What goes up doesn’t come down

December 17, 2007

by Ivan Raconteur

Traditional wisdom says what goes up must come down. Anyone who has paid any attention to things such as prices or taxes lately knows that this simply isn’t true.

Prices go up a lot more quickly than they come down – if they come down at all.

Marketing types have been hoodwinking us for years, trying to hide this fact.

We should not be too hard on them, though. They are simply doing their jobs, and they are to be admired for the way they twist the meanings of words in interesting new ways.

For example, a seller will take three cents off of the price of an item, and proclaim that prices have been slashed.

If a retailer takes a couple of bucks off the price of a shirt, he will call it a massive markdown or a huge rollback.

Things are very different when prices go up.

Sellers generally don’t tell us when prices go up. If pressed on the subject, they put a spin on it.

If an item goes up by 50 percent, the marketing department will describe this as “slight pricing adjustment.”

If the price of a product increases from $15 to $37.50, they will call it a minor market re-assessment.

Marketing people will never use the words “price increase” – unless they are trying to get us to buy something today to avoid the threat of a price increase tomorrow.

For years, marketers abused the word “sale” until it ceased to have any meaning.

The government finally stepped in and decreed that in order to call something a sale, items had to be offered for a price that was actually less than the usual everyday price.

This gave rise to a new concept, the “sales event.” Marketers figured out that by calling something an event, they could skate around the law.

Now, we have Labor Day events, inventory reduction events, and year end super bargain bonanza events. The prices offered during these events may or may not be less than one would have to pay at other times of the year, but buyers can be entertained (or distracted) by giant inflatable characters on the roof, and clowns wandering about on the sales floor. They might even be treated to free popcorn, hot dogs, and soda pop.

This is a great investment from the seller’s point of view. If you can convince someone to fork over $25,000 for a new vehicle just by giving him 79 cents worth of dogs and soda, you are going to come out pretty well on the deal.

Retailers are understandably reluctant to reduce the prices on the products they sell, even when their costs go down. They take a slow and cautious approach to price reductions.

On the other hand, they have lightning-fast reflexes when it comes to raising prices.

All it takes is an oil tanker traveling within about a mile of an iceberg out on the ocean, and, before you can say “Jack Robinson,” the world price of oil has skyrocketed on fear that there might be a disruption in the flow of oil.

The price at the pump leaps up 23 cents per gallon instantly. Then, three weeks after the tanker safely passes the berg and arrives back in port, the price goes down about two cents.

It is amazing how uncertainty about the future affects the price of gas that is already in the tanks at the gas station. The cost of that product must surely have been established long before the current panic came on the radar. The retail price of gas seems to have no connection at all to the cost of the product.

These dramatic increases and minor decreases are part of an elaborate scheme to get us used to higher prices. If we have been paying $3 per gallon, suddenly $2.89 doesn’t seem so bad (until we remember when it was $1.89).

Marketing people have other ways of distorting the price of things, including adding hidden charges.

One of my favorites is the “fuel surcharge” that shipping companies or transportation companies add to their prices. Isn’t fuel a normal cost of doing business when one operates a fleet of trucks or planes? These companies seem to think that by publishing low rates and then piling on surcharges and extra fees, we won’t be able to figure out the total cost. Separating some charges from the published price is nothing short of humbuggery designed to mislead consumers.

One has to admire their brassiness though. I think I will try their strategy. I do a lot of driving in my job, so the next time the price of gas goes up, I am going to add a fuel surcharge to my expense report. I am sure that will go over well.

Taxes are another area where things go up, but don’t come down.

The politicians are constantly talking about tax cuts, but I have yet to see any evidence of one.

My property taxes have consistently increased by double digits, even as the market value declined.

With the amount of time the politicians spend arguing about tax cuts, one would think we would eventually be able to reap some of the benefits, but apparently, the cuts are all going to people in other tax brackets.

The government loves to come up with new taxes (sometimes it calls them fees. They learned this from the marketing people). Once the government gets a new tax on the books, it will never let it go.

The difference between prices and taxes is that, at least with some items, we can choose not to buy products or services when the price gets too high.

With taxes, the government gets its hands on our dough before we ever see it.

There is one thing we can count on. Once prices or taxes go up, they will never come back down to the same level again. If it ever looks like we are getting a good deal, we should proceed with caution, because there is probably some sort of hocus-pocus behind it.