Downloading my Citibank records, I found a charge for "RoadRunner Club Renewal." Apparently, much like GQ magazine, RoadRunnerSports.com has taken the initiative to provide me a "service," automatically renewing my RoadRunnerSports Club membership. The membership provides faster shipping, a "free" return of shoes and 5% discount.
Here are three possible reasons people need to be renewed automatically:
1) The deal is very good if you order enough stuff to pay for the membership fee right off. If you are a real runner (which those of you who have seen me in person know is not the case at this point in my life), it's probably a decent deal. However, if you want to optimize your spending, it would make more sense to lump as many purchases together at a time and then be "inactive" until you need the discount/fast service again.
2) The economics for someone like me don't really make sense unless I buy a lot of stuff. Last year it was a heart monitor, about three pairs of shoes and some other things people find interesting if Mark Wahlberg (aka Marky Mark) was buying them. However, if you do the math, you'd have to buy a whole lot. The annual fee is $24.99 and this entitles you to 5% off your purchases, which means you'd have to buy $499.50 ($24.99/5%) to break even. For $38.98, you can save 10% on every order, but then your breakeven is $779.60. No wonder they had to automatically renew me!!
3) It's not really a club. Why do amateur marketers insist on calling everything a club? Who's stupid enough to think a two-part tariff pricing scheme is a club? It's a purely economic relationship.
Note that two-part tariff pricing, where you have an up front fixed price coupled with a per unit price, is very effective in the right situations. For RoadRunnerSports, it's really a way to get people who are buying a lot or expect to buy a lot to make a commitment to buy at least $500 worth of stuff (assuming they do the math). Industrial companies to this all the time. So do wireless phone companies when they charge a larger monthly fee up front and then give you more free minutes and lower per minute charges. Amazon does this when they charge you $3.00 to ship the first book and $0.99 for each additional book. This creates an incentive for the customer to buy more than the one thing they came for by effectively lowering the price of other items they might not have bought at a higher price.
The problem with the folks at RoadRunnerSports is they took a good idea (two-part pricing via the RoadRunner Club) and messed it up by automatically renewing membership.
Lesson: If you don't know why something works, you'll probably screw it up by trying to make more money off of it.
2 comments:
Well, I think as a marketing "club," they definately work. Otherwise, the companies wouldn't have them. However, my friends who have "joined" such clubs have been anything but pleased. The whole "12 CDs for a penny" thing is awesome, but it's the next 12 CDs at some amazingly high retail price that are the killers.
I used to belong to Book-of-the-Month club about 10 years B.A. (Before Amazon). Although I loved getting books and was totally into the catalogs - they would send me some book I every 4 weeks unless I specifically requested not to receive it (via a response in the US mail). Long story short, I'm sure BOTM made quite a bit of money on me, but I finally ended our relationship and vowed never to enroll in such a thing again.
Ironically, such "clubs" have almost a reverse two-part pricing tariff. They charge you an artificially low price for the first set of items (I'm sure it's below cost) and then make up all their investment on the back side by sending you stuff you didn't want or could get cheaper somewhere else.
Bottom line though, I suppose CD/DVD/Book clubs work when the company/brand that is doing the club is de-coupled from any channel which might want to sell you stuff without entrapping you. Hence, BMG might run a CD club, but I don't think Tower Records, Blockbuster or Barnes & Noble run such clubs. Instead, they sell to all the people who tried the clubs, got ticked off and now want to buy from them;-)
P.P.S. Some people probably like Book-of-the-Month clubs, BMG Music clubs and whatever else.
I'm just a spaz who can't be bothered to keep track of 13 mailings a year, which I need to respond to in order to NOT receive some "Green on Greens Cookbook." (And yes, I do have such a book that I was too lazy to return and too unhealthy to actually use.)
For all those people who enjoy these clubs, I just have one question: Where's the club house and is there a pool?
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