Can somebody explain to me ....

[lcm1947]

how in the world can or why do they give a free whatever away with the purchase of an item that sells for the same amount that the one item is. That just doesn't make sense to me. For example. Makita is giving away a free ( rebate ) impact driver if you buy a drill/driver from them. Heck, the impact driver costs what the drill/driver costs if purchased separately. Anybody in retail know why? This just blows my mind.

[JR]

Easy.

You've designed a new impact driver. You have 50,000 old impact drivers in stock. Before you bring the new one to market you stimulate sales for the related product by offering the giveaway, while simultaneously unloading the inventory of the the old impact driver.

JR

[drumpriest]

I mostly agree with JR. Also know that a 70% mark-up isn't uncommon. So they arn't taking a loss on the impact driver.

[LCHIEN]

I mostly agree with JR. Also know that a 70% mark-up isn't uncommon. So they arn't taking a loss on the impact driver.

That's right. retail prices being 4x what it cost to make/market are not uncommon.

So a drill for $150 costs $37 to make, the impact driver for $150 costs
$37 to make. If they sell both ($75 in production and marketing costs) for the price of one ($150) then they still make $75 to be split somehow between the factory and HD or lowes.

[Holbren]

Yep, what Loring said. Those tools are plastic and steel, both which come cheap where they are made.

[Tequila]

Plus I've read that rebates submission rates can be as low as 5%. Combine that with the manufacturer having your money in the bank for at least 6-8 weeks, and it's clear that they're not giving away quite as much as it seems like.

[just4funsies]

Not only that, but if you've got those 50,000 discontinued tools in stock, giving them away with another purchase allows you to write them off as a promotional expense. It's almost as good as selling them, and less of a hassle.

[steve-u]

As everyone else said there is a large markup from manufacturer cost that allows them to do these type promotions. Also realize that you generally get just the tool - no batteries and charger so take that into consideration when comparing prices. Usually when you buy a cordless kit anyhow you are not paying much more if even as much than the retail price of the batteries and charger for the kit including the tool. --- Steve

[LCHIEN]

Could be one more thing...
sometimes retailers like Lowes or HD get so much discount when their sales of a certain manufacturers product exceeds a fixed volume or even a (wholesale) dollar amount.

By moving more stuff even at breakeven or a small loss they can up their
sales and get better pricing which ultimately leads to improved margins for the store.

[lcm1947]

Yeah I guess that makes sense. Didn't realize the amount of markup I guess plus it would make sense to bomb stuff out when they're fixin to come out with something new. Thanks for the replies.

[LCHIEN]

Easy.

You've designed a new impact driver. You have 50,000 old impact drivers in stock. Before you bring the new one to market you stimulate sales for the related product by offering the giveaway, while simultaneously unloading the inventory of the the old impact driver.

JR

Wait a minute - that's Aggie economics. How do you stimulate demand by giving away units?

One, it saturates the demand, no one who really needed them before you gave so many away will still need one after you give a lot away.

Two, it sets a low price expectation and makes it hard to move new product at the suggested retail price even less customary discounts.

Oh, I get it. The old one works great and builds customer dependency and familiarity but break quickly and/or you can't get replacement battery packs. Now that you have them addicted to Impact "Crack" drivers you sail in with new nose candy at retail prices.

[sleddogg]

I purchased a makita lithium ion hammer drill/driver and sent for the free lithium ion impact driver. Yes they cost the same but what I'm getting free is just the tool. No case, no charger and no 2 batteries included. The batteries sell for around $90 each or 2 for $170, the charger sells for around $90. That's $260 that I already bought and own with the $329 purchase of the drill. A price I assume is inflated to accomodate the rebate and that the tools are new on the market. I suspect after Makita gets the people aware of these awesome tools and once the rebates end, they will settle the price in somewhat lower than $300 each. Perhaps even around $250. No matter what, they are making money only if we are buying. Once we are buying though, boy are they making money, markup on stuff like this is scary. If it wasn't for the rebate there's no way in **** I would spend this on a drill.

[cwsmith]

I agree, it doesn't make a lot of sense to me either. Regarding the opinion about giving away old models to peak the interest in what may be coming up; I don't know, it doesn't seem logical to give away, say, a 18 volt tool as a way to entice you to buy the 24 volt replacement. I suppose there are those who really believe that bigger is better, but once I have a tool that fit's a particular task, I'm not that impulsive to upgrade just for more power.

However, I love some of these combo deals, because they are usually short term items; and when retailed by the likes of the Home Depot mindset, that means dumping the inventory the second it becomes inactive. I have no idea how they do anything but loose money on some of these deals.

For instance, within the last year, I bought two Ridgid combos on close-out. The first was a 14.4 V 3/8 drill with the 14.4 Impact driver. Close-out price was something like $135. Yet, the tools sold separately sell for $179.

Similarly I bought the Ridgid "Finish Carpenter's Combo" for about $110, as I recall. It consists of the 10" CMS and the 16 guage straight finish nailer. At the time, the 10" CMS was $179 and the Finish Nailer was $189.

With the exception of the 14.4 volt, 3/8 drill, which was replaced with the "X2", all of these tools are still being retailed at those same prices. The only thing that I didn't get because of the "combo" deal, was the case for the nailer. Hey, it saved me a bundle, but I almost feel that HD cheated themselves.

CWS

[djcannon]

Just buy it if it is a good deal

If it's a good deal just buy the thing I've learned not to question a good deal if it looks like a good piece of equipment.