Penny and Cents7. January 2013 by Joachim Goldberg
I shop quite often at my local hard-discounter, Penny. It is not just because the store is literally round the corner, but because one can genuinely get good value for money. The recent bonus-points promotion has not escaped my attention either; the store is offering a variety of kitchen knives, not for the manufacturer’s recommended price of €33.99 or €39.99 each, but for just €2.99. Of course, one must bring a few bonus points to the sum – 45 to be exact – and these must first be collected at a rate of one for five euros spent in the store. I can well imagine a shopper, intent on acquiring one of these knives, might arrive at the checkout with purchases totaling €14.99 and be tempted to throw something else into the basket just to get over the round number. Why forgo a precious bonus point just for the sake of a euro cent?
Bonus points and other such promotions are designed to increase client fidelity and are particularly attractive when they are associated with windfall gains. Consumer will more readily spend €2.99 for a kitchen knife when the price difference of more than €30 is made up by bonus points earned with no effort at all. It was a little puzzled when I noted that whether one opted for a brand-name chopping knife with a six-inch blade, a bread knife with double the blade length, or a peeling knife with just half, the MRP at Penny was €33.99 or €39.99. Nonetheless, the bonus points appeared to be a gift horse whose mouth was not in need of any closer inspection. By the way, one can make a quick search in the internet to see what the ‘real’ price of one of these knives is, which I did while waiting ten minutes in the check-out line. “Even if the discount is really only €20,” volunteered the gentleman ahead of me, “and the value of a bonus point is approximately 45 cents, you are still looking at a 10 per cent discount.”
So I was almost convinced: I would take one of these little booklets and collect my bonus points so I would be able to spend €2.99 for a knife I didn’t really need. But then, what about the wooden block to keep the knives in? Penny wanted an extra €9.99, with no discount or point-based purchase possible. This represented a mental loss large enough to wipe away the entire mental gain. Only later did I realise that the wooden block was genuinely a good deal. It was a shame Penny kept the details of this bargain to itself.