31 ms·

Former Apple Exec goes to JC Penney and slashes prices by 40%

103 points by kennethologist 15y ago

technoslut 15y ago
I could see this being hugely successful. The only question is whether people have been conditioned for the sale season. Growing up in a household full of women who buy clothing and accessories all the time, they particularly save up for when holidays approach.
- joezydeco 15y ago
  The teaser ads that JCP is running on TV show people getting mad and screaming at piles of coupons as they fall out of mailboxes, newspapers, clippings, etc and then missing the sale when they get to the store, or after the fact: http://www.youtube.com/watch?v=NA0L556vGa4 http://www.youtube.com/watch?v=NA0L556vGa4
  - mishmash 15y ago
    Great commercial and easily relatable. Just yesterday I was looking for shirts at a top3 US retailer and encountered something I'd never seen before: - there were six rows (shelfs) and about 7-8 columns - there was a maybe 14x10" "70% OFF" sign at eye level - HOWEVER, there were two qualities/brands contained in the cells - one brand had the clearance 70% off marked on their tags - the other brand DID NOT and was marked full price - the clearance and full price cells were randomly placed So the display resembled this simplified matrix: [FULL][sale][FULL] [sale][FULL][FULL] [FULL][sale][sale] I had already carted four shirt designs before realizing three of them weren't on sale. Tricky bastards. ;) edit: formatting
- MrFoof 15y ago
  Johnson made no mentioning of eliminating popular sales seasons like Black Friday. This New York Times article (yes, login may be required) is much more informative in regards to his plans: http://www.nytimes.com/2012/01/26/business/jc-penneys-chief-ron-johnson-announces-plans-to-revamp-stores.html?_r=1 http://www.nytimes.com/2012/01/26/business/jc-penneys-chief-... Johnson pointed out that last year, JC Penney had 590 promotions, which made it seem that everyone was always on sale in some form or another. Honestly, that's tremendously confusing for consumers, as you basically can't keep track of what's on sale. The net result is they were selling everything at such a low price, that a 40% cut puts it only higher than the average sale price with those near-600 promotions. "“So customers ignored us 99 percent of the time,” he said. “At some point, you, as a brand, look desperate if you have to market that much.” He will move to monthlong promotions, on which Penney will spend $80 million a month, he said, which is a decrease from Penney’s current marketing spending level, which is more than $1 billion a year. And instead of mailed fliers, the company will send shoppers a 96-page catalog each month with a more magazinelike presentation." 72% of JC Penney's revenue came form products sold at a 50% or higher discount. So a 40% across the board reduction on SKU prices still increases their ASP. Apparently from between 2002 the 2011, their average cost per item sold stood around the same, yet even as the average price tag rose from $27 to $36, JC Penney's margin never increased due to the 590 promotions a year. "Now most things are on 60 percent markdown, and every time we do that, we're discounting Penney's brand". So less trickery around pricing, far fewer promotions at regular schedules with long intervals that consumers can actually respond to, and an attempt to increase the overall ASP of products. Sounds like a good change from their promotion-driven, brand-devaluing death spiral.
  - ajays 15y ago
    Johnson pointed out that last year, JC Penney had 590 promotions, which made it seem that everyone was always on sale in some form or another. Honestly, that's tremendously confusing for consumers, as you basically can't keep track of what's on sale. I agree. I wanted to buy a sports jacket at Macy's, but their continuous sales made me wait for a long time. Every time I would just peek into the store; and then convince myself to wait till the next big "sale" came along. In a sense, it's like the "secretary problem".
    - rictic 15y ago
      Apt analogy: http://en.wikipedia.org/wiki/Secretary_problem http://en.wikipedia.org/wiki/Secretary_problem
- Avshalom 15y ago
  It probably wouldn't work everywhere but JC Penny's is a little weird with their sales, it generally seems like at any given time about a third to a half of their stock is "on sale." I don't know about the everyone else but at this point in my life sales at JCP don't even register.
  - tesseract 15y ago
    Honestly Kohl's, Macy's, etc. are all the same way. It's almost enough to make me want to go to Nordstrom where at least I know I'm paying too much.
yarone 15y ago
Also, new JC Penney logo and branding: http://www.underconsideration.com/brandnew/archives/jcpenney_nails_the_american_look.php http://www.underconsideration.com/brandnew/archives/jcpenney...
