Why selling so cheap? How to obtain profits?

Have you ever wonder why some companies are willing to give consumers out of this world deals? How can a company earn by selling so cheaply? Example, AirAsia is famous for their free seats promotions. Have you ever notice that they always sell those free tickets almost 1 year ahead. The implication is, AirAsia can hold the cash you paid for 1 full year. And recently according to thestar newspaper, AirAsia reported RM 40 million sales alone from their 500,000 free seat marketing. Assume averagely all the passenger will fly 1 year later, with the assumptions that the cost of capital for a company is 8% per anum, AirAsia are actually earning additional RM 3.2 million from interest.

This a a fantastic marketing technique one should consider as you are able to create value for your customers and youa re able to earn money indirectly.

Some retailers do practice quite similar marketing techniques too. With the principle of Cash now = profits, big retailers often have 1 day only, exclusive sales. On that 1 day sales, the product are often sold cheaper than usual. It means, retailers are able to sell products cheaply to the consumer and consumer can purchase products at a discounted price. This is a win-win situation for the consumers. So where is the profit going to come from? Firstly, the retailer gets economy of scale, even on a low profit margin, big volume purchase = high profits. Secondly, if the retailers are able to squeeze the supplier for a credit terms say 3 months, they will be earning 3 months interest for the cash amount.

Creative marketing really pays.