Well, you and I understand this, but do the companies that are competing for us consumers understand it? What got me started on this blog were a couple of rate increases from our cable TV company over the prior year or two; in particular, the small plain white piece of paper with a list of old and new prices, plus a quick explanation of why ". . . in order to remain competitive, we are raising our rates . . ." Gee, excuse me??! Did I hear right? You are raising prices in order to remain competitive?
Only marketing "experts" could try to put such a spin on increasing the price of a commodity such as cable TV and feel OK about telling us how it is all about remaining competitive. I guess that sounds better than all of the more likely real reasons for an increase, such as:
- We know you have limited choice in who provides this service to you, so we do not have to be competitive at all, since there is barely anything left that could truly be called competition; (most likely imho)
- We have aging infrastructure that needs updated or you may leave for a competitor - and, we have not planned accordingly and now need funds to pay for it; (at least this may have been somewhat honest);
- Our debt burden is now your problem -- sorry, but we grew too quickly using debt to make us look like a fast growing, high flying company that is best for everyone, at least long enough to push others out of the market; (common place)
- Our top directors have taken advantage of the company through excessive pay, stock options, and the likes, and well, you get to pay for their mistakes and greed; (in this case, their is truth to this scenario, since the company we have is Adelphia, and we all know about how the founding family got in a bit of a legal jam for fraud).
- We do not care about being competitive on the price offered to you, our customer, but we do know we want our stock price, P/E ratio, and the likes to be competitive and need to increase cash flow to do so (oh, and some bonuses will certainly have to be paid to top management as soon as this plan works).