I saw an ad on the TV for Rosetta Stone, which is a foreign language course. Now this caught my eye immediately as I’ve always been fascinated by the real Rosetta Stone which is housed in the British Museum and is a wonderful mix of history and linguistic science (read the link to find out more).
This Rosetta Stone Company is one of those computerised language courses; what was interesting about it though was the “Money-back Guarantee. Every Rosetta Stone CD-ROM is backed by an unconditional six-month guarantee. If you’re not satisfied with the progress you’re making, we’ll return your money, no questions asked.” This is a great offer, and while sadly the terms and conditions don’t seem to be actually written on its website, we have to take the ‘no-quibble’ bit at face value.
When I look at these things I think it’s always important to try and “think through the logic” of how it can make such an offer. In this case the main factor seems to me that the business is based on the fixed-costs of making the course. This is an international company with a US service too, so it’s likely it has huge volumes, and once its done a course that’s it. It then charges £139 for the courses, a serious wedge.
Yet once the course is made all the other costs – ie making and distributing the CD-Rom are small- a couple of quid at most- so it’s all about paying off the fixed costs and due to that it can take the risk that most people who buy the course, even if they don’t use it, will be too lazy, forgetful or apathetic to return it. I’m sure some actuary somewhere has calculated the risk return pricing model. Of course it does leave itself open to people getting the CD-Rom, learning the language and then saying it didn’t work for them; though most people are fundamentally honest so I doubt that’d happen too often.
PS this isn’t a recommendation. Please don’t think this post implies any recommendation for Rosetta Stone – I was just interested in its marketing; I have no idea about the product, but over £100 certainly sounds pricey. If you are looking for this type of thing, it’s worth being aware there are free language course downloads available.