Bing Cashback is an online shopping cashback rebate service offered by Microsoft. Microsoft announced the program will end on July 30 at 9:00 pm Pacific Time. Before it bids farewell, Bing Cashback offers 40% off shoes at Endless.com. I’ve been buying from Endless.com through Bing Cashback for some time now. At times it was 25% off or 30% off. 40% off is the best I’ve seen so far.

Some shoes are hardly ever on sale anywhere. For those shoes, 40% off at Endless is a great deal.

Here’s how it works. You start at Microsoft’s search engine bing.com. Search for "shoes". Click on the ad on the top of the search results that says 40% off at Endless.com. Give an email address to Bing Cashback if it asks you. Shop at Endless.com as usual. When you are done, you will get an email from Bing Cashback about your rebate. Your rebate will be paid to an Amazon Payments account in about 60 days. You can redeem the rebate as an Amazon gift card or withdraw it to your bank account. For more information, read Bing Cashback FAQs.

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I bought a file cabinet from the office products store Staples a few years ago. I only used it for storing random things, not files. As such, I didn’t install the rails for hanging file folders. Now I want to use it for files, but I can’t find the rails. Maybe I threw them away thinking I would never use them. So I called Staples and asked if I can get the rails somehow.

I didn’t know what to expect but I thought I would try. "I’m sorry, but the rails only come with the cabinet" would be a reasonable answer. Or it could be "We don’t have the rails. Here’s a phone number for the manufacturer." I would be happy if they tell me "We sell the rails for $4.95 a pair. Would you like to order them?"

After I explained the situation, the customer service rep put me on hold a few times while he checked with others. Then he told me he arranged to have the rails delivered to me for free.

That’s exceptional service in my book. How often do requests like mine come up? I doubt very often. Solving such an edge case requires a substantial investment in computer systems and front line customer service agent training. The system has to be able to look up past purchases to locate the product I was talking about — I didn’t have the item number or exact name of the product. To me it’s just a file cabinet. The system has to find the associated accessories for the product, taking into consideration any model changes over the years. And finally, what’s the point of making all the investment when Staples doesn’t charge for the replacement rails?

You bet I’ll be a loyal customer of Staples. Among the three major office products chains, Staples, Office Depot, and OfficeMax, the prices are competitive anyway. Staples’ exceptional service basically comes for free.

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My local NPR station did its twice annual fund drive last week (or is it three times a year now?). I haven’t seen any stats but I’d estimate a large percentage of regular listeners don’t contribute. They listen to the NPR programs because they like the programs. They don’t contribute because other stations are free. Then why are they not listening to those other stations? Because they like the NPR programs. It goes in circles like that.

Somehow we are able to justify paying more for better quality on physical products. Many people pay more to buy Macs because they like the quality. We all drive different cars — some are much more expensive than others. We have more trouble with the concept of paying more for better service, and maybe especially so for some types of service versus others.

I have heard and read many complaints about banks, credit cards, airlines and what not. Not once did I hear the person say they are willing to pay more for better service. No matter how good the service is, a checking account has to be free, with free online billpay and no minimum balance. A credit card must have good rewards with no annual fee.

Companies learn quickly it doesn’t pay to invest in good service. If Company A sends customer service to another country and Company B keeps customer service in the U.S., but customers are not willing to pay a higher price for the higher cost of customer service, guess where customer service will go?

Companies advertising an honest headline price can’t win business against competitors advertising a low headline price with hidden costs. Competition drives the service quality down, hidden costs up, because customers pay too much attention to the headline price.

Once you get over the mindset of refusing to pay more, you will often find better service. I recently switched to a different provider for hosting this blog. I’m paying nearly four times as much as before, but I’m very happy because I’m getting much better service.

My limited observation also tells me small business owners have less trouble with paying for quality service. Maybe they’ve been burned by bad vendors too many times. They understand the value of better service.

Next time if you find yourself not happy with something, perhaps think about paying more to someone who provides better service. Better service will disappear if people aren’t willing to pay more. If you are already doing this, I’m interested in knowing for what service you are paying more even though you know you can get away with paying less.

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Instead of being content about having had some unusually good years, people are mad about being asked to go back to normal because they got used to the good times. Rioters threw fire bombs into a bank. Three poor bank employees who had nothing to do with the wage cuts died of inhaling smoke. How sad.

Lesson learned: don’t get used to the good life. It’s much harder to cut back than to spend the extra money. At the individual level, how do we make sure we are able to deal with an income reduction so we don’t riot in the streets?

Saving money when times are good is too obvious. I won’t bore you with that.

Maintaining a flexible budget would be another way to deal with potential income reductions. I’m very wary of buying anything that requires an ongoing payment. Once you sign up for an ongoing payment, it becomes part of your budget. You keep paying and don’t think much of it. Any cutback will be perceived as giving up something that you got used to.

