July 11th, 2008 
Vijaianand Sorry for coming out late on this final part of this blog. Last week was little different and out of schedule. I was busy with my court date for Traffic ticket contesting and my first time blood donation which turned out to be little interesting one. I passed out at my work after the blood donation which seems to be normal for first timers because of the sudden blood loss.
I had to literaly say “NO” to many of my extra-curricular activities because of the pleasing request to take rest from my well wisher which I can’t deny.
Alright, let me continue where I left off from the last week post by adding some more interesting story to this topic and also share my real example on how to get around or take advantage of it.
Last week I ended the post saying, “Price Optimization” is the unknown business tactic starting to be used by many industries. As per my research, Airlines started to use it in 1980’s. AA and many airlines successfuly implemented them and turned around their profits during the tough times using this very own strategy. It is so successful other industries like apartment property managers, hotel&car rental companies, Big Retailers, Event Ticket sellers and now the banks, mortgage lenders are attracted towards this business strategy and making very good progress in doing so.
Last week I ended the post saying, “Price Optimization” is the unknown business tactic starting to be used by many industries. As per my research, Airlines started to use it in 1980’s. AA and many airlines successfuly implemented them and turned around their profits during the tough times using this very own strategy. It is so successful other industries like apartment property managers, hotel&car rental companies, Big Retailers, Event Ticket sellers and now the banks, mortgage lenders are attracted towards this business strategy and making very good progress in doing so.
I have a real example to prove the fact that banks are also way deep in implementing this strategy successfully.
Two years back, I was in the market for refinance. Like any 3 out of 5 americans who got trapped into ARM loans during the housing market boom, I was one among them. I had 5/1 ARM with 6.125 APR. I got warnings many times from my mortgage lender CountryWide and I kept hearing about it over the media and financial news. So I decided to take action and didn’t want to take any chance waiting till the end.(If I would waited, I could have got better rates now) I started looking out for better interest deals and refinancing options.
As I mentioned my loan was serviced by Countrywide at that time after Ryland Homes sold my loan to them. I was looking for a rate closer to it so I don’t want to see a big increase in my monthly payment. I also decided to to reduce the number of years to finish the loan quickly. I called Countrywide to check with them whether about my options and see whether they will be willing to refinance my loan for better rate.
After a long telecon, I only recieved an answer for refinancing option of higher rate and bigger closing cost which will be rolled in to my loan. Inspite of my why and what questions, they never want to come down. Being a deal hunter myself, I never settle for anything at first attempt. After a month long hunting, I finally ended up with 20 year fixed with 6.375 APR with GMAC mortgage.
According to De Lotto’s research(courtesy:Smartmoney magazine), more than 55 percent of banks already have adopted some form of price optimization, and more than 75 percent plan to use price optimization in some way by 2012. The report surveyed 34 top banks from across the world; more than half were based in the U.S.
In this bad economy, now its the chance for every industry to turn around and show some profits and this will be the right tool for their effort. As a consumer we should be very careful in making any financial decisions.
How to get around or take advantage ?
We all got options in any situation if you look around. You can either decide to stay away from it or make a oath to ride the wave by taking advantage of this new trend. I would definetly urge you to take this opportunity to ride it as its going to catch to you sometime or other.
1. If you are looking out for loans/mortgage, don’t look in your bank whom you had account for years. It doesn’t matter whether you have good credit score and long term relationship. If they happen to use this strategy, you might be on their books to be get ripped with high rates.
So look out for competitors for banks in your area and also try to go out on the web to search for good deals. But be wary of the cold marketing calls or emails from mortgage brokers with cheap rates, they might be bogus. Be careful in choosing the right one with best closing cost.
2. When you are trying to book hotels and rental cars, look out for deals depending on the market. Try to plan your vacation or trip accordingly taking advantage of weekly rentals or 3 day rentals which cost less than 2 days rentals. Also Hotels charges higher rates for friday and saturday night stays especially booked in short notice. Plan to book them in advance and try to hunt for any discount codes or cheap coupons online or ebay.
3. Do have plans to take your family for a ball game or Football or basketball game? Event ticket sellers charge high on mostly watched games. When there is a demand, the price goes up. Try to settle yourself for games when there are mediocore teams visiting home. Also try to find out tickets from your work or friends network which will turn out free and no money from your pocket.
4. Are you looking out for Renting apartment or Buying car, your credit report and credit scores are more likely to be looked at to determine the rents and rate. A good credit score does matter but other factors also play a roll as per the price optimization strategy.
Try to spend time researching over the internet to see competitors around the area and check them out. Apartment renters put special offers all the time and also try to find a friends to take advantage of referral programs many property companies offer. For car buying, you can bargain since you are the buyer. I know its hard for many to bargin, its your money so don’t just give it up when you spend hours earning them.
5. Got attracted by the nice cashmere sweater in a high priced retail store. Hold on!! Don’t just buy it yet. You might find this cheaper online or in other retailers. You might find coupons which you can use to get some discounts. Just turn off your rushing urge to buy anything fast.
My conclusion, be on the look out for deals on any of your shopping and never settle for less if you deserve the best.
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