I just bought a can of Folgers Classic Roast coffee from Costco and saw one of the most amazing marketing lies ever. I can understand companies that make packages smaller. We all know fuel and food is more expensive and we can accept paying more for the same products. We can understand when companies charge the same price but give you less. They don’t tell you it’s the same size, they just hit it with the shrink ray and are done with it.

Until today, no one flat out lied about it.

(For those in no mood to watch a video, Folgers’ new can is 4 oz. less in ground coffee but the company claims it produces more actual cups of coffee in big bold lettering - the one on the left is the new can)

Check out this video (if you’re reading through the RSS, you will have to click on the post to see the video):

Here are a high resolution shot of the two cans (newer and smaller can is on the left). You can see the size clearly labeled at the bottom of the can and the ridiculous assertion that the smaller can produces more coffee. Click the image to get a full size version and see for yourself.

Here’s the full set of Folgers Shrink Ray photos, it includes multiple shots of each can from the front and the back so you can see that the labels flat out lie.

Amazing isn’t it?

Upselling is when the salesperson tries to sell you something more expensive than and instead of what you were already buying. Cross-selling is when the salesperson tries to sell you something that is related to or can be integrated into whatever you’re already buying. A prime example is a digital camera. If you were buying a 5 mega-pixel camera, an upsell would be an offer of a 7 mega-pixel camera at a reduced price. A cross-sell would be offering a camera case, digital printing services, printers, or just printer paper. Upselling and cross-selling are crucial parts of sales process becuase you’ve already identified yourself as someone willing to buy something. Now it’s just a matter of convincing you to buy more.

Upselling and cross-selling is not inherently bad. For example, under “personalized service” I talk about how salespeople may ask about your intentions as a way of identifying products that may be a better fit. While their ultimate goal might be to make a bigger ticket sale, the end result could be better for you even if you spend more money. You may get products that are more in line with what you want, rather than what you think you want. However, this is not always the case.

To help you combat this financial encroachment into your wallet or purse, here are some successful upselling & cross-selling techniques. Once you recognize them, you can properly defend against them:

Engage, then Asking Permission to Describe

The Technique: With many products, the upsell involves another product and so the goal of the salesperson is to have the customer engage the product. Touch it, play with it, investigate it, become connected with it. By building a brief relationship with something, the customer might imagine themselves using it and thus they are more likely to buy it. Then, once the customer has engaged, salespeople will ask if they can describe its benefits to the customer. Psychology studies have shown that if you agree to something, you’re more likely to agree with additional things down the road… such as agreeing to buy! Also, by asking for permission they don’t come off as pushy because you agreed to have them continue!
The Defense: Stick to your guns, say you’re not interested and repeat you let them know they’re being pushy.

Packaged Kits

The Technique: You wanted shampoo but somehow got roped into buying a bath and body set of shampoo, conditioner, lotion, hand sanitizer, that poofy thing, and some liquid soap. That’s called grouping related products and offering a discount, it’s a passive cross-sell and one that is remarkably effective.
The Defense: If you don’t need it, you don’t need it. How many poofy things do you need? A favorite technique of frugal shoppers is to have a list, stick to the list, and leave even if you see a great deal. You might get a discount but it’s on something you don’t need right now.

“Personalized Treatment”

The Technique: As you start ordering, the salesperson begin asking about your goals for the product in the hopes that they may be able to identify a better product for you. In some cases, the better product may be.
The Defense: If you’ve done your due diligence, you know what you want. You know your budget and you’ve select a product that fits the bill. You can either stick to your guys or check out the other product. It helps to understand how the store operates. For example, CarMax, a large used car lot, has a flat commission regardless of the value of the car. In that scenario, the sales person is trying to get the best fit, not a higher priced car.

Would You Like Fries With That?

The Technique: It’s a line as ubiquitous as any other but it’s actually one of the best upselling lines in the world. In fact, “would you like [insert food] with that?” is something that many restaurants use to add expensive sides to your meal. If it’s an unfamiliar restaurant, you may not realize that fries are an extra charge because in many places fries come with the meal (and the fries question there is used as a means of identifying a preference for which sides, not whether you want to buy a side!). Since it’s so ubiquitous, sometimes we are caught off guard and don’t realize it’s an upsell.
The Defense: It’s much like the “package deal” concept, except done more casually. The defense is to decline every add-on a sales person attempts. Ever buy something and get asked if you want the extended warranty? Those are the “fries” in the retail electronics market.