That’s why I don’t have an iPhone, even though the other day I saw the grocery store cashier has one. If I have the money, I’m OK with spending it on a one-time purchase. I bought a 52-inch LCD TV and a Blu-ray player last Christmas. I enjoy them. They are not that expensive. After Bing Cashback, I paid about $900 for both. They are much less expensive than an iPhone.

When you have a flexible budget, a 20% income reduction doesn’t affect your basic lifestyle. You naturally hold back the one-time purchases you used to make but your basics are still covered. When your basics are still covered, there’s no reason to go rioting in the streets.

Governments don’t seem to understand this concept of budget flexibility. When times are good, they create new programs that require ongoing funding. The programs are no doubt worthwhile, just like an iPhone is nice. Once created, people get used to these programs. When good times pass, cutting back on the programs becomes so much harder.

Lately I received many flyers in the mail about protecting such and such programs against the dire consequence of budget cuts. I wonder if the so called cuts are only compared to the good times. I also wonder if such programs would have been created if we didn’t have a real estate bubble which flooded the government with extra money.

The same goes for tax cuts. It’s clear to me that the Bush tax cuts weren’t sustainable when they were enacted. However, once people get used to them, they become the norm. Even Obama is afraid of sunsetting the Bush tax cuts as scheduled. What a disaster. If the Bush tax cuts were bad, let’s do the right thing and not continue them.

You see how good times can do so much damage?

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"I’m afraid that we have to live with the fact that people have been buying snake oil for centuries, and will certainly continue to do so."

That got me thinking. Why do people buy snake oil? I can understand why people sell snake oil but why do people buy it? The immediate answer would be lack of education. Obviously if people know it’s snake oil, they wouldn’t buy it. But I keep thinking there’s got to be more to it. After witnessing one such purchase first-hand, I developed a hypothesis: people buy snake oil because they expect magic.

I was at a running event recently. This event required that all participants go to an Expo to pick up the required bib on the day before the race. They do that instead of mailing the bibs because the Expo is an opportunity for exhibitors to sell stuff.

A booth at the Expo was selling a balance bracelet. This bracelet supposedly improves one’s balance. It does that instantly. They did live demos with real prospective customers. The demos are similar to what’s shown in this video:

The salesperson had the prospect extend her arms and stand on one foot. Then the salesperson pressed down on her extended arm. The prospect couldn’t hold the balance and the lifted foot had to touch the floor. After the salesperson gave the prospect a balance bracelet and repeated the test, the prospect could hold longer and against stronger force this time. The convinced customer bought the bracelet on the spot.

You can improve your balance by wearing a bracelet. As simple as that. That’s magic, isn’t it?

I propose an alternate test. Give the test subject the bracelet first without saying anything. Do the test. Remove the bracelet and test again. I bet the test subject will perform better the second time because she’s more prepared. Does that show having the bracelet hurts her balance?

If people expect magic, they will buy snake oil. I can think of another example: buy CDs issued by a bank in Antigua paying high interest. I’m sure you can think of other examples too.

The simplest way to guard against buying snake oil: don’t expect magic; take the slow road.

For more debunking of the balance bracelet magic, watch this video:

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Although many stores sell furniture, there is actually very little information online. Many furniture stores don’t put their inventory on their website. Those that do omit meaningful information. They give the furniture a nice-sounding name: a “Madison Park” collection or a “San Marco” dining table. Who makes it? They don’t tell you the name of the manufacturer. What’s it made of? “Select hardwood and veneer.”

When I buy shoes from Zappos or Endless, I see them in six different angles. When they show furniture that costs many times more, I only get to see one picture. How tall are the drawers? They don’t tell you.

So much for looking for furniture online. Off I went to the stores. It’s not any less confusing at the stores than shopping online. What am I supposed to look at? Just the style and the dimension, like women’s clothing? Or the quality of the material and workmanship too? How do I tell good quality from bad? I have no idea.

No worries, stores have design consultants, aka salespeople. They are like full-service brokers. The service is “free” as long as you buy from them. Their readiness to help gives me the impression that there’s got to be at least 100% markup in the prices.

Ah, prices. Unless I go to stores of the same chain, no two stores sell the same pieces. Strict apples-to-apples price comparison is out of the question. Is this piece at store A more expensive than that piece at store B because it’s better quality, or is it just more expensive for no reason? How much is quality worth? I have no idea.

Like jewelry in mall department stores, furniture is always on sale. 30% off is an everyday event. Sale ends on Sunday, but don’t worry, there will be another one on Monday. And the strangest thing is, with that kind of markup, furniture stores go out of business all the time.

