What’s In It For Them?

Every time you interact with a business, you’re trading something of value for something of lesser value from them. If that were not the case, then the business could not continue to operate. Businesses cannot make a profit if you’re getting equal or greater value from them.

So, every time you use a product or a service, it’s worthwhile to spend a moment or two asking yourself the simple question that titles this post: what’s in it for them?

Let’s take television, for example. Obviously, television stations make their money by selling ads during the program. Usually, those ads together sell for more than the program costs to air, so the business makes money.

Why do companies pay for ads? Again, they wouldn’t pay for the ads if they didn’t feel they got more value out of them than they’re putting in. They pay for those ads because they’ve shown time and time again that customers buy more of a product if it’s advertised. Advertising, on the whole, makes money for the business.

“Aha, but I don’t watch ads. I’m smart. I use a DVR to fast forward through commercials.” That might have been a good idea a few years back, but the television studios have become much smarter, too. They now insert products all over your television shows. Notice the big Apple logo on that person’s laptop. See how that person is using a smartphone with a huge shining Sprint logo at the bottom? That person is driving a Ford Explorer! These are all advertisements, right inside the program.

“But television doesn’t cost anything!” It does. You pay with your time and attention, and advertisers use that time and attention to increase your recognition of whatever they’re selling. For them, this is a net gain, as they make so much more in sales if they advertise that it makes up for their costs. If they’re advertising, people are buying.

This same type of thought process goes into almost everything that you do and virtually everything you spend money on. There truly is no such thing as a free lunch. I’ll use a few common examples.

With coupons, what’s in it for them? Even with that coupon, the company ends up still making a profit in the long run. Even if they don’t make a profit on that specific sale, they’ve put their logo into your home and it’s going to stick in your mind. If you’ve bought a product once, you’ve got a chance of becoming a repeat customer.

What if I stack that coupon with a store sale? The store is offering that sale to get you in the door so you’ll buy other things, and they’re particularly good at getting people to buy more than they come in the store intending to buy. They’ll do things like put the sale item on the far end of the store or make you have to walk past a lot of advertising displays to get to the item.

With free samples, what’s in it for them? They’re hoping that you’ll buy the item, of course. However, even if you do not, they’re also hoping that the positive feeling that you get from trying the item will associate with whatever it is you’re trying and that this might convince you to become a customer now.

It goes on and on and on.

But I’m a savvy consumer. I never fall for this stuff. For many people, when they’re actively thinking about a purchase, such tactics don’t work. If you’re focusing on what to buy, good with your math, and conscious of what constitutes a good buy, you’ll make a pretty good purchase for your needs.

Often, what they’re hoping is that you’ll be making decisions when you’re tired or not feeling 100% or you have a long list. In those cases, you rely on impulse, and impulse usually isn’t the best tool to use in a shopping situation.

So what can I do? There are several things you can do, actually.

First, avoid shopping when you’re not prepared for it. If you go into a store when you’re tired or hungry or feeling down, you’re much more likely to buy things that you shouldn’t. Our family shops less than once a week for groceries, for example, and we usually do it when we’re wide awake and have a relatively full belly.

Next, justify every single thing that you buy. This is the old “ten second rule.” If you’re going to buy something, ask yourself why you’re buying it. If you can’t come up with a coherent reason, then don’t buy it. It’s important to recognize when you’re buying things because of short-term urges, such as “That looks tasty” or “I’m hungry right now” or “I’m thirsty right now.” Those things often result in very expensive impulse buys.

Most importantly, never make a move without a concrete reason that’s not based on emotion. Advertising, politicians, and other entities trying to gain influence over us try to tap into our emotions. They use cute babies, attractive people, sentimental moments, unrealistically beautiful food – anything to make us have an emotional response. The more time you spend actually looking at real information instead of at advertisements and marketing images, the more likely you are to make good decisions. Learn about what you choose to eat and wear and entertain yourself with so that you’re always making better decisions.

We’re all going to fall prey to these tactics sometimes. The key is to reduce how often that it happens.