Bait & Switch

The Technique: This is not an upselling or cross-selling technique but rather a scam that may seem like a sales technique. Several electronics companies have been doing this lately. The scam involves listing a digital camera at a phenomenal price, then requiring the customer call the store only to be told the camera they bought is out of stock. They’re told a more expensive alternative is available but you also need to get a memory card. However, count your lucky stars, there happens to be a coupon on this one memory card so you get it for cheaper than retail. It sounds a lot like an upsell (more expensive camera) and a cross-sell (digital memory card) right but it’s actually a scammy bait & switch. If you ever cannot buy the product you want for whatever reason, walk away. No reputable company will do this intentionally as a means of selling you a more expensive product.
The Defense: Don’t buy from a place that will bait & switch.

(Photo: bonkedproducer)

I just received an email that Washington Mutual will be raising the interest rate on their online savings account from 3.30% APY to 3.75% APY. This beats the rates of 3.50% APY rate found at FNBO Direct and HSBC Direct. It’s also a sign that interest rates are headed up. (FYI, FNBO’s top rate isn’t a “promotional offer” and has no set expiration date, HSBC Direct’s rate is a promotional offer and is set to expire in September)

With inflation heading upwards, the rate was 1.0% in June 2008, it’s getting more and more likely that interest rates will also move upward to counter. The Fed doesn’t like high inflation rates and will counter with increasing the funds rate, which will in turn increase bank’s interest rates. Whether or not that’s good for your pocketbook in the long run remains to be seen, there are simply too many factors pulling at one another, but a higher bank interest rate is better than a lower bank interest rate.

Update: For some reason I thought FNBO and HSBC were at 4.50% and mis-typed 3.50%, they’re not, they’re at 3.50% and now they lag WaMu.

A friend recently learned that a co-worker, with similar responsibilities and credentials, found a new job for slightly more pay. The difference in salary was, percentage-wise, in the single digits and the move was a lateral one (no significant added responsibilities). She was wondering whether she should start looking for a job too because money’s getting tighter and everyone’s looking for an edge.

There’s no harm in looking.

I wouldn’t be spreading the news around the office but you’re not dating your job, you’re allowed to see if better opportunities are out there. You’re doing yourself a disservice but not looking. If you look and find a good opportunity, that’s great. If you look and don’t, then you will be happy in your job.

Now, given all that, if she were to find a job for a few percentage points more in pay, I would probably tell her not to take it. Here’s why:

• She’s happy. If you’re happy at your job and you’re not talking about a significant salary difference, it’s really not worth the risk. It’s difficult to find a job that you enjoy, that is fulfilling, and that pays you fairly (it’s fair if the salary difference is in the single digit percentage points). There are plenty of jobs that pay very well but are miserable, you might have a few extra dollars but you won’t be happy.
• She has a good reputation. When you start at a new company, you start all over again. This is great if you had a rep as a slacker who is just skating by, you get a fresh start. This is less great if people know they can depend on you or if you’re the first name on the list in building a new team, you’ll have to rebuild that. If you can be compensated well to start over, by all means, but building a reputation takes time and a lot of effort.
• She has a strong network. I don’t know for sure if she has a solid network of friends and co-workers in her company but she’s very personable and has been there for several years. I’d bet even money she has a solid network of friends she can rely on to get things done. Along with a reputation, building up a network at a company also takes a lot of time and is as valuable as being smart.
• She’s powered through the learning curve. She’s been there a few years so she knows how things work. She doesn’t need to read the benefits package because she knows the options. She doesn’t need to look at a map to know where the mail stops are or where the conference rooms are or where the lunch room is. All those little headaches you have to deal with when you first start at a company, she doesn’t have to deal with them.
• She’s not financially strapped. At least from what I know, so she doesn’t “need” the added salary. If she were at the fringe, where her income was barely covering her expenses, I think she’d do well to get another offer and get her current company to match (it’s risky to get an employer to salary match but if you’re strapped, you’re strapped). However, she’s at a point where she’s comfortable and not struggling to make ends meet.

