A True Price Comparison

Usually, I write on the latest business management news or on marketing plans and tactics as topics for my network-marketing website and blog. On occasion – when a unique or rare subject hits me, I might even compose something with political overtones related to current events. However, my compelling need for writing this article was spawned by an article I read in an investor’s trading publication that I received in my email called, Investor’s Daily Edege.

The article was entitled, “What a Basket Case,” written by investment author, Lynn Carpenter. She filled a basket of real food items compiled from 1938 to the present and compared them against minimum wages of the time to calculate inflationary figures. To no surprise, the outcome showed inflation to be much higher than most economists thought and easily shed doubt on any figures the Busch administration came up with..

She spruced up the article with reader feed back from previous articles in the series. What really caught my attention and made this article a must for me was a man who wrote of price comparisons from 1968 and how much the economy has changed in relationship to earning power. (I’m 53, so I remember the time well, even though I was only 14 at the time.)

I agreed with them on the higher inflation rate, but I also yearned to tell them about some other variables they didn’t consider in figuring their calculations. I concluded they better add another 12% on top of their inflation rate. The two major factors they left out of their calculations were the decline in product quality, and the added cost to products that was passed to consumers from the growth and usage of the quickly evolving promotional tool of marketing.

Think about this: we can’t forget that the manufacturers, growers, distributors and retailers find any way they can to cut costs and sell more. For example, today’s candy bar is much smaller than one from 1968. Today’s automobiles have less steel in them and what steel is left is a much lighter gauge. Service has become almost non-existent in the food industry (excluding restuaraunts) as it gave way to the supermarket, or the contemporary super-store.

In another example, we used to have a milk box on our porch for the weekly delivery of dairy products. The price was slightly higher than the grocery store, but the goods were fresher and delivery was included in the cost. This helped Mom because most families only had one vehicle and she couldn’t up and go to the store whenever she felt like it, nor were stores open 24/7, or on Sunday. Many families counted onthe personal service of the milkman and many butcher shops used to deliver their meat products too.

The larger quantity of dairy products sold in the grocery store didn’t drop the prices. As the system of distribution improved, a new industry was born – marketing! Marketing was supposed to be a good thing – a vehicle to bring buyers and sellers together. No one counted on it to become strictly a sellers tool to change the face of advertising and increase sales through packaging.

Suddenly quality was being replaced by popularity as the marketing industry found name recognition and graphics to be catalysts for high-volume selling products. Mom and Pop businesses couldn’t afford the extra costs of marketing and were quickly swallowed up by the giants. Packaging became more sophisticated and informational, which raised manufacturing and marketing costs that were quickly passed on to the consumers in various forms. Within a 10 year period of 1960-1970, many small local diaries became obsolete and the milkman met the same fate as the dinosaur.

While some prices rose at a higher rate than the cost of living indexes, it was marketing strategies that really increased advertising and packaging costs to those levels. Product size started shrinking to absorb the extra costs and packages increased in size to hide the smaller product and to deliver the new form of promotion.

Consumers mistakenly associated beefed-up packaging with higher quality until watchdog groups like Nadar’s Raiders started exposing corporate practices for what they really were – consumer flim-flam that was profit-driven for high stockholder dividends and not product enhancements.

And it wasn’t just tangible products that went through the inflated-price evolution, but also the service oriented product too, like that of filling up your car at a service station. I really miss those days of getting your oil checked, windsheild washed and tires checked while thy filled up your car with gas at no added cost. The gas station that had the best service sold the most gas and other related products. Can you imagine someone putting air in your tires while they pump your gas and not charge you for it?

Then, during the energy crises of the 70’s someone came up with the bright idea of self- serve gas pumps to offset the rising gas prices. It didn’t take long for marketers to capitalize on the self-service gas pump and turned the station itself into the convenience mart, which ate up the carry-out concept for quick staple shopping.

It was quickly realized that less service could be transformed into higher priced products away from the pumps if they were inside in a store setting. Oil, windsheild-washer fluid and other accessories used to be sold out at the pumps. Combining self-service with the conveinance of staple shopping and other goods meant higher profits using less resources. Soon the gas station attendent was another fatality with the dinosaurs, but at least he turned into a cashiere. No longer was a gas station a place to get your car fixed either because repair bays meant less room to sell products like energy drinks.

We are constantly reminded of the loss of service every time we make a phone call to a bank or utility company. How many recordings and menus do you get to go through before you get to speak with a real person? Now days the option isn’t even on the main menu to speak with a representative – if you can find the option at all!

Price escalation on products and services now have new allies using consumer ignorance and have picked-up where the marketing industry has left off. The financial service industry, along with various political affiliations for economic development, are legislating towards government control and less competition. Their rationale is price and interest rate stabilization, which works temporarily in the short term, but it has proven to be an upward spiral of rising costs and interest rates that often doesn’t show up until a few years later in the “long-run.”

Free-enterprise is also being stifled by large corporate mergers (government enabled) that were most likely not possible in the 1960’s. This has had a trickle-down affect on prices. Corporations got so large they could not police themselves or serve the public with personal service or the consumer with product quality. There usually ends up to be too many management levels where bad managerial decisions become inherent in the system. Product quality suffers as management scrambles to fix organizational blunders.

Managerial oversight happens in decision-making because managers and/or executives from one company or the other that merged don’t understand the new company’s mission, the process control needed, or the attributes of the larger scope of products and the new company. The mega-sized organization suddenly finds itself bailing out by raising prices or worse yet, trimming the work force.

Of course, the latest and most effective strategy for cutting expenses is in trimming, or even eliminating salaries and wages -mostly through the relocation of operations to underdeveloped areas, while also being offered added tax incentives or some other form of local government backing. If consumers still want the products that left the country, they can either buy low quality substitutes or pay extra due to unfair tax treaties like NAFTA.

Now when you figure a cost comparison of now to the pre-marketing and pre-conglomerate eras, what is the formula? More marketing costs plus more packaging, less product and less service follwed by more imports and less exports; consequently, the ultimate decline in manufacturing and drop in employment rates, which has to lead lead to the decline in the GNP. My guess is add another 12% to the inflation rate for any year past 1980. Also add a 30 % rise for the increased start-ups to the home-based busineess industry in the next two years.


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