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Q&A: How do those BOGO grocery offers work?

Those BOGO offers get you in the store

How do the supermarkets afford all those "Buy One Get One" offers? How about Publix's $50 gas cards for $40? I love those things. It is the equivalent of saving about 80 cents per gallon. How do they do it?

Special marketing, such as the examples you describe, is directed at increasing sales. Some of the goals of special deals include:

• Matching a competitor doing a similar promotion, to protect market share.

• Using the discounts as "loss leaders" to get you into the store.

• Getting customers to feel like they're saving money at a time when food prices are rising, or getting customers to overlook individual item prices, which are almost always higher at supermarkets than at discount stores.

• Making a customer aware of a new brand.

• Getting a customer to try a different brand.

• Getting customers into your store, hoping they will like it and become repeat customers.

• Hoping customers will spend more than required by the promotion.

In the Publix example, customers are required to purchase at least $25 worth of groceries in order to get the $50 in gas cards for $40. So you're spending at least $65, and probably more, and Publix is building customer loyalty.

In some cases, two companies will enter into an agreement on a joint promotion that has a benefit to both. To use the same example, a supermarket may offer a $50 gas card for $40 when you spend at least $25 in the supermarket, and it might have paid the oil company just $45 for that card.

And in some cases, the price cuts in supermarkets are paid for by manufacturers in return for spending more on advertising.

Odd predictors of the economy

What is the hemline index? Is it similar to the Super Bowl index?

George Taylor, an economist at the Wharton School of the University of Pennsylvania, has been credited with creating the hemline theory in 1926. He noticed that the hemlines of women's skirts were higher in a strong economy because they could afford silk stockings, according to a recent article on CNBC.com.

Marjolein van Baardwijk and Philip Hans Franses of the Econometric Institute, Erasmus School of Economics, examined hemlines from the past 90 years and couldn't find evidence that they predict economic performance, according to the article. Instead, they found there's usually a three-year delay when it comes to hemlines, which were longer at this year's New York Fashion Week.

The Super Bowl Stock Market Indicator states that when an NFC team wins the Super Bowl, the S&P 500 will post gains for the year, and it will decline when an AFC team wins, according to BusinessInsider.com. The website said this theory "has had nearly a 78 percent accuracy rate." The NFC's New York Giants defeated the AFC's New England Patriots on Feb. 5.

Q&A: How do those BOGO grocery offers work? 04/22/12 [Last modified: Sunday, April 22, 2012 4:30am]
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