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17 thoughts on “What’s In It For Them?

  1. Johanna says:

    “Every time you interact with a business, you’re trading something of value for something of lesser value from them. If that were not the case, then the business could not continue to operate. Businesses cannot make a profit if you’re getting equal or greater value from them.”

    Um, no. Think about it – if this were really true, nobody would ever interact economically with anyone, unless they were forced to or tricked into it. Fortunately, there’s no single measure of “value” that applies to everyone, so an economic exchange can be a net gain for you *and* for the business – each of you trades something you value less for something you value more.

    I have some time and some skill in science writing, and my employer has some money and needs some science writing to be done, so they hire me to do it. Each of us enters into this exchange voluntarily – neither of us is coerced or deceived. Then I take some of my money (which by itself isn’t much good to me) and trade it to my landlord for a place to live, and so forth.

    The main point of the post still makes sense: When it seems like you’re getting something for nothing, look a little deeper for some hidden cost you might be paying, and make sure the exchange is still worth it for you. But to think of every interaction you have with a business as a net loss for you is just bizarre.

  2. valleycat1 says:

    Another item to watch out for are customer loyalty cards, usually coupled with discounted prices on selected items, only for members. These are marketing tools for the company, not given out just because they want to give you a deal.

  3. AnnJo says:

    “Businesses cannot make a profit if you’re getting equal or greater value from them.”

    As Johanna says, this is a bizarre formulation of what happens in trade. It’s actually completely the opposite of what happens. Businesses that do not offer you a better value in their product or service than the money you hand over to them will go broke, because you won’t hand it over.

    And another reason businesses use loyalty cards, coupons and other discounts is to take advantage of the varying degrees of price sensitivity among customers. If some people will buy a can of soup for $2.59 whenever they want it, while others will only buy it at $1 and will stock up at that price, coupons and sales allow businesses to extract top dollar, and higher margins, from the first group while not losing the volume the lower group can provide.

    @valleycat1, I’m not sure why you urge that we “watch out for” loyalty cards. Granted they are marketing devices, what’s wrong with that? They do save a lot of money. I know some people are concerned for the privacy of their purchases, but in my experience, you can sign up for a card under a false name and address and use cash to pay for your purchases, and you will remain just as anonymous as you like.

  4. krantcents says:

    As much as I avoid shopping, I can not avoid it entirely. I use coupons, discounts and every incentive when I can. I may not buy often or a lot, but I do get the lowest prices when I do.

  5. Lesley says:

    This is really cynical! With this post, and with the recent Used Books post, I’ve been wondering about how to balance being frugal with spending my money where I want to make a difference. For example, I value good literature and I think having an independent bookstore in my town is valuable to the community, so I spend my money there and I often (but don’t always) buy new–especially from small publishers and new authors, because my money makes a difference to them and what they do in the future. This store has a loyalty program, and puts a percentage of profit back in the community–that is a marketing gimmick, but it’s also social responsibility, and you can’t really separate the two (if they don’t publicize that they do this, people won’t give them the money do it). Same thing with food–I’ll sometimes spend more at a local coop than going with the cheapest food at the chain grocery store, because I see this as a different kind of fiscal responsibility.

    Sorry for going a little off topic, but does anyone else wrestle with this? Have you found good ways to strike a balance?

  6. kristine says:

    Lesley- I also wrestle with this. Buying local can be more expensive, but I would not want my local shops to disappear, and the only option to be big box stores. I try to buy local items strategically, just as you do, out of a sense of social responsibility to my community. And it is a nicer world when you know the people you patronize. I also try to buy American, when possible, and am willing to pay more for preserving a familiar standard of living for all of us. But in my lifetime it has changed so not much is made here anymore.

  7. Steven says:

    I am a member of REI, and I tend to look their first for the items I am shopping for, but then I comparison shop just to be sure I’m getting a fair deal. Sometimes I find the item cheaper elsewhere, and I buy it there. But I’ve often found that despite the common belief that REI is an overpriced place to shop, when comparing apples to apples, they’re prices are practically identical to the competition, and I get a 10% annual rebate on top of it.

    Point being, utilize the member benefits to your advantage. Don’t become mindlessly loyal to any company, shop around and find the best deals for what you need.

  8. AnnJo says:

    Lesley and Kristine offer an example of how individualized “value” can be. Just as some people will pay a higher price to feel part of the in crowd, or to feel like they’re keeping up with the Joneses, or to avoid spending the time to shop around or clip coupons, some people will pay a higher price for the feeling of well-being they get from believing themselves socially responsible. That feeling adds value to their purchases, while it might not for someone else.

    As long as those decisions are made consciously — “I spend $20 a month for my actual reading material and another $10 as an incentive to my local bookstore owner to stay open” — those value choices are just as consistent with frugality as any others. I don’t know why they would generate conflict.

  9. Availle says:

    Interesting how nobody noticed yet that Trent is a businessman as well. That he’s offering a service – this page – and expects something in return. A certain number of clicks per day is earning him his income, he is trying to sell us his books and downloadables.

    I have no idea how Trent can be bashing the other businesses for what may be “in it for them.”

    No need to guess Trent, you’re one of them as well!
    C’mon, ‘fess up, straight from the horse’s mouth:
    What’s in it for YOU?

  10. ChrisD says:

    I was just reading the book, the value of nothing (i.e. knowing the price of everything an the value of nothing) by Raj Patel and he devotes quite a bit of discussion to free stuff, and how it is full of hidden costs, e.g. (the worst example) free formula milk so you stop producing your own milk and get locked in to continuing with expensive formula. Or free printers that lock you in to expensive cartridges.
    Also Priceless by William Poundstone discusses how we are vulnerable to manipulation, the $450 tickets that make you think $50 is a really good deal.

  11. Vanessa says:

    With free samples, what’s in it for them? They’re hoping that you’ll buy the item, of course. However, even if you do not, they’re also hoping that the positive feeling that you get from trying the item will associate with whatever it is you’re trying and that this might convince you to become a customer now.

    Does that apply to this website and your FREE eBook, Trent? After all, you’re a business too. What’s in it for you,hmm?

    And I am tired of the tv bashing. Advertising is everywhere these days. You won’t avoid it just because you watch your shows on dvd.

  12. TLS says:

    Lesley – I also try to balance buying local with everything else. I buy certain products at Costco, which saves me a lot of money. I also am a member of a local co-op health food store and buy most of my other groceries there. I also belong to a meat CSA, which supports a local farm.

    Not all of these choices are ‘frugal’, but they offer a lot of value to me. Still, I sometimes find it hard to draw the line between saving money and buying locally.

  13. TLS says:

    @Vanessa

    You are right, advertising is everywhere these days, and you cannot avoid it completely. But, by not watching TV, you can avoid it somewhat. (I am not passing judgement on TV here – I am just sharing my own experience).

    At our house, we do not have TV reception (a conscious choice), but we do sometimes watch shows on DVD. The funny thing is that oftentimes I have no idea what people are talking about when they mention the latest products, services or various ads shown on TV. My husband and I occasionally go to a local bar to have dinner, and we often watch a football game or other sporting event. I see the ads then too, and then I realize, ‘Oh that’s the product/service/ad that so-and-so was talking about’. It just makes me laugh, because I often find myself clueless about what others are interested in.

  14. kc says:

    Federated Media

  15. kc says:

    Sorry. Stuck in moderation, and wondering why.

  16. Paul says:

    All value is relative. It can be a good deal for both parties if I value the thing I’m buying more than the money I’m spending, and the seller values the money more. And while it’s generally a good idea to think ahead before buying, that doesn’t mean you should eliminate emotion entirely from your buying life. Sometimes it’s worth it to be manipulated by the companies into buying something you don’t need.

  17. jim says:

    KC, theres no logic to why some comments get stuck in moderation. Its not you, you didn’t say anything wrong or bad and Trent isn’t censoring you. Its just buggy moderation software stoping some comments for no good reason.

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