Chapter Two: Burn Baby Burn!

The life of a salesman is not, contrary to what some might suggest, glamorous. The hours are long – during the holiday season the typical full-time salesman can expect to work from between 65 to 80 hours a week, and during the week before Christmas it’s a seven-day schedule from open to close, or roughly 100 plus hours. The conditions are exacting; between over-demanding managers who expect their staff to be flawless and consumers who expect to get everything they want for a song and a prayer, patience weighs thin and tempers fly. The families of these salesmen must endure extreme sacrifices as well while their loved ones work these grueling hours. For these people the holiday season is hardly a joyous time; in deed it is the closest thing they will find to hell on earth.

Consider the following. Standing on one’s feet for up to 12 to 16 hours per day, five, six, or perhaps seven days a week. On some days there aren’t that many customers who come into the store, and those few who do are coming in for the advertised products. It is not at all that unusual for the average salesman to go an hour without seeing a prospective customer walk in. For many in the business this is as good as it will ever get. After all the years of welcoming customers in to their stores and thanking them for shopping there, some have managed, if they are fortunate, to build up a steady stream of repeat business, which keeps them one step ahead of their colleagues.

Quite a life, isn't it? And yet with all they have to endure - the brutal schedules, the unsympathetic managers, the cantankerous customers, and the family members who still don't understand why they can't be home more, even after all these years - salesmen are still expected to do their jobs and turn a profit for their employers. To say it isn’t easy would be an understatement. In days long since passed, salesmen could steer customers toward more expensive products and more lucrative attachments with far greater ease. If you were buying a $5,000 plasma, what was a few hundred dollars of cable anyway? That ship sailed long ago. Today the the prices have plumeted and the differences between plasmas and LCDs are not as noticeable; consumers are far more hesitant to spend money they deem unnecessary simply to add an extra HDMI input or an extra 10,000 in contrast ratio. Trying to get customers to upgrade and spend more money is akin to trying to squeeze water out of a stone. Even the best salesmen are hard-pressed to succeed, and those who do are still making far less money than they did even a few years ago.

In the last chapter we saw how retailers lure their perspective customers into their stores with ads of inexpensive, loss leader models and then place those models next to “step up” models. They then turn their sales staff loose on the unsuspecting consumer to upsell them into a more profitable purchase. It is an art form, but even the best art can use a little assistance now and then; hence when the “tell” portion isn’t enough to convince the consumer, there’s nothing quite like a little “show” to speed things along.

You’ve heard of the phrase, “Good, Better, Best?” Well feast your eyes on this: “Burn, UG, Best.” Every showroom is merchandized carefully to show the “burn” piece – the one in the ad – next to its step up or UG (upgrade) model. And right next to that model is the “best” model. While there are legitimate differences between all three, retailers are not above “enhancing” those differences to steer the gullible towards at the very least the UG model. The contrast is turned down and the brightness is raised to make the picture look washed out and give the appearance that the advertised piece is inferior to the UG model. Conversely, the UG and best models are put in either “vivid” or “sports” modes to exaggerate their contrast levels and make them seem far more attractive. Some salesmen are not above fabricating "issues" with the burn models, referring to them as discontinued when in fact they are still current, or, in the case of plasmas, claiming they suffer from burn-in problems. Anything goes when trying to steer customers away from the loss leaders.

The irony is that without employing such shameless tactics, the differences would still be apparent to the naked eye, just not as obvious. But retailers are loath to take that chance, hence the helping hand of deception. The goal is to ensure that the perspective customer is successfully brought to the “correct” conclusion: that the upgrade is worth the extra money and the advertised piece would be a mistake to purchase.

But what about the more difficult customer who still won’t drink the Koolaid? After forcing him to look at the burn piece next to the UG models several times, and constant pressure tactics from the salesman, whose livelihood depends on the customer swallowing his malarkey, the chase for now is abandoned. Like it or not the customer is not going to go along with the program. He came in for the advertised piece and he intends to leave with it, or go somewhere else and buy it. And that is not permissible. No matter how reprehensible a retailer might be, at the end of the day low profit is still better than no profit. The customer cannot walk; the deal gets written.

Time to throw in the towel? Hardly. For now, the fun part starts. Having subjected him to ceaseless badgering on the merits of the superior model, the customer now gets to the register and has to endure the onslaught of the attachment phase. This is where the salesman begins the process of getting back the money he lost by selling the burn piece. This is where his revenge begins.

First up is the extended warranties. Assuming the customer has not been completely put off by the scurrilous antics of the salesman or become overly suspicious of the “doctored” pictures on the flat panels, he might be open to hearing about the warranty. Most, if not all, manufacturers include one year parts and labor on their sets, and a few even offer a second year on parts only. Most of these warranties do not cover trip charges to the home, meaning that it is up to the customer to bring the set in to an authorized service center. For that reason alone, the prospect of extending the warranty out to four or five years with in-home service is appealing to many consumers.

