San Jose Mercury News: Law of supply and demand turned on its head

Cecil Johnson reviews Rick Kash's book The New Law of Demand and Supply.

Sears Credit supplies Kash with an example of how knowing the wishes and needs of your most profitable demand segment pays off. The author tells of the panic that hit Sears Credit when the corporation decided to begin accepting MasterCard and Visa. Thought was first given to reducing the percentage rate on the Sears Card to compete. But that approach was discarded after research revealed that the percentage rate didn't matter that much to Sears' most profitable demand group. Those customers just wanted low minimum monthly payments and Sears' commitment to stand by its products. The Sears customers in the researchers' target group said they would continue to use their Sears cards in order to leave room on their other cards, which could be used at other stores. "If they maxed out those cards and the refrigerator broke down, only the Sears card stood between them and no refrigerator," Kash writes. The Sears Credit team used its findings, Kash writes, to enable Sears Credit to give up its monopoly and still increase business performance. "It raised the Sears share of credit card transactions in its stores, and its margins actually went up," he writes. "Over three years, its profits on the card rose by 44 percent."

Looks like a most interesting book (published last September) -- it gets great reviews on Amazon -- will have to check it out! His firm's web site also has an interview with Rick Kash.