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Saturday, February 15, 2014

Fool’s Economics

Fool’s Economics
During the 1950’s and early 1960’s there was a sense of stability like we haven’t seen before or since.  During the above mentioned period you could work on your personal budget and be off by a very few dollars year after year.  You knew a year or two in advance what a gallon of milk was going to cost or the price of a gallon of gasoline within a couple of cents month to month.  You could also plan on your house rent and car payments staying stable. 
Granted your wages also didn’t fluctuate much but there also were no imminent lay-offs.  For extra income there were plenty of side jobs, or overtime with your own employer.  There were also opportunities like Avon sales, Kirby Vacuum cleaner sales, Encyclopedia sales.  Of course there were also ample opportunities to start your own business if you wanted to (examples: landscaping, painting houses, and etc.).
The fool’s part of the economics, comes and has been around for way too long, when consumers are looking for savings anywhere they can get them at any cost (did you catch the irony).  A very popular saying comes to mind: “If it’s too good to be true, it most likely is.”
I am way too sensible and common sensed to be lured by obvious tactics.  Any time you get a special coupon from a newspaper or magazine offering, “40% off today only!”  My response is, if you don’t have that product or service in your must buy now list don’t.  Stay home and instead of saving 40%, save 100%.  If one product is being offered at regular price with a 40% rebate, and a competitor is selling it for slightly cheaper with no rebate, I say skip the rebate and save a couple of dollars on the spot.  The reason rebates are not redeemed are:
  • Sixty percent of study participants who failed to redeem their rebates said procrastination or forgetting was to blame, compared with 20 percent who said the redemption process was too much effort, and 20 percent who lost their receipts, mistakenly threw out the required packaging or faced some other constraint.
  • Rebates are a popular marketing strategy of manufacturers because they boost sales yet result in little payout, since few buyers bother to redeem them. They are most frequently used as a tactic to promote consumer electronics, where redemption rates, even on larger-ticket purchases such as computers and televisions, are well below 50 percent. ~University of Florida News
During many years of marketing competition, manufacturers offered towels, glasses, cups, saucers within their boxed products (example: laundry detergent).  Cereal manufacturers offered popular music releases in 45 rpm records in their boxes to get the kids to ask for a particular brand as opposed to another.
It seems that everyone offered Green Stamps at one time or another.  Cigarette manufacturers offered their own coupons that could be redeemed for anything and everything in their catalogs.  I remember my step-father’s friends used to poke fun at him, asking if he was saving enough coupons to get an Iron Lung.  The silliest part of all is that in most instances, if you spend $800 dollars on product you will have enough stamps to receive a prize valued at $1.50.  The fallacy is that if you stop smoking you could spend thousands of dollars buying all the prizes you want (no coupons required).
Not much different than spending (wasting) $300 dollars in a Casino to come out a $50 dollar winner at the end of the Casino visit (if a winner at all).  In the case of the saucer in the box of detergent; you could spend your money on the cheaper detergent with no gift inside and then buy a saucer for thirty cents (at 1960’s prices).  To make it event worst, they would hook you until you acquired the whole set of plates.  I will need to follow-up this post with more comparisons.  Up next:  Have you ever benefitted from any service or product that the government has Regulated or De-Regulated?  I know the answer, do you?  The best is yet to come….

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