The problem is not need, but cost. Many extended warranties can cost as much as twenty percent of the cost of the LCD or plasma; in some instances, more. It is at this point that the salesman, in an attempt to rescue himself from the hole he has dug, tries yet another tactic that has brought many a black eye to an industry already bludgeoned by its own ineptitude. He first inflates the cost of the service contract, then inboards part if not all of it back into the purchase price, thus reducing the miniscule profit to nothing, just so he can make a commission on the one item that pays him the most. This is how it’s done.

Say a plasma that was advertised for $698, has a dead cost of $633. After repeated attempts to switch the customer over to a plasma that sells for $999 with a cost of $804 have failed, the salesman, knowing full well that he will not make much on the “profit” of the plasma, will then “negotiate” on the extended warranty. He will quote the price of the extended warranty for a more expensive set – the UG model – and then pretend that he is an advocate for the customer by promising he is going to work out a deal whereby the cost of extending the warranty will only be a few extra dollars. He quotes a price of $149 for a warranty he knows should only cost $99, and then backs out $50 from the burn piece to accommodate the customer. The receipt reads the plasma selling for $648 with the warranty costing $149. There are still some profit dollars left in the plasma, but the salesman has increased the profit of the transaction by $50 and hence his paycheck goes up.

Failing that, he then pretends to have a “discussion” with his manager then comes back and sells the correct warranty by saying he was able to get the manager to agree to lower the price of the warranty. The receipt thus reads the plasma selling for $698 and the warranty selling for $99. A wash? Hardly. The salesman does not get paid as much on the plasma as he does on the warranty, hence the push to inflate the warranty.

If all else fails and the customer is still balking at purchasing the extended warranty, the salesman will take part or all of the price of the warranty out of whatever profit remains on the TV. It is not unusual to see LCDs and plasmas going out the door below cost, so long as a warranty is included on the receipt. Such a receipt might look like this: $598 for the plasma and $99 for the extended warranty. The store lost money on the TV, but the salesman made a greater percentage of profit on the warranty. This is called inboarding: a time-honored tradition employed by many salesmen to increase their commission checks by defrauding even their own employers.

Salesmen often tell their customers they are giving them a “package” price and “including” the warranty at no extra charge. In point of fact, they are being charged for it. If it is on the receipt, you paid for it. Unlike the products on the shelf, extended warranty prices are set in stone and are not negotiable. When any salesman tells you he is giving you a “deal” on the extended warranty he is either lying outright or robbing from Peter to pay Paul. Not only do retailers know this is going on, it is actively encouraged within the industry. Many sales managers and, in deed, many store managers are paid bonuses based on the percentage of extended warranties their stores write. While they get paid on overall volume, attachment selling is how they make commission. And speaking of attachments, the best is saved for last.

With the customer raked over the coals over the upgrade model and taken for a ride on the extended warranty express, the sad truth is that the one attachment that could actually enhance the overall enjoyment of the plasma or LCD is left for last. Contrary to popular opinion, not all cables and surge suppressors are the same. Poor cables and cheap power strips can rob the customer of the performance he or she deserves out of their product. Whether it’s watching HD cable or satellite, or watching a Blu-ray DVD, a good HDMI cable is vital, as is the appropriate surge suppressor or line conditioner. Such attachments may seem like a waste of money, but out of all the extras that consumers purchase, none have more to say about the overall satisfaction. It is even more integral than purchasing an extended warranty or an upgrade model. And yet, thanks to the scandalous practices of many salesmen, by the time they get to cable and surge, the consumer’s patience and money have run out. Customers should expect to pay more for the right cable and surge suppressors. In some cases these two items can add as much as a couple hundred dollars to the overall price depending on the panel purchased. Unfortunately, because it is the last thing brought up during the transaction, customers end up walking out the door with inferior cables and little or no surge protection for their products. Shameful!

All of this in unnecessary. If only the industry would realize the futility of such practices, fire those salesmen who employ them, and be more transparent with their market, in all likelihood they would have more profitable sales and, along with that, more satisfied customers. But how does one overturn decades of sloppy and lazy salesmanship? It isn’t easy, but it is possible.

Some retailers have resorted to something unique. When they advertise a product – be it a loss leader or upgrade model – they do so by stating in the ad what other items are needed or recommended to enhance the overall performance, such as the appropriate cables and surge and an extended warranty. Perhaps a home theater system? When the perspective customer comes into the showroom to see the advertised piece, it is proudly displayed – with no attempt made at altering its performance, steering the customer away from it and without any salesman denigrating it – along with all the attachments recommended to enhance its performance. When upgrade suggestions are made, it is within the context of improving upon an already good product. The customer’s intelligence is not insulted; rather he or she is made to feel as though their choice is an informed one, instead of being forced upon them through avarice motives.

As I have mentioned, legitimate upselling is possible and vital to any consumer-based industry. But it takes more than just ruthless guile to accomplish it. Deliberately misleading consumers by denigrating the products they came in to purchase and then inflating the costs of warranties and minimizing true enhancement attachments is the main culprit here. The reason so many consumer-based groups have been so negative towards the consumer electronics industry is painfully obvious. To reverse this stigma will take a lot of effort, but it is effort worth spending.