Tuesday, September 20, 2005

What's Whiskey Got To Do With The Price Of Gas?

When I was in the Jaycees and sold advertising for a newspaper, the editor was very active in the YMCA. They wanted to build a world class center and the first part was an Olympic size pool. He asked me if we could man the phones and solicit donations. The local phone company was willing to give us an area to make calls. I said I would bring it up at the next meeting.

We ended up with about 9 members willing to participate. When we went to the phone company, we each got a stack of 3x5 file cards with names, addresses and phone numbers. I started off by asking people for $25-50 toward the building of this pool. They all said, "No, we can't afford it right now." After about 4 calls, I knew I had to change my spiel. I then told them that we needed $150,000.

"Well, how much do you want from me?" they asked.

"Oh, $1,000 or $2,000 would be nice."

"NO WAY!" they screamed.

I said, "OK, how about $50?"

"Oh, OK, I can handle that."

I ended up collecting the most money that night, and the editor told me he had given me all the deadbeats because I sold advertising for his newspaper. He wanted to see how good I was. That is not my point, though. My point is that if you aim really high, invariably, you will get some amount from people. Sometimes, more than you thought you would ever get.

In the mid-seventies, I had a roommate who worked for a family owned liquor store. He told me about a name-brand whiskey that played mind games with its consumer base. It might have been Jack Daniel's. I don't remember for sure. A few years earlier, I had gotten sick to the point of wanting to die from drinking way too much Wild Turkey. Ever since that time, I can't stand the smell of whiskey of any type, let alone drink it. It's kind of like lamb. You either like it or you don't even want to smell it cooking.

In any event, Pete, my roommate, told me how this whiskey outfit would charge about $8.00 (back then) for a quart or whatever for most of the year. That was before we went metric. Then they'd jack the price up to around $12.00 a bottle. It would remain that way for a couple of months, then go back down to $8.00. What this, in effect, created, was a false sense that you were getting a really good deal when the price was at $8.00. People would scoff it up in anticipation of the impending price hike. This made product sales skyrocket through the roof. People would horde the stuff like it was going to disappear forever. Of course, being the gluttons that most people who need to horde alcohol are, they soon ran out and the price was then back up to $12.00 and they'd buy it again anyway. Eventually, they'd leave the price at $12.00 and raise it to $16.00 and start the whole cycle over again. At that point, people would think they were getting a good deal at $12.00, because over time, they adjusted to and had become comfortable with the $12.00 price, since they had seen it time and time again.

I think there are similarities here between that whiskey deal and what's going on with gas. Gasoline prices have been hovering around $3.00 per gallon of late. All of a sudden, I saw a gas station selling it for $2.49. WOW! Such a deal. I know the whole thing works on supply and demand, but, I kind of think of those gas guzzling SUVs as the heavy duty gasoholics of the world. They just can't seem to get enough. So, will we get used to, let's say, $3.00 a gallon, then $3.50, then back to $3.00 a gallon for a while, until it finally goes to $3.50 and stays there until the next price hike? Just a thought, but, it's not like I've never seen it happen before.

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