Filed under: pricing
When I was a kid, I lived about a mile from K-Mart. There was no such thing as Wal-Mart or Target. But then again, Diners Club was still a viable charge card (different than credit, charge cards are “pay entire balance” cards, like AmEx) and you actually had to have a decent credit score to qualify for a line of credit.
K-Mart had to come up with realistic ways, then, to satisfy the needs of its customers with respects to offering them the ability to buy when they didn’t have the means at hand. Their response was lay-away. This wasn’t a unique offering, department stores had offered similar programs for years. But it was effective none-the-less.
For a small administrative fee, anyone (regardless of your background or history) could put one or more items into storage at your K-Mart (items actually came out of inventory). On any periodic basis, prior to a scheduled end-date, you could pay against the remaining balance. When the balance reached $0, you received your items. The risk to K-Mart was your failure to pay and the restocking of the items into inventory after such item was obsolete. But this was a simpler time and items weren’t replaced as quickly by the manufacturer. Adjust the timing so that you can’t keep it in lay-away forever and K-Mart was at least assured that if you didn’t complete the transaction, they could sell it to someone else.
I’d forgotten about lay-away until I saw a K-Mart commercial the other day where it was the focus of their advertising. The obvious assumption is that this is a result of the current economic state. People don’t have (or want to use) available credit for purchasing.
I wonder if the same is true for businesses – ones who are concerned not only about credit (though most thing are purchased under contract or PO requiring payment like a charge card – at the time the invoice comes in) but moreso about the availability of a vendor to deliver long-term on the promise of providing services, since the traditional software model is pay-first-then-pray-it-works. So, does the opportunity exist for creative vendors to come up with ways to spread payments out over time without creating real problems for the vendor or the customer? I think so… but I’m not sure what they would be. Models used by services providers (pay as services are delivered) only work if you can measure it that way… but what about standard software vendors? What choices are available for them? Leasing?
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