Although I didn’t know what I was doing, I had to make a decision. I spent a non-trivial amount of money based on limited judgment. Some investors must feel the same way when they face thousands of investment choices at different price points.

I still have to buy furniture for a couple more rooms. Do you have any tips about furniture shopping? Or are you just as confused as I was?

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Windshield Wiper Blades. These are the easiest. Press a clip, slide off, and slide on the replacement. Time: 5 minutes. Cost: about $10 each.

Battery. The dealership does a vehicle inspection for me whenever they do an oil change. They told me my battery’s cranking power was low and they would charge me $150 to replace it. I went to Wal-Mart. They install the battery for free if you buy it there. I waited nearly two hours and it still wasn’t my turn yet. I got fed up and just bought the battery.

The job turned out to be really easy too. Unscrew two nuts on a metal bracket, disconnect the battery cables (negative off first, on last), remove and replace. Time: 15 minutes. Cost: about $80.

Air Filter. Another easy one. The air filter stays in a plastic box under the hood. You can see it easily because there is a big hose connected to the box. Either unclip some clips or loosen some nuts. Open up the lid, remove and replace. A piece of cake. Time: 5 minutes. Cost: about $15.

Cabin Air Filter. Also known as A/C Air Filter. This one may be a little tricky depending on the car. On my Honda Accord, it’s also a 2-minute job, but the dealership wanted to charge me $100 for doing it.

The cabin air filter is behind the glove box. Drop down the glove box, pull out and replace. Time: 2 minutes. Cost: about $15.

Oil change. I haven’t done this yet. I heard it’s also easy but somehow I’m afraid of crawling under the car and having oil gushing onto my face.

What other car maintenance work can an owner do easily?

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I have been a AAA member for a few years but I still don’t understand what AAA really is. I mean, is it a for-profit company? If so, who owns it? AAA books travel. Who earns the commission? AAA sells auto insurance. Who’s providing the insurance? Does AAA have its own insurance subsidiary or is it just an agent for other insurance companies? If I don’t use AAA travel agents or buy insurance from AAA, am I benefiting from the profits in those areas?

Wikipedia says AAA is a non-profit owned by regional motor clubs. Individuals like myself are members of a regional club, for example AAA Northern New England. It’s still not clear to me whether the regional clubs are for-profit or non-profit. I don’t have auto or homeowners insurance through AAA. Therefore I don’t know who’s behind the insurance. If anyone knows for sure, please help.

Suppose the regional clubs are non-profit. Then they are a form of a co-operative. People band together and provide services to themselves, either in-house or by contract with outside providers. That’s how Vanguard, mutual insurance companies, credit unions, and homeowners associations are organized. A retail chain store I frequent called REI is also organized as a co-operative. Costco, on the other hand, is a for-profit company, although it also charges membership fees. In the health care field, the Kaiser Foundation Health Plan is a non-profit co-operative which contracts with Kaiser hospitals and Permanente doctors, unlike other health insurance companies which are in it for profit.

I wonder why we don’t see more co-operatives. I can see the lack of profit prospect makes people less motivated to start these. But how did these co-operatives get started in the past? The organizers knew there wouldn’t be profit. Was it easier to start a co-operative in the past but more difficult now?

It’s also interesting to note that a co-operative structure does not guarantee the lowest cost or the highest quality. Vanguard does very well in both cost and quality. State Farm as a mutual insurance company isn’t necessarily the least expensive. Other stores often beat REI in prices although REI has a better return policy. For towing and jumpstarting? I don’t know if other companies do it better or cheaper than AAA because I don’t have any experience with others.

The roadside assistance option from auto insurance is cheaper than AAA membership. I wonder if I should use that instead, or just pay out-of-pocket if I need service.

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5-Step Guide to Finding The Lowest Rate For Hotel Rooms

Basically if you use an "opaque agency" like Priceline or Hotwire, you are able to save substantially on a hotel room. Although I’ve had a problem with Priceline, I still use them because on average I still get a better room for the money.

When hotels sell the same room for less on Priceline or Hotwire than they do on their own web site, they are practicing price discrimination. Customers who are willing to jump through a few hoops get a lower price. [Note 1]

The "catch" with Priceline and Hotwire is that you don’t know exactly what you will get before you commit to buy. In the case of Priceline, you also don’t know how low you should go. [Note 2]

Consumers counter it with web sites like BetterBidding and BiddingForTravel, where they post what prices were accepted or rejected and to which hotels they got assigned. When consumers share notes with each other, it’s no longer as opaque.

Businesses share notes about consumers all the time. They have access to a consumer’s credit reports, ChexSystems report, C.L.U.E. reports, MIB file, and God knows what other reports. It’s time for consumers to get together and share notes about businesses.

