Friday, February 26, 2016

How much do I charge? Let’s see what you drive first

Not many of my co-workers live nearby, so it was nice when I met one guy from work who lives in the next neighborhood over. We both moved to the area from out of state about 3 years ago and we've frequently shared tips about things around town we discover. We swap restaurant recommendations, hardware store suggestions, and even suggestions on which routes to take to work.

Earlier this week, he came to me and had a horror story to share about an oil change place in town that he went to with his wife's car over the weekend. He normally changes his own oil but in this instance was in a hurry, so he went to a national chain oil change shop. When he got there, he told them he's just looking for the most basic oil change and they had him go inside and sit down and then shortly came to him and gave him the rundown of what they were going to do. They told him that his car required a full synthetic oil and that the oil change was going to be $129.99! Of course by the time they told him that, they were already draining his oil so he couldn't leave and try to find a cheaper place.

They went back to work on the car and left my friend in the waiting room. He had never changed the oil on this particular car before, but knew enough to realize that $129.99 didn't sound quite right. While they were doing the work, he hopped on the free Wi-Fi and in a few minutes found that his car did NOT in fact require what they were telling him was a requirement. He quickly got the attention of the person that had been helping him to discuss the discrepancy and was told that "Oh well, it may not be required, but we recommend it." And of course, an oil change doesn't take that long so they had already put the new oil in the car.

Long story short, they went back and forth about him feeling misled and they ended up charging him the price he would have paid if they had done what he originally asked them to do instead of the much more expensive service they actually did under the guise of it being 'required'.
So my friend tells me the story and the name of the shop so that I never get ripped off. I appreciated the tip but told him that I had actually been to that exact shop previously, and had a completely different experience.

It didn't take long for me to realize why our experiences were so different. Care to guess what I drive and what he was driving?

Yep, that 11 year old Corolla pushing 200k miles would be me (although mine could use a carwash…). My friend was driving a $50k Lexus that was bought brand new less than a year ago.
It shouldn't happen that businesses try to take advantage of people who look like they have more money, but clearly it does happen often, and not just at oil change shops. I've seen subcontractors set their base rate based on how nice your neighborhood is and how much they think you can afford. I've seen cell phone kiosk shops not put price labels on cell phone accessories so they can charge a higher price to someone who pulls out a corporate Amex card since they are more likely to buy it at any cost. Most car dealerships these days will have their inventory and prices online, but when you go to the lot the prices are either not on the vehicle or are higher than the online price.
Even though this may feel a bit shady, it is completely legal to charge different prices to different people for the same product or service, and companies spend a lot of time and money trying to figure out how to make sure you pay the most you can for whatever it is you're buying.
So how can we avoid being a victim of this 'price discrimination'?

Driving a crappy car generally may send a signal that you don't have a lot of money to spare, but you probably don't want to do it forever.

Likewise, living in an inexpensive neighborhood would likely avoid any 'fancy neighborhood' markup, but this isn't really an option if you ever want to live in a nicer part of town.

Maybe you do like a friends' grandpa who, when shopping for used cars, would take out his dentures, wear old clothes, and borrow a beater car so that he showed up at the dealership looking broke when in reality he planned to pay cash for a car. That could work, but I probably wouldn't do it even for a one-time purchase.

In some other countries, I have friends who will send local friends shopping for them since the 'English speaking price' is so much higher than the 'Local language price', and even if you know the local price you can't haggle down to it if you don't speak the language. I really like this one, but it doesn't really apply since I live in the U.S.

All of these may sound good but what really is going to work comes down to the basics of being an informed consumer. Don't forget to shop around and get multiple price bids, especially for larger ticket items. Evaluate your alternatives and substitutes. Be willing to walk away and wait for a later time to buy. Call ahead to get a quote. Do your research enough so that, like my friend did, you can tell when something doesn't seem quite right.

So if you do decide to buy that fancy car, be ready to be treated differently. And not always in a good way.

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