Marketing and Mathematics!

Students assume that marketing is a gift of the gaband that there is no mathematics involved.Mathematics is all pervasive and marketerswhoembracemathematics and love numbers would benefit a lot. Most marketing activities wouldinvolve numbers and marketers shouldtake to mathematics like a duck takes to water! We should all love mathematics.

Sample this, once a smart alerkyAmerican marketer put out a small classifiedadvertisement in the newspapers “send me a dollar”. That is all. The simplicity of this scam was breath taking. That is all the advertisement said “send me a dollar”.

Thinking that they would be sent a great business plan or a business idea many thousands of Americanssent him a dollar each. There is a hugefortune in numbers! What they got back in return, a big fat zero.

The scandal was of such a hugehumongous proportion that there was a hue and cry in the press. The scamster was caught and hauled to the courtof law.

His explanation wasvery simple. He said “your honour. I did notcommit any crime. I just asked the senders to send a dollar and they did. I did not promise them anything. There is no scam involved”.

The presiding judge shut the fellow up by saying “there is animpliedcontract. You hadimplied that they would get something in return for the dollar that they paid”.

He punished the fellow and asked him topay back all the people who sent him money! Given below are two examplesof using numbers and getting profited, albeit in an unfair manner. But as customers we should be on our vigil and not get caught when such scams are operated.

Real estate Magic:I was traveling to work and got stuck in the traffic. Out of sheer boredom I turned into a local FM channel. I heard the over exuberant and over the board radio jockey getting excited about a very trivial issue. Luckily for me there was a commercial break.

I heard the voice over blaring "once in a life time offer. XYZ realty is offering something unbelievable. Come and book your flat at Hi-tech City (a posh locality in Hyderabad) and get a cash discount of Rs 5,00,000/-".

This was what alerted me "one out of every three lucky buyers will get this offer. The other two will get cash discount of Rs 75,000/- and Rs 50,000/-. The offer will end soon. Hurry up, flats starting at Rs 30,00,000/-".

As the innately boring chatter of the RJ started again I got thinking about this sales promotion. On the face of it, it looks unbelievably exciting. But the marketer and academician in me kicked in. If anyone gives you an unbelievable offer most probably it is true. Don’t believe it. There is a catch some where!

In the face of it the offer is very good but the catch. The offer says buyer. Which means that it is not for everyone and the customer has to commit himself/herself by paying some token advance amount (and as we all know advances are never returned). That way the buyer is captive and he/she has no escape route.

One in three will get that Rs 5,00,000/-, wonderful! On a base price of 30,00,000 rupees that is a whopping discount of nearly 17%. In the depressed economy that is a great savings. But the second buyer gets only 75,000 rupees off.

And that is a discount of only 2.5% and the third gets a discount of 50,000 rupees and that amounts to less than 2% of offered price. That much discount can be had by anybody who asks for a discount. And second and third buyers are captive and they can’t wriggle out of the deal. They will have to take it or lump it.

The total outlay for the realty company is only Rs 6,25,000/- (5,00,000 + 75,000 + 50,000) and that is on the total list price of 30,00,000 x 3 which is 90,00,000/- rupees. This works out to less than 7%. This way the company is not shelling out a major discount but is getting captive customers at a very low acquisition cost. Good for the company but is it good for the buyer? Caveat Emptor (Buyer Beware).

So the next time someone offers an unbelievable deal, don’t believe them. There is no free lunch in this world. The discount that is being offered has to come out of someone’s pocket and that pocket is inevitable the customer’s.

Even in the above deal the company has no real issue as the quoted price is only the list price and the realtor will invariably add cost of common spaces, lift cost, parking fee cost and cost of the lift and the generator on to the customer.

This way the company laughs its way to the bank and the buyer is not any wiser as he does not know how he was swindled. Ignorance is bliss.

Classified Hungama:Advertising agencies are called 15% men. This is a real puzzle. Why 15%? 15% is the commission that the advertising agencies get as commission from the media for making the client advertise in a particular media vehicle. 15% commission is paid only to advertising agencies and not to individuals and companies who approach the newspaper/media vehicle directly.

But in many cases 15% is not paid on classified advertisements. Why? The following is the one of the reasons why 15% commission is not paid to the advertising agencies.One of the local news newspapers in Hyderabad is very popular. It gets lots of classified advertisements on a Saturday (for the Sunday issue).

The customer who wants to run classified advertisement has to approach the booking clerk. The booking clerk would calculate the number of lines and words, let us say it comes to Rs 1,000/-. He would say “you have to pay Rs 1,000/- and you would not get any discount. But would you like have 5% discount?” Naturally the customer would be interested in the discount.

The customer would be asked to approach the advertising agency. The agency then would issue a release order (a release order is an instruction from the advertising agency to the newspaper authorizing the release of a client’s advertisement. It is released by the advertising agency on behalf of its client).

The customer would be billed Rs 950/- (he gets 5% discount) the advertising agency gets 5%, Rs 50 rupees and the booking clerk of the newspaper would get 5% or Rs 50./-. Many of my readers would sneer at the idea of getting Rs 50/- .

But let us remember that the newspaper would get something like Rs 10, 00,000/- on a weekend for its classified advertisements. 5% on that would mean Rs 50,000/- for the booking clerk and Rs 50,000/- for the advertising agency. And that means Rs 1,50,000/- loss every week for the newspaper That is Rs 6,00,000/- loss for a month.

This scandal was on for many years. Finally jealous coworkers who were not given a cutspilled the beans and revealed the modus operandi it to the management who put a stop to this unhealthy practice.