I drastically simplified the situation but I believe I captured all the salient points. What would you say to her?

(Photo: mugley)

For the last three years, I’ve watched for and written about the list Yahoo releases every year for the best jobs for graduates. The 2008 best paying job for graduates was in the field of Chemical Engineering. Last year, the 2007 best paying job for graduates was Chemical Engineering. The year before that, the 2006 best paying job for graduates was Chemical Engineering. I think it’s safe to say, Chemical Engineering is here to stay.

The problem with looking at these types of lists is that if you were equally capable of doing any of the jobs on the list and if money were your primary driver, by the time you graduated, the list could change. When I started college in 1998, I was lucky. All the hot job lists had computer science, computer engineering, information systems and information technology all over the top spots. I wanted to study computer science and so the appearance high on the list for salaries merely cemented the decision. However, when I graduated in December 2001 (for all you math majors, I was done a semester early partly because of AP credits), computer science wasn’t really a hot job in too many places because of the dot-com bust.

Despite that, one thing is clear by looking at these lists year after year. Engineering is hot. While the non-engineering jobs on the list, the doctors, lawyers, accountants, etc. are stable, high-pay (eventually), and high-demand, the competition for top engineering talent will always keep salaries for new graduates in those fields very high.

Chemical engineering may not always be the top paying graduate job (though it’s prospects do look good), but chances are #1 will have ‘engineering’ in there somewhere.

Last Friday, my wife and I went to the Maryland Science Center to see the Body Worlds 2 exhibit. Body Worlds is an exhibit in which cadavers, properly donated, are plastinized (essentially turned into a plastic-like material through a “plastination” process). It’s a really unreal experience seeing actual bodies, which look like plastic, all opened up, in mid-motion, for all to see but it was certainly worth the price of admission.

Body Worlds 2 focused heavily on the brain, our little three pound nerve center and the little orb controls everything we do. One interesting quote from the exhibit, and one that I felt tied most closely with that of our soaring debt, was this one:

The Adolescent Brain: The immature pre-frontal cortex, the last region of the brain to develop, may be responsible for an increased desire for speed, danger and rebellion, and an indifference to planning and priorities.

The quote was used to explain why adolescent children are so rebellious and behave as though they think they’re invincible. It’s because the pre-frontal cortex is responsible for “executive functions,” such as weighing the future consequences of current activities, and it’s not fully developed by adolescence. The brain isn’t fully developed until age 25 (hmm… maybe that’s why car insurance falls so much when you turn 25!) so you see a seven year window where your body is ready to take on anything but your brain isn’t. See how getting a credit card can be dangerous? How you now have access to credit but aren’t fully aware of the consequences of accumulating debt?

Okay, so what right? Why can you blame your credit card debt on your brain? Isn’t it just shuffling accountability from yourself onto nature? Yes, if you stop there.

All this means is that the debt you may, or may not, have acquired doesn’t define you. If you have a lot of debt, you might feel like defines you but it doesn’t. Just focus on righting the mistakes you made, in your biologically eased rebellious years, and you’ll be just fine. If you need a place to start, check out these ten simple steps to eliminating debt.

(Photo: Gaetan Lee)

HSBC Direct recently sent out an email to account holders notifying them that the 3.50% APY promotional rate was being extended an additional month to September 15th. The email is a bit silly, it’s obvious that customers like higher rates for longer periods, but the rate is good. 3.50% APY is among the best in the nation and one of the largest from a reputable, brand-name bank.

Is it worth it to transfer funds from one bank to another for this rate? Probably not, but opening a new account doesn’t cost you anything (no minimums, no fees) so you could always put new savings into this bank. I have several of these high yield accounts and when I’m looking to save, I simply transfer from my checking account to the bank with the highest rate. This leaves me with several online bank accounts and goes a little against the simplifying my personal finances concept, getting the best yield is worth a little extra headache.

