Saturday, October 17, 2009

An irresistable upsell - leaves money on the table

I had to refurbish the utility trailer that I use to clean up the autumn leaves from my yard. I stopped in Home Depot to pick up a 1" spade drill bit. I already have a set of spade bits, but my 1" bit was just worn out. I expected to buy a single bit which was priced at $4.69/EA.

I noticed a 3 piece set adjacent to the individual bits at such a bargain price, I simply couldn't pass it up. The package of 3 bits, which included the 1", a 3/4" and a 1/2 inch, was priced at $5.97.
Those are all sizes that I use and my drills are usually dull, but I wasn't looking to replace them today. I couldn't pass up the opportunity to pick up two new bits for an additional $1.28 . The 1/2" and 3/4" bits were priced at $4.19 and $3.70 each. The cost of the 2 extra bits in the bundle was 16% of the individual pieces.

From a differentiation perspective, the shanks on the set are a little shorter than the individual bits. The shank length makes very little difference to me, this will only affect very rare instances when trying to drill through stock that's more than about 4" thick. In fact when I'm using my drill press, the shorter shanks are often easier to work with.

I have to wonder what Irwin and Home Depot were thinking when they priced this set. Here are some ideas:
  • It's definitely cheaper to package and deliver 3 bits on one card than one product per card.
  • Manufacturing cost is a very small fraction of the retail price.
  • Home Depot also offers Rigid auger bits which are a little more expensive than the spade bits. Home Depot sells the 1" diameter Rigid auger bit for $5.97. The Auger bits are promoted as 6x faster than a spade bit, and re-sharpenable. I'm not sure if Irwin was trying to grab more market share by differentiating from the higher Rigid price point.
I had already decided to buy, but boosted my current purchase due to an irresistible upsell. I don't really want Home Depot or Irwin to know, but I would have gone for the upsell if it had only been one additional bit for an extra $1.28. I would say they left some money on the table.


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