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Regarding Daless post - boycotting the gas companies is a lost cause - there is no elasticity of demand with gas. You need it and they know it. So don't buy gas on a weekend - they'll adjust the price to when you do buy it.
Hi Jeff,
Given how you have explained this I couldn't agree with you more.
It's called "Pricing Power", meaning the gas stations have individual and collective control of the commodity price which we consumers want or need.
However, I don't advocate that consumers stop buying gas, I advocate that individually and collectively we stop buying gas from ONE PARTICULAR gas supplier!
There is a very big difference.
All stations use their "Pricing Power" to raise the gas prices on weekends becuase they can. They can only becuase we let them.
Let me explain how it works.
For the sake of this discussion lets assume in this model there are only four gas station in the USA. And, they are all located at the same intersection of two roads.
There is Exxon, Schell, Conoco, and Texaco. For the most part, their price per gallon is within a penny or two of each other.
Now along comes Thursday night, just prior to the peak demand by the consumer for the coming weekend, they all raise their price 20 cents per gallon.
Why do they do this? Pricing Power!! (They can!)
Now here is how to stop it or modify their behavior.
Pick one of the four brands. Everyone picks the same brand, and no one buys gas from that brand. (You will never get that to happen, but you could significantly reduce the amount of business that brand is doing.)
If you reduce the volume of business that particular brand (company) does, you reduce their gross revenues, and in turn reduce profits, and increase expenses as they relate to underutilized capital investments.
This hurts my friend, big time, particularly in this day and age of corporate "Next Quarter Profits".
So what has happened here.
Profit for the gas company we are all boycotting go down for the weekend, and consumer gas prices for the weekend have stayed the same, only all gas was purchased from the three other stations.
So what is the boycotted gas station to do?
Well if they are Galactically Stupid they will raise their prices to make more profit per gallon, to make up for their lost business. (This is called the K-Mart approach in my business. It is also known as "Eating Your Offspring".)
What happens when they raise their prices to make up for their lost profits and their three competitor on the other corners do not?
They lose More Business! (i.e. Kmart, a consumer products marketeer, vs. Wal-Mart, Target, Kohl's, etc.)
Now if the boycotted gas station is this galactically stupid, and their three competitors are half-way Smart, they will lower their price per gallon, making less profit per gallon, but making it up in the volume they are capturing from the boycotted gas station.
So what do we have here:
Boycotted station is stupid (galactically!), tries to make up profits by raising prices. Competitor are smart and go after market share and increased volume.
How does this effect the gas consuming public? We get to buy gas cheaper from the three stations.
Now let say the management of the boycotted gas station Isn't Stupid, but rather enlightened and they see the error of their ways for having been put into this business box.
They elect to lower their prices, instead of raising them.
Hmmmm....... Four gas stations, all on the same corner, one is cheaper then the other three. What's going to happen?
Consumers will beat a path to the cheaper station, and the cheaper (once boycotted) station will be making LESS profit per gallon, but MORE profit overall from the volume increase in gallons sold!
So what do we have here now?
Boycotted station see the error of it's ways and lowers prices. They make increased overall profits due to increased sales volume.
Gas consuming public gets lower prices at the once boycotted gas station then they can at the other three.
Business (profits) at the other three stations go down, and management there has a choice to make, be Galactically Stupid and raise prices, only to loose more business and profits, (Kmart Model again) or lower prices to meet the competition across the corner.
When consumers take individual and collective action again any ONE company which sells a commodity that can easily be purchased from other suppliers, the consumers are in effect taking "Pricing Power" away from the gas stations, and replace it with "consumer action power."
For sure there are many permutations that could be discussed in this example, and each would have some "plus or minus" impact on the overall effectiveness of this type of consumer action. But none the less, this model is sound and occurs every single day all across America.
Consumer actions take place all the time naturally, without organization. Look at Kmart's business (10 years ago the largest retailer in the world, today in Chapter 11 Bankruptcy Court), and Wal-Mart's business (in 1968 one Ben Franklin Store in Arkansas, and now the largest company In The World with $1 Billion Dollars a Day in revenue.)
Both Wal-Mart and Kmart basically sell the same things. Yet one made a mistake 10 years ago in raising it's prices to increased profit margins and the other then lowered it's prices and decreased profit margins, but made more total profit from the volume increases in sales.
Who won?
Well that is debatable I guess, but most people would say Wal-Mart and the Consumers, and that Kmart lost.
Life is simple, and business is simple too. But business is a game of Strategy, Tactics, and Logistics, just like the Military.
Whomever does it best wins. And whomever is motivated to do it best wins too.
Pick a gas brand, any ONE brand.
Get everyone to pick the same brand, and it is a guarantee; stop buying gas there for some period of time and prices will come down. (Economics 101)
It doesn't matter if they reduce their prices or not.
Their competitor will.
And that is where the consumer wins! (Or in this case at least doesn't get ripped off on the Weekend Price Hikes.)
Sorry Jeff, I get carried away. Couldn't help myself. This is what I do for a living these days. I keep some rather large companies from doing Galactically Stupid Things!
Thanks for putting up with me.
Frank
PS: Kmart is not one of my clients!
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