Dear JIM,

Customers like you have told us how much they love our big fat rate. And as far as our customers are concerned, we can’t give them too much of a good thing. So that’s exactly what we’re going to do.

* You’ll keep earning 3.50% APY* on all balances in your Online Savings Account.
* That’s 9x the national savings average.±
* Deposit more now to take full advantage of our great rate extension.

Now’s the time to watch your savings grow. So deposit more today.

Deposit more now Sincerely,
Kevin Martin
Executive Vice President,
Head of HSBC Direct U.S.

Regular oil changes, as defined by your owner’s manual, is one of the best ways to lengthen the life of your car and the efficiency of its engine. Don’t skip oil changes to save a few dollars, the thousands of miles you’ll add to the engine’s life will dwarf the cost. That being said, there really isn’t much difference in the product and service offered at a discount oil change place and your dealership, despite what your dealership may say! This PSA is anyone who uses discount oil change services like Wal-Mart or Jiffy Lube. After you get your $15-$20 oil change, double check their work before you leave or you might be in for a nasty surprise.

Wal-Mart Whoops!

A while back my wife took her 2004 Honda Civic to the local Wal-Mart for their famously economical oil change. With a price under twenty bucks for conventional oil, you couldn’t beat it. After the oil change, she drove home and it wasn’t until she left for work the next day did we see an oil stain in her parking spot. When we popped opened the hood, we saw the oil cap sitting on the engine. I should’ve taken a picture because my wife’s daily commute is about 40 minutes and it’s a miracle the cap was still sitting on top of the engine (it may have been wedged by the hood, we didn’t check but there wasn’t a dent).

Everything under the hood was covered in oil spray and she lost about a quart of oil. We couldn’t believe they forgot to put the oil cap back on (then we realized the technicians are probably pressured to do things as quickly as possible, so it’s not that surprising that they miss something once and a while).

Check Their Work…

So, the next time you get an oil change at those discount places, do a perfunctory check that everything is in order. Check that the oil cap is on (I know it sounds ridiculous but it happened to us), check the ground when you pull out for signs of oil leaks, check your oil level via the dipstick, and check the service work report for inconsistencies. You won’t be able to detect detect outright fraud but you can ensure there isn’t any carelessness.

… Or Do It Yourself

I change the oil in my own car because I prefer to use synthetic oil (mostly because you change it less frequently, but there are other benefits). You can get synthetic oil changes at the discount places but the price magically jumps up to $50-60 for the base oil change, a price point that makes it more economical to change it yourself. I also drive a car that offers very easy access to the filter (the filter was impossible to reach in my last car, an Acura Integra) so changing the oil is straightforward. The only downside is the mess, but you do get the satisfaction of doing it yourself.

But, if I forget to put on the oil cap or tighten the oil filter… I have no one to blame.

Student loans have been on my mind ever since I read about the latest legislation dropping Stafford rates earlier this month.

Here’s a brief recap of where my student loans are now. I consolidated my Stafford loans years ago, locking in a very comfortable rate of 3.25%, and the balance currently stands at a little over $22,000. The loan had been in deferment as I completed my MBA at Johns Hopkins, which has stopped the clock the last few years, but with my graduation the interest has started to accrue again. We earn too much to be eligible for the student loan interest tax deduction (certainly not a bad thing) and thus bear the full brunt of the 3.25% rate. Once again, I’m revisiting my student loan dilemma.

$22,000 in student loans at an effective tax rate of 3.25%. We also have a mortgage of around $220k at an effective tax rate of 4.3125% (the rate is 5.75% but it’s tax deductible, in the 25% tax bracket the effective rate is 4.3125%; we could consider only the deduction above the standard deduction for couples $10,900 but that begins to get overly complicated). Math says that if we were to pay down a debt, it would be my mortgage first because it’s at the higher tax rate. So I should never make more than the minimum payment on my student loan unless we have paid off the mortgage (which I envision is something that won’t happen for quite some time).

