Until pianists start bringing their instruments to me for tuning I will provide home service. That’s why I’m including this article I’m intending for a separate publication here:
attn: My Generation
subject: Why Pennies Matter
There’s been a lot of talk in recent years about doing away with pennies. The arguments for this are fairly logical. For instance, it costs more to manufacture a penny than the coin itself is worth. Many people walk right by one another person has dropped, they’ll even walk by several others have disregarded. There’s hardly any purchasing power to a fist full of pennies, so by the time you’ve managed to kneel down to pick up enough pennies to purchase something either the price will have gone up or you’ll need to invest in some chiropractic visits. But ask an investor if he would do away with 1/100 of a dollar, would he give up that profit? or maximize that loss?
Luckily they are not toting around pennies to complete their trades. And for the most part we don’t either. For that matter, many of us don’t use cash at all, we use plastic and even that is trending away with the utilization of digital means(Google Wallet and similar services). But if we cut the penny from circulation we also increase our losses as a consumer. This in turn means we lose some power to influence market prices.
I’m not suggesting we direct our purchases of single items based on a penny difference, if you’re purchasing an item where competitors have priced $20 vs. $19.99. This is obviosly a sales gimmick where the seller is hoping if they sacrifice 0.05% of their price that number of sales will increase to make up for that loss. But in an instance like fueling your car a penny is important.
For ease in working the numbers, lets say every gas tank fills with 10 gallons of gas. A penny per gallon saves you $0.10 when you refuel. You’re probably not going to miss the dime. Neither will the competing station – they’ll miss the $35.90 because they were charging $3.60/gallon (equalling $36 for a refuel). Still small potatoes to a gas station because your friends didn’t care to save a dime and fueled at the higher price. That’s very little incentive for station to come down in price.
Lets suppose everyone is on board for saving a penny – stations in a high traffic area with 10 pumps, lets assume it takes 6 minutes for customer, that’s 100 customers an hour. Now the station with a penny higher price isn’t losing $35.90, they’re losing $3,590 an hour in fuel sales because they were hoping to make $3,600.
Look a little deeper at the situation. Is the station only selling fuel? Many people stop for fuel and leave but others pick up something extra; food, drink, oil, windshield washer, etc. If we assign an average purchase value of $5 per customer the hourly loss for the higher priced competition rises by $500. Loss per hour now stands at $4,090 because they wanted to make $4,100. A difference of $10 an hour can be a big difference. Maybe tomorrow or even the next hour the station will lower their price.
Some may be wondering why I refer to the loss of sales as money lost. If you’re not making money you’re losing money. There are salaries, utilities, leases, and inspections to pay. The competition’s success is another’s loss. That’s why it is important to count your pennies, supply and demand are strong forces but as a society you need to get the most for your money.