Friday, September 28, 2007

The Girl Alarm System Scouts

Girl Scout Cookies now cost $3.50, and that's pretty expensive for cookies.

For every sale, the scout gets about $0.65. Sure, that’s good money for little kids, but this means we’re paying around $2.85 per box for a few semi-delicious cookies. (Admit it, they’re not that good…) Wouldn’t it make more sense to go to the Dollar Store and buy some peanut butter cookies or cheap “Samoas” for a dollar, then give $2.00 directly to a girl scout sitting outside the store? Yes, it would. In fact, you just saved 50 cents, and the girls just made an extra $1.35 – That, my friends, is called a Pareto superior outcome.

Who gets screwed if we decide to stop buying cookies from girl scouts? The company that produces cookies, that's who. While a portion of your purchase goes to a form of charity, a much, much larger portion goes to the cookie makers. An easy way to look at this, I think, is to imagine the case of direct charity: You give money to a girl scout who sits in a chair outside of a store. That's it - very direct. However, if you place a cookie factory in the middle, the charity then becomes less direct, and clearly more inefficient. I'm not saying selling cookies isn't good - it clearly helps convince some people to donate who otherwise wouldn't. The trick, though, is that if you feel like supporting a charity, or an organization, like the Girl Scouts, then buying cookies wastes your money and reduces the scouts' take in the process.

So, every time you feel like buying cookies from a scout, just give them about $2.00 per box (per box that you would have otherwise purchased). With the extra $1.50, remember to buy crappy cookies at the 99 Cent Store or even Safeway next time you go. Besides, you'll get the cookies faster this way.

If every moderately charitable person that enjoys the idea that "buying cookies helps a good cause" would follow this advice, we'd put an inefficient cookie-making company that operates under the guise of "charity" out of business, we'd make the girl scouts much richer, and we'd have a lot more cookies and we wouldn't have to wait for them. F yeah!

Oh, and don’t forget about the opportunity cost of paranoid mothers sitting in the car staring at you while you’re buying cookies from their daughters at your doorstep. That seems like a big waste of human resources. What we should do, instead, is start a corporation in which both mothers and their daughters go door to door (just like they're doing in the scouts), only instead of using their daughters' cutesy sales ability to sell cookies, we'll have them sell more important and expensive things, like insurance or home security products. Those are the same as cookies, but they require a more complex contract than the one the scouts already have you sign when you buy cookies... That shouldn't be too hard to update...

What?

Did you ask, "What about child labor laws?"

Oh, all right. Fine. We'll call the company "Mother-Daughter Fun Time Relationship and Skill Building Scouts." We'll allow the mother-daughter teams to keep 18.6% of the revenue, provided they spend it on more relationship or skill-building activities like camping and community cleaning (or whatever the hell the Girl Scouts do). There! Child labor laws successfully averted, and we'll make the big bucks selling overpriced, crappy alarm systems!


...instead of cookies...

16 comments:

Unknown said...

I get the impression that 18.6% isn't some arbitrary number, but rather an actual percentage that is required for something? Is it the government non-profit rules, child labor rules, or is it an income tax issue?

Honestly Confused,

Fred

Disposable Info said...

Ah, very astute, my friend.

18.6% is the average percentage that girl scouts get from selling cookies (65 cents per box @ $3.50).

Anonymous said...

I agree that the cookies aren't that good. That's horrible that they only get 65 cents per box. I'm boycotting.

Anonymous said...

Why would you want to give 18.6% of the insurance or whatever, when you were just complaining that the Girl Scouts only get 18.6% of the cookie revenue?

Isn't it basically the same issue, just bigger numbers?

Disposable Info said...

Burgess:
I'm glad I've managed to convince somebody - I hope you boycott the cookies, though, and not the scouts - Just remember to give them more than about $0.75 in cash & spend the rest on better (and cheaper) cookies at the store.


Zane:
I was complaining about the cost of the cookies, not the girls' take.

In reality, I should give them just over $0.65 for every alarm system they sell, instead of 18.6%. I don't know what I was thinkin' - 18.6% of an alarm system is probably far greater than minimum wage, and somebody would surely complain about giving such a large amount of money to Girl Scout girls in commissions. I'm serious: The higher the commission, the more likely it is that someone'll make the connection between selling alarm systems for a company's profit rather than for Girl Scout charity. I'd be willing to bet that the lower we pay the girl scouts, the easier it is to think they're working for a charitable organization. This probably explains the $0.65 take per box more than the "greedy cookie maker" implication did...

I also have no idea about any of this, but it's pretty interesting that an entire cookie-making company can actually make sustainable revenue through their (round-about) customer's feelings of charity. Of course, if the Girl Scouts were not a non-profit, they'd be able to wrangle a lot more of the transaction profit from the cookie company by threatening to move to a different supplier. Actually, this is probably happening anyway, and my whole post, therefore, is probably a little misleading. Fun though, eh?

The real point stands, though: Don't buy anything that says 'charity' on it if you care about the charity. Give money instead.

Chris Jeffords said...

Dave,

Good post. A few remarks:

I imagine trying to explain to a given Girl Scout or her guardian the fact that you are offering her $2.00 instead of paying for a box of cookies will become easier over time and not waste too much of your time, something I think you might consider. You might also be seen as a deviant, if you catch my drift. Also, it would need to be the case that the place where you are spending the difference on actual cookies is close to where the Girl Scouts are selling theirs or that you already know when the Girl Scouts are coming to your home and are well-prepared for their onslaught and that of the insurance saleswomen mothers. Another point is that you would be spending a good deal of your time trying to figure these things out when it might actually be cheaper to just buy the cookies from them as you would have in the past.

Plus, I happen to like Thin Mints and the peanut-butter sandwich cookies. They have no rival(s) in my eyes.

-Chris

Disposable Info said...

Very, very well put -

I did anticipate the location/time problem and suggest getting cookies "...next time you're at the store." This makes especially good sense due to the fact that girl scout cookies are often delivered to your house in 4 to 6 weeks. Sometimes they're not, though, and then it really matters where the scouts are located - if they're outside a store, we're faced only with the second problem which I originally skirted:

I also love the hell out of Thin Mints. Fortunately I've found larger and better thin-mint substitutes at Safeway for $1.99. They're equally as delicious, and you get twice as much "cookie" for half the cost. If it wasn't for these cookies, I probably would have withheld this post...

I'm thinkin' a more important point is that the cookie-making company exists because of their unique position: They've got relatively unique recipes along with the "charity" entry-barrier that allows high prices. I'm fearful of arguing with a much better/experienced/knowledgeable economics fan than I, but I'm going to go out on a limb and make an assumption (and ignore another):

First, I'm ignoring the fact that the amount of time going into any analysis or behavior modification offers returns likely in the negative territory in the short term. (AKA, you're completely right, Chris, but there's a longer term problem at hand that I'm gettin' to...)

...And here's the assumption: The cookie company & its recipes will start to expand into new markets ONLY when forced. There is clearly demand for the cookies, and I'm assuming the company's