Monday, April 21, 2008

My Basket of Goods

My blogmate is still working on his finals, so you're stuck with me again today. Or, if you happen to be an expert on early American history (specifically all things Tecumseh) then you could help RJ out and give him more blogging time.

So I was an Economics major in college and my favorite topic was the Consumer Price Index. I know...I'm a huge dork. For those of you who have not devoted years of your life to studying Econ, the Consumer Price Index (or CPI) is a measure of inflation. The concept that always interested me was the so-called basket of goods. It's a basket of real products that economists use to determine the level of inflation. This basket is used as the foundation for the CPI. Prices increasing on the items in the basket helps determine the rate of inflation. Okay, no more Econ lecture.

The basket of goods is supposed to be a representation of commonly purchased food and household items by the typical American consumer. I'm curious how they determine which items to put in the basket. Like when the whole Atkins Diet craze happened, did they start taking bread out of the basket and put in more meat? Also, do you ever look at the stuff that the people in front of you buy at the grocery store? It's one of my favorite things to do. It's very rare for me to have a matching shopping cart with the person in front of me, so I wonder if they're using my basket of goods or the person in front of me with the clear plastic tub of generic ice cream and the Hungry Man XXL TV Dinner.

A similar topic is the concept of persona marketing- where companies try to put a face on different segments of customers. Basically trying to figure what different characteristics make up different segments of the customer base. The idea seems to make sense to me, until I think about some of the random-ass product assortments that I've purchased lately. Last month I went to Best Buy and bought my H&R Block Tax Software, a Kid Rock CD, and a "teach yourself German" CD-Rom. Are there other people out there who have purchased the same three products out of Best Buy's 10,000+ SKUs? Oh, and then my wife and I went to CVS (one of Kate's favorite leisure activities) and we walked out with a tube of Neosporin, a handle of gin, and an issue of Marie Claire. You can probably figure out which item was for me and which were for Kate.

So I've decided that an accurate basket of goods would look more like the back page of the Menards advertisement (reading this is another of Kate's favorite activities). I encourage all of you to look at the Menards Ad in this Sunday's newspaper. It's just completely random stuff that Menards sells (for some reason). I'm convinced that they just let a four year old or drunk person go into one of their stores and point to a bunch of items and that's how they determine this week's advertisement. This week they have beef jerky, an 18'' push broom, and bird seed.

Feel free to post your own basket of goods. I have to get back to my gin and German lecture.


Amanda said...

I always wondered how closely CPI and the merchandise on "The Price is Right" were related.

Viel Gluck!

Liz said...

In regards to the Menards ad, I also enjoy reading it every Sunday.

This week they were trumpeting the fact that they now had a grocery section. You can buy milk, eggs, and potato chips while purchasing the glue for your birdhouse hobby.

I have decided that I don't like glue and milk in the same ad space.

Neal said...

this is neal, im the one reader you have in guadalajara. in regards to the cpi, and the "basket of goods", they routinely describe the mexican economy down here in terms of the daily price of the Tortilla. So like in USA where we have a standard price of gold, here its the tortilla.
im not even making this up. we've been laughing about this for weeks down here.

have you and katie hung out with Andre Dawson yet?