Proponents of Dave Ramsey’s Debt Snowball approach would say that you should pay off the student loan first because it’s the smaller amount (ahh, psychology). I personally don’t subscribe to that idea, I go by the Blueprint for Financial Prosperity Common Sense Payment Strategy (okay I just made that up, it’s how most people who understand interest rates and math would pay down their debt, I just added some color). While I anticipated this result, it’s always good to revisit things as situations change.

So, the student loan is here to stay for the foreseeable future.

Update: Lending Tree has developed a tool to help determine if you are eligible for an FHA loan.

This week, the Senate passed a housing bill a little over a week ago (the House joined last Wednesday) that seeks to give the housing market a shot in the arm. With 1 in every 171 homes going into foreclosure, the cries for help are getting loud and loud and, with the next year’s deficit nearing half a trillion dollars, we might as well pile it on. What’s another few hundred billion? Personally, I don’t like the idea but economic turmoil doesn’t help anyone. It doesn’t help the people who erroneously got themselves into bad loans, it doesn’t help the people who intelligently avoided them, and it doesn’t help everyone else standing on the sidelines. Considering we can’t pass energy legislation and likely won’t before Congress recesses in a week, we might as well take what we can get.

So, what’s going on? Here are the bits that are likely to affect you.

The Main Bailout

The FHA will be allowed to insure up to $300 billion in 30-year fixed mortgages for those at risk and who are living in owner occupied homes. The net result of this is that some loans will be restructured from their current state to an FHA insured loan. It’s help but it’s not a get out of jail free card, you’ll see why in the second paragraph of the gotchas section.

Who is qualified? You qualify if you have a loan that was issued between January 2005 and June 2007, must be spending at least 31% of your gross monthly income on mortgage debt, the total debt cannot exceed 95% of the home’s appraised value, and prove that they will not be able to continue to pay their mortgage. (LendingTree has a lending tool to help determine if you’re eligible) They can be defaulting or current, that won’t matter, but they have to retire all other debt on the home.

What happens? If you think you qualify, go to an FHA-approved lender and they will take it from there.
Any gotchas, catches, or tricks?There are two types of gotchas. First, in order for this go through, the lender will have to write down the value of the existing loan to 90% of the home’s current value and take the hit. Lenders won’t do this unless they think they’ll lose more than that, so you will probably really have to be in trouble to qualify.

The second type of gotcha is the restrictions and extra payments the borrower will have to bear. You can’t get a home equity loan for at least five years, you’ll have to pay the 1.5% annual insurance premium to the FHA for the guarantee, you’ll have to pay a 3% exit fee on the principal to the FHA if you sell or refinance, and finally you’ll have to give up all profits to the FHA if you sell or refinance within a year. After a year, you’ll only be on the hook for 90% of the profits and drops by 10% each year until it gets to 50%, where it will be forever. That’s a long time.

The Supporting Cast Measures

There are a few other additions to the bill that may be of interest.

Conforming Loans ceiling set to $625,500. A temporary measure increasing the maximum value of a “conforming loan,” or loans that would be guaranteed by Fannie Mae or Freddie Mac, was increased and pegged to home prices in a geographic region. I mentioned it as the Little Footnote on the 2008 Tax Stimulus Package and it really was a boon for the higher end housing market. Well, it’s permanent now.

10% home-buyer “credit,” up to $7,500. It’s not really a credit, it’s a 15 year no-interest loan of up to 10% of a home’s purchase price, no greater than $7,500. I don’t know if this will induce many folks into buying, there’s no sense rushing to buy something if you think it’ll still go down in value. No one loses money by sitting on the sidelines in this market.

My Thoughts

Overall, I think the way the “bail out” was structured was reasonable. Borrowers might be bailed out, only if the lenders accept the writing on the walls, but they don’t get to reap any rewards on the back end. I like the idea that the government gets at least 50% of a bailed out home’s appreciated value if it’s sold or refinanced. That’s a hit and the cost of doing business. Qualified borrowers get to keep their homes, lenders don’t lose as much, both sides seem to win.

It appears that the only losers are those excluded from the deal (taxpayers included). Lenders may be stubborn and refuse to take the hit, borrowers may find themselves close but not quite over the 31% gross income rule, and others may be left out because of the date of issue on their loan.

You can’t save everyone.

(Photo: respres)