Right now the consumers are very disorganized. There are various review sites (Yelp for restaurants, for example), forums, blogs, Facebook, Twitter, but the "notes" are scattered all over the place. Google helps people find them, but relative to the number of consumers conducting transactions with businesses, the number of reviews is still very very small.

A smart government can play a good role here, as you see in how they help consumers save money on auto and homeowners insurance. If there is an official place where consumers can look up the score card of any business, they are so much better off than being in the dark.

If the government says every business must provide a score card and disclose their scores before entering into a contract with a consumer, good honest businesses will welcome that. This has worked very well on eBay.

If the consumers who fill out the score card with a review are entered into a lottery, there will be an incentive for consumers to do so. Some countries use this lottery mechanism to reduce tax evasion. In the end, everybody benefits. The consumers are more informed. Good businesses earn more business.

Whenever possible, I do my fair share of notes sharing. The reach is still very limited though. Sadly my post about BBG Communications has become a popular one because so many other consumers are also victimized by BBG.

Notes:

1. There’s an econ paper about this whole opaque model. To be honest the propositions and proofs make my head spin. I will leave them to your enjoyment.

Shapiro, Dmitry A. and Shi, Xianwen, Market Segmentation: The Role of Opaque Travel Agencies (February 2008).

2. If you use Priceline, make sure you are familiar with this "free rebid zones" strategy:

Consumer’s Checkbook: Priceline Can Deliver Incredibly Low Rates on Hotel Rooms — If You Use It Wisely

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Is an extended warranty on a car "worth it"? The standard advice you hear about extended warranties is that they are not worth it. I disagree. I must say it depends. It depends on what price you pay and what you get for that price. The coverage is worth something. If you pay a low enough price for the right coverage, you can make the extended warranty "worth it."

Let me begin with what NOT to do when you buy an extended warranty.

1. Don’t buy it from the dealership at the same time when you are buying a new car. New cars are covered by bumper-to-bumper manufacturer’s warranty, typically for at least 3 years or 36,000 miles. The extended warranty kicks in only after the manufacturer’s warranty runs out.

You have plenty of time to see how the car holds up while it’s covered by the manufacturer’s warranty. If it looks like it’s rock solid, you don’t have to buy an extended warranty. If after 2-1/2 years you think you are not going to keep the car for long, you don’t have to buy an extended warranty. The extra time for making decisions and the opportunity for observation have value. Don’t give up that value.

Also, when you are buying a new car, you get only one offer for the extended warranty. There’s little chance to shop. You don’t know if the dealership is offering the extended warranty at a fair price or not. If you buy the extended warranty together with your new car, chances are you will overpay by a lot.

2. Don’t buy an extended warranty plan unless it’s backed by the manufacturer and honored by all dealerships. There are extended warranty plans offered by third parties. I think the chances of getting a repair covered by the manufacturer is a lot higher than getting it covered by a 3rd party because the manufacturer is usually interested in building some loyalty from the owners. I have no scientific proof for this. It’s just my opinion.

Most (all?) car manufacturers have their own extended warranty plans. They call them by different names, for example:

• GM Protection Plan (GMPP)
• Ford Extended Service Plan (Ford ESP)
• Toyota Vehicle Service Agreement (Toyota VSA)
• Honda Care
• Volkswagen RealDriver

You just have to remember to shop for the extended warranty when your manufacturer’s warranty is about to run out.

Now, how do you shop for an extended warranty if you decide to buy one?

3. Shop from any dealership, including out-of-state dealerships. All dealerships of the same manufacturer are authorized to sell the same extended warranty to all customers. The dealership is not on the hook for the warranty. The manufacturer is. You don’t have to buy it from the same dealership where you bought your car. Your don’t have to buy it from a dealership in your local area either.

Extended warranties have a high markup in the MSRP. Never pay MSRP. The markup on the extended warranty is pure profit because the dealership does not have to do anything to it until there’s a sale. They just fill out some forms and collect the sales markup. If an out-of-state dealership has a willing customer calling them, ready to buy, they will much more likely offer a good price, because they know the customer is shopping for price and only a good price will get the sale. A quick sale for $100-200 profit is so easy.

4. Shop by phone, not online. Yes, the old fashioned telephone. You are unlikely to find really good deals online, because the manufacturer discourages posting discounted prices online. One "rouge" dealership ruins the fat profit for everybody. If you call and make an offer that still gives the dealership a reasonable profit, they will gladly accept the easy profit.

For the kind of extended warranty I was asked to shop for, I came to the conclusion that the cost to the dealership is 50% of MSRP. I got quotes for the same plan from three dealerships. Based on the 50% of MSRP number, here are their markups:

You see the difference?

I sent my family member to dealership #3. Everybody is happy. He’s happy to have peace of mind and he saved at least $300. The dealership got an easy $200 profit. All I’ve got is this blog post.

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