide cash coupons with the purchase. The scheme (well, we'll see how it is a "scheme") works as follows. They provide a cash coupon of Rs 50 on the bill of Rs. 500. Simple math tells us they are offering 10% discount. When inflation is running more than 7%, that's a neat sum.

Now the fine print. You can redeem the coupon only on your next bill of Rs 500. So, essentially, you got Rs 50 on purchase of Rs 1000. That's a 5% discount.

Since when you shopped for the first time, you must have had bill more than 500 but less than next multiple of 500, i.e. 1000. That amount doesn't get any cash coupon. So, in a hypothetical case, purchase of Rs 990 will give a coupon of Rs 50. The same applies when you redeem the coupon. You see where we are heading. Since the bill will shoot Rs 500 mark by a margin which doesn't get any discount coupon, actual discount may be less than 4%. Still good, but not as cool as it seems at first glance. Somebody didn't say ignorance is bliss just like that.

There is a lesson here. Our minds perceive actual cash discount different from the percent discounts. eg. Pizza Hut routinely run the campaign of 50% off on next pizza if you order a top-range medium pizza. Now, if there 2-3 people, they don't need the second pizza and feel let down with such offer. Pizzahut is trying to to increase individual order size instead of increasing volume. They can increase the volume if they adopt More scheme.... er, strategy. If they give a nice shiny coupon with Rs 50 printed on it, people will give it a thought before deciding to "waste" it.

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