@allenJo - I never did understand how companies could make money on buy one get one free sales. I always thought that these were teasers, meant to get the customers into the store to buy other products.
The marginal cost revenue explanation that the article gives is a real eye-opener. I realize that nothing is really “free” in the retail world. The company is making money somehow, even if we consumers don’t understand the actual cost numbers involved.
I am amazed, however, at some of the deals that I see. One retailer runs a special for suits that would normally sell for $450, where he offers a two for one deal at around $175.
Don’t ask me to figure that one out. That retailer must be looking at some seriously small marginal utility numbers to pull that off. From all accounts, the business seems to be doing well even with those specials.