- josefresco 15y ago
  "The new jcpenney logo, which combines the elements that have made jcpenney an enduring American brand, by evoking the nation’s flag and jcpenney’s commitment to treating customers Fair and Square." Soo.. they made it look almost exactly like the US flag and made is square. Design genius. Personally I think the new logo is pretty crappy, wouldn't scale well and would lose most of it's appeal printed in B&W. Alas this debate should be saved for another thread.
  - maxharris 15y ago
    "printed in B&W" I haven't read a printed newspaper in years. Having said that, it's true that a good logo should still be recognizable without color. The new logo passes that test.
troymc 15y ago
Is there a website where I can go to see when normal retailers have had sales in the past, so that I might predict the arrival of the next one? Better yet, imagine this data set: the price of every consumer good sold in retail stores, as a function of store and time. What would be the impact of such a database, if it became widely available, say, from a company whose mission is to organize the world‘s information and make it universally accessible and useful?
- a_a_r_o_n 15y ago
  "What would be the impact of such a database, if it became widely available, say, from a company whose mission is to organize the world‘s information and make it universally accessible and useful?" More ad buys from the covered companies.
mseebach 15y ago
It doesn't appear terribly novel to me, hasn't big box retailers done this for a long time? I don't recall IKEA doing out-right sales for an example (they have continuous clearances and promotions, of course, but not an "everything is cheaper in January" type sale). For instance, jewelry and Valentine's Day gifts would go on sale in February, while Christmas decorations would be discounted in November. Isn't the point of "seasonal sales" to clear stock? So Christmas stock goes on sale in January, Valentines stock goes on sale 15 Feb?
- xsmasher 15y ago
  Clearance sales are used to clear stock. Other types of sales are used to get shoppers in the door, like promotional sales and loss leaders.
- pbreit 15y ago
  True, except Ikea (and H&M, Zara and Forever 21) only sell their own merchandise. Slashing markups on branded items on his scale is fairly novel.
benjohnson 15y ago
Knowing that I can pop in at any time and get a fair price is much better for than wondering if I'm getting screwed that particular day. Maybe it's an American thing - it seems that the rest of the world loves to haggle.
- pyre 15y ago
  When was the last time that someone haggled at JCPenny?
deleted 15y ago
[deleted]
eps 15y ago
One thing to keep in mind is that this cheapens the brand. It's one thing to buy a $10 t-shirt at Gap and another - a $30 T at 60% discount at Banana Republic. They might be identical, but the perceived value of latter is higher. This is a very ballsy move for the company. Must be desperate times.
- xenophanes 15y ago
  Ballsy, yes. But ballsy doesn't imply desperate. Maybe they are ambitious and want to get ahead.
- jaredmck 15y ago
  I think the JC Penney brand has already been placed into this cheaper segment. They are squarely aimed at the mass market.
  - ams6110 15y ago
    Agreed. Most of the retail JCP outlets near me have closed. They are grasping at straws.
blahedo 15y ago
It's down at the bottom of the article, but this: > Penney will use whole figures when pricing items. In other words, you won't see jeans with a price tag of $19.99, but rather $19 or $20. is actually my favourite part of the whole thing. Taken together, it's a major overhaul that says, hey, sorry, over decades we'd gotten wrapped up in all these little marketing tricks to increase our sales and bottom line, but we decided it was time to treat y'all like grownups for a change. I hope it works out for them.
- noinput 15y ago
  My favorite as well. I've found myself in discussion with many on this logic for some time but rarely does it go mainstream. On a logical stance, all these moves represent honesty and no BS. Similar to when General Motors launched the Saturn line of cars with flat pricing. We owned a few in my family growing up and I remember my dad telling me one of the biggest reasons he bought it was because he knew no one else paid a dime less than he did for the same car.
  - angstrom 15y ago
    That's a very good point. Four-square (the car sales strategy BS not the site) is one of the most dishonest tactics ever devised to subvert the buying process. Why should I have to deal with a gauntlet of crap that has been tilted so much in the favor of the seller due to decades of salesmanship trial and error? The basis of a good deal is mutual benefit, which can't be reached without honesty.
    - arjunnarayan 15y ago
      I've never heard of the four-square strategy. Link please? (And the google namespace is hard to sift through)
      - sghill 15y ago
        http://www.edmunds.com/car-loan/four-square-basics.html http://www.edmunds.com/car-loan/four-square-basics.html
matsiyatzy 15y ago
This is referred to as the "fast fashion" business model. H&M and Zara in Europe has been doing it for quite a while already. Wikipedia article here: http://en.wikipedia.org/wiki/Fast_fashion http://en.wikipedia.org/wiki/Fast_fashion It's not so surprising that they go for this business model, since "fast fashion" retailers have an average profit margin of 16%, compared to 7% for typical retailers, at least according to this source: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CEgQFjAC&url=http%3A%2F%2Fwww.igi-global.com%2Fviewtitlesample.aspx%3Fid%3D55212&ei=KTEkT7mFNOiE4gSmg9ycCQ&usg=AFQjCNFqEtCUAGjKwf20s8OhZlJM3S23cw&sig2=DTTdgCx_0KORIy26dRVxpQM http://www.google.com/url?sa=t&rct=j&q=&esrc=s&#... Basically it's "just-in-time" production coupled with "agile"-type response with regards to fashion trends and customer wants.
- windsurfer 15y ago
  I find it really surprising that their profit margins are so small, considering that the actual physical product is so cheap to produce.
  - matsiyatzy 15y ago
    I would expect a significant part of costs to be rent, as stores typically are in relatively expensive locations. And there's also considerable loss due to unsellable excess inventory, which is what the "fast fashion" business model tries to reduce.
- hammock 15y ago
  Not sure if that's entirely accurate. JCP is a mall anchor/dept store, not an H&M or a Zara. They sell other makers' labels. And this announcement seems relegated to the pricing domain, haven't read anything about them changing their production/distribution model.
  - matsiyatzy 15y ago
    I wasn't aware of that. That probably means the ideas behind this is a bit different, yes.
brd529 15y ago
For a really good explanation of what is going on, I highly recommend Brian Roemmele's quora post: http://www.quora.com/JCPenney/Why-did-Ron-Johnson-leave-Apple-to-become-JCPenneys-CEO http://www.quora.com/JCPenney/Why-did-Ron-Johnson-leave-Appl... Not sure if he was at Johnson's press event or not, but he has pictures from it and explains in detail Johnson's new strategy for JCPenny. Looks like a good bet to me.
buu700 15y ago
For some reason I read the headline as saying that an Apple exec got pissed and drunk after being fired then stumbled into a random JC Penney and demanded that all prices be slashed 40%. The actual news is much more interesting.
JeremyStein 15y ago
Thank you OP (kennethologist) for fixing the title of this article. The nymag title is "JCPenney Permanently Cuts All Prices by 40 Percent" which is certainly not true. Copy editor Bill Walsh writes: The company meant "permanent" in the sense of regular prices as opposed to sale prices. It’s lowering regular prices and cutting back on sales in a strategy that may or may not work. If the strategy doesn’t work, the company has every right to change course -- and if it does, a bunch of news outlets will be revealed as big, fat liars. Bill goes on to criticize lazy journalists who just write what they're told: http://theslot.blogspot.com/2012/01/penney-want-cracker.html http://theslot.blogspot.com/2012/01/penney-want-cracker.html
Corrado 15y ago
Just informally talking with the women in my household, they all seem to hate the idea of not having sales. I told them that JCP will still have sales (Christmas, Valentines Day, etc.) but they were nonplussed on the whole idea. The first thing my wife did when she got her new JCP catalog was look for coupons and she was sorely disappointed. I think it's hard-wired into some people's (read: women's) brains to not purchase anything unless its on sale. Every single one of them said it was a bad idea.
- skylan_q 15y ago
  I agree with this fully. I know many people who wouldn't buy a pair of boots for $100, but would buy the same boots if labeled "Uusually $400, but on sale for $200!" People don't understand the shopping experience. It's about going there, trying the clothes, getting good deals. The whole shopping experience starts at the parking lot: find the spot closest to the main entrance.
prewett 15y ago
A long time ago I read a book called "The 22 Immutable Laws of Marketing" [1] and one of them was don't get caught up with couponing (i.e. sales). They are like drugs: they quickly increase revenue, but now you are dependent on them to get revenue. I like how this exec thinks. (I also like how they'll round up prices to the nearest dollar) [1] http://www.amazon.com/22-Immutable-Laws-Marketing-Violate/dp/0887306667 http://www.amazon.com/22-Immutable-Laws-Marketing-Violate/dp... (not an affiliate link)

103 points by kennethologist 15y ago

I could see this being hugely successful. The only question is whether people have been conditioned for the sale season. Growing up in a household full of women who buy clothing and accessories all the time, they particularly save up for when holidays approach.

joezydeco 15y ago
The teaser ads that JCP is running on TV show people getting mad and screaming at piles of coupons as they fall out of mailboxes, newspapers, clippings, etc and then missing the sale when they get to the store, or after the fact: http://www.youtube.com/watch?v=NA0L556vGa4 http://www.youtube.com/watch?v=NA0L556vGa4
- mishmash 15y ago
  Great commercial and easily relatable. Just yesterday I was looking for shirts at a top3 US retailer and encountered something I'd never seen before: - there were six rows (shelfs) and about 7-8 columns - there was a maybe 14x10" "70% OFF" sign at eye level - HOWEVER, there were two qualities/brands contained in the cells - one brand had the clearance 70% off marked on their tags - the other brand DID NOT and was marked full price - the clearance and full price cells were randomly placed So the display resembled this simplified matrix: [FULL][sale][FULL] [sale][FULL][FULL] [FULL][sale][sale] I had already carted four shirt designs before realizing three of them weren't on sale. Tricky bastards. ;) edit: formatting
MrFoof 15y ago
Johnson made no mentioning of eliminating popular sales seasons like Black Friday. This New York Times article (yes, login may be required) is much more informative in regards to his plans: http://www.nytimes.com/2012/01/26/business/jc-penneys-chief-ron-johnson-announces-plans-to-revamp-stores.html?_r=1 http://www.nytimes.com/2012/01/26/business/jc-penneys-chief-... Johnson pointed out that last year, JC Penney had 590 promotions, which made it seem that everyone was always on sale in some form or another. Honestly, that's tremendously confusing for consumers, as you basically can't keep track of what's on sale. The net result is they were selling everything at such a low price, that a 40% cut puts it only higher than the average sale price with those near-600 promotions. "“So customers ignored us 99 percent of the time,” he said. “At some point, you, as a brand, look desperate if you have to market that much.” He will move to monthlong promotions, on which Penney will spend $80 million a month, he said, which is a decrease from Penney’s current marketing spending level, which is more than $1 billion a year. And instead of mailed fliers, the company will send shoppers a 96-page catalog each month with a more magazinelike presentation." 72% of JC Penney's revenue came form products sold at a 50% or higher discount. So a 40% across the board reduction on SKU prices still increases their ASP. Apparently from between 2002 the 2011, their average cost per item sold stood around the same, yet even as the average price tag rose from $27 to $36, JC Penney's margin never increased due to the 590 promotions a year. "Now most things are on 60 percent markdown, and every time we do that, we're discounting Penney's brand". So less trickery around pricing, far fewer promotions at regular schedules with long intervals that consumers can actually respond to, and an attempt to increase the overall ASP of products. Sounds like a good change from their promotion-driven, brand-devaluing death spiral.
- ajays 15y ago
  Johnson pointed out that last year, JC Penney had 590 promotions, which made it seem that everyone was always on sale in some form or another. Honestly, that's tremendously confusing for consumers, as you basically can't keep track of what's on sale. I agree. I wanted to buy a sports jacket at Macy's, but their continuous sales made me wait for a long time. Every time I would just peek into the store; and then convince myself to wait till the next big "sale" came along. In a sense, it's like the "secretary problem".
  - rictic 15y ago
    Apt analogy: http://en.wikipedia.org/wiki/Secretary_problem http://en.wikipedia.org/wiki/Secretary_problem
Avshalom 15y ago
It probably wouldn't work everywhere but JC Penny's is a little weird with their sales, it generally seems like at any given time about a third to a half of their stock is "on sale." I don't know about the everyone else but at this point in my life sales at JCP don't even register.
- tesseract 15y ago
  Honestly Kohl's, Macy's, etc. are all the same way. It's almost enough to make me want to go to Nordstrom where at least I know I'm paying too much.

yarone 15y ago

Also, new JC Penney logo and branding: http://www.underconsideration.com/brandnew/archives/jcpenney_nails_the_american_look.php http://www.underconsideration.com/brandnew/archives/jcpenney...

josefresco 15y ago
"The new jcpenney logo, which combines the elements that have made jcpenney an enduring American brand, by evoking the nation’s flag and jcpenney’s commitment to treating customers Fair and Square." Soo.. they made it look almost exactly like the US flag and made is square. Design genius. Personally I think the new logo is pretty crappy, wouldn't scale well and would lose most of it's appeal printed in B&W. Alas this debate should be saved for another thread.
- maxharris 15y ago
  "printed in B&W" I haven't read a printed newspaper in years. Having said that, it's true that a good logo should still be recognizable without color. The new logo passes that test.

troymc 15y ago

Is there a website where I can go to see when normal retailers have had sales in the past, so that I might predict the arrival of the next one? Better yet, imagine this data set: the price of every consumer good sold in retail stores, as a function of store and time. What would be the impact of such a database, if it became widely available, say, from a company whose mission is to organize the world‘s information and make it universally accessible and useful?

a_a_r_o_n 15y ago
"What would be the impact of such a database, if it became widely available, say, from a company whose mission is to organize the world‘s information and make it universally accessible and useful?" More ad buys from the covered companies.

mseebach 15y ago

It doesn't appear terribly novel to me, hasn't big box retailers done this for a long time? I don't recall IKEA doing out-right sales for an example (they have continuous clearances and promotions, of course, but not an "everything is cheaper in January" type sale). For instance, jewelry and Valentine's Day gifts would go on sale in February, while Christmas decorations would be discounted in November. Isn't the point of "seasonal sales" to clear stock? So Christmas stock goes on sale in January, Valentines stock goes on sale 15 Feb?

xsmasher 15y ago
Clearance sales are used to clear stock. Other types of sales are used to get shoppers in the door, like promotional sales and loss leaders.
pbreit 15y ago
True, except Ikea (and H&M, Zara and Forever 21) only sell their own merchandise. Slashing markups on branded items on his scale is fairly novel.

benjohnson 15y ago

Knowing that I can pop in at any time and get a fair price is much better for than wondering if I'm getting screwed that particular day. Maybe it's an American thing - it seems that the rest of the world loves to haggle.

pyre 15y ago
When was the last time that someone haggled at JCPenny?

deleted 15y ago

[deleted]

eps 15y ago

One thing to keep in mind is that this cheapens the brand. It's one thing to buy a $10 t-shirt at Gap and another - a $30 T at 60% discount at Banana Republic. They might be identical, but the perceived value of latter is higher. This is a very ballsy move for the company. Must be desperate times.

xenophanes 15y ago
Ballsy, yes. But ballsy doesn't imply desperate. Maybe they are ambitious and want to get ahead.
jaredmck 15y ago
I think the JC Penney brand has already been placed into this cheaper segment. They are squarely aimed at the mass market.
- ams6110 15y ago
  Agreed. Most of the retail JCP outlets near me have closed. They are grasping at straws.

blahedo 15y ago

It's down at the bottom of the article, but this: > Penney will use whole figures when pricing items. In other words, you won't see jeans with a price tag of $19.99, but rather $19 or $20. is actually my favourite part of the whole thing. Taken together, it's a major overhaul that says, hey, sorry, over decades we'd gotten wrapped up in all these little marketing tricks to increase our sales and bottom line, but we decided it was time to treat y'all like grownups for a change. I hope it works out for them.

noinput 15y ago
My favorite as well. I've found myself in discussion with many on this logic for some time but rarely does it go mainstream. On a logical stance, all these moves represent honesty and no BS. Similar to when General Motors launched the Saturn line of cars with flat pricing. We owned a few in my family growing up and I remember my dad telling me one of the biggest reasons he bought it was because he knew no one else paid a dime less than he did for the same car.
- angstrom 15y ago
  That's a very good point. Four-square (the car sales strategy BS not the site) is one of the most dishonest tactics ever devised to subvert the buying process. Why should I have to deal with a gauntlet of crap that has been tilted so much in the favor of the seller due to decades of salesmanship trial and error? The basis of a good deal is mutual benefit, which can't be reached without honesty.
  - arjunnarayan 15y ago
    I've never heard of the four-square strategy. Link please? (And the google namespace is hard to sift through)
    - sghill 15y ago
      http://www.edmunds.com/car-loan/four-square-basics.html http://www.edmunds.com/car-loan/four-square-basics.html

matsiyatzy 15y ago

This is referred to as the "fast fashion" business model. H&M and Zara in Europe has been doing it for quite a while already. Wikipedia article here: http://en.wikipedia.org/wiki/Fast_fashion http://en.wikipedia.org/wiki/Fast_fashion It's not so surprising that they go for this business model, since "fast fashion" retailers have an average profit margin of 16%, compared to 7% for typical retailers, at least according to this source: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CEgQFjAC&url=http%3A%2F%2Fwww.igi-global.com%2Fviewtitlesample.aspx%3Fid%3D55212&ei=KTEkT7mFNOiE4gSmg9ycCQ&usg=AFQjCNFqEtCUAGjKwf20s8OhZlJM3S23cw&sig2=DTTdgCx_0KORIy26dRVxpQM http://www.google.com/url?sa=t&rct=j&q=&esrc=s&#... Basically it's "just-in-time" production coupled with "agile"-type response with regards to fashion trends and customer wants.

windsurfer 15y ago
I find it really surprising that their profit margins are so small, considering that the actual physical product is so cheap to produce.
- matsiyatzy 15y ago
  I would expect a significant part of costs to be rent, as stores typically are in relatively expensive locations. And there's also considerable loss due to unsellable excess inventory, which is what the "fast fashion" business model tries to reduce.
hammock 15y ago
Not sure if that's entirely accurate. JCP is a mall anchor/dept store, not an H&M or a Zara. They sell other makers' labels. And this announcement seems relegated to the pricing domain, haven't read anything about them changing their production/distribution model.
- matsiyatzy 15y ago
  I wasn't aware of that. That probably means the ideas behind this is a bit different, yes.

brd529 15y ago

For a really good explanation of what is going on, I highly recommend Brian Roemmele's quora post: http://www.quora.com/JCPenney/Why-did-Ron-Johnson-leave-Apple-to-become-JCPenneys-CEO http://www.quora.com/JCPenney/Why-did-Ron-Johnson-leave-Appl... Not sure if he was at Johnson's press event or not, but he has pictures from it and explains in detail Johnson's new strategy for JCPenny. Looks like a good bet to me.

buu700 15y ago

For some reason I read the headline as saying that an Apple exec got pissed and drunk after being fired then stumbled into a random JC Penney and demanded that all prices be slashed 40%. The actual news is much more interesting.

JeremyStein 15y ago

Thank you OP (kennethologist) for fixing the title of this article. The nymag title is "JCPenney Permanently Cuts All Prices by 40 Percent" which is certainly not true. Copy editor Bill Walsh writes: The company meant "permanent" in the sense of regular prices as opposed to sale prices. It’s lowering regular prices and cutting back on sales in a strategy that may or may not work. If the strategy doesn’t work, the company has every right to change course -- and if it does, a bunch of news outlets will be revealed as big, fat liars. Bill goes on to criticize lazy journalists who just write what they're told: http://theslot.blogspot.com/2012/01/penney-want-cracker.html http://theslot.blogspot.com/2012/01/penney-want-cracker.html

Corrado 15y ago

Just informally talking with the women in my household, they all seem to hate the idea of not having sales. I told them that JCP will still have sales (Christmas, Valentines Day, etc.) but they were nonplussed on the whole idea. The first thing my wife did when she got her new JCP catalog was look for coupons and she was sorely disappointed. I think it's hard-wired into some people's (read: women's) brains to not purchase anything unless its on sale. Every single one of them said it was a bad idea.

skylan_q 15y ago
I agree with this fully. I know many people who wouldn't buy a pair of boots for $100, but would buy the same boots if labeled "Uusually $400, but on sale for $200!" People don't understand the shopping experience. It's about going there, trying the clothes, getting good deals. The whole shopping experience starts at the parking lot: find the spot closest to the main entrance.

prewett 15y ago

A long time ago I read a book called "The 22 Immutable Laws of Marketing" [1] and one of them was don't get caught up with couponing (i.e. sales). They are like drugs: they quickly increase revenue, but now you are dependent on them to get revenue. I like how this exec thinks. (I also like how they'll round up prices to the nearest dollar) [1] http://www.amazon.com/22-Immutable-Laws-Marketing-Violate/dp/0887306667 http://www.amazon.com/22-Immutable-Laws-Marketing-Violate/dp... (not an affiliate link)