Discounting on Lens Coatings
I recently purchased a new pair of glasses from a vendor strongly recommended by a good friend. Overall the prices were towards the lower end of the spectrum – more than Zenni, less than Costo and far less than the typical optometrist or optical boutique.
The lenses were $49.95. It was the pricing of the additional lens coatings that was interesting. Each of three additional coatings (anti-reflection, UV protection and scratch resistance) was an additional $9.95. Again this was at the lower end of the spectrum of what is typically charged – more than some vendors but less than most. But, in context, it didn't seem inexpensive - adding almost $30 worth of coatings to $50 lenses increased the cost 60%. I started to look at each coating in turn, trying to decide whether it was worth an additional $10.
Then I noticed that you could get all three coatings for $19.95 – essentially getting one of them for free.
Suddenly it barely seemed worth thinking about – it was easier to just take all three coatings at the discounted price.
The vendor would undoubtedly prefer to avoid discounting and take the higher margin that comes with the full price. For them to discount so aggressively they must be more focussed on revenue management and profit than margin. How often do people buy glasses? Maybe once every 12-24 months? The vendor doesn't know when the customer will be back (or if for that matter – it is very competitive business and each pair of glasses I have purchased over the past six years have been purchased from a different vendor) so they seem to have decided that the lower margins that result from discounting ultimately result in higher profits as more people spend more money on coatings.
But does it work? I asked the employee who was helping me and he said almost everyone chose all three (and the savings that came with it). That doesn't prove that people wouldn't have paid full price for all three coatings at the full price but it certainly suggests that the 3-for-2 pricing is a powerful motivator.
There is another benefit as well: the customer doesn't feel like they got lured in with cheap lenses only to get gouged on the coatings.
It works well and some florists use the same technique very effectively. Rather than trying to maintain margins on each of the potential items that could be added to an order (things like chocolates, plush toys, greeting cards, etc.) they will bundle two or more together as a discounted upgrade special.
It does mean sacrificing some margin (and, for years, they have been told that margins are sacred) but they have seen that it makes the offering far more attractive, and that more sales at a lower margin ultimately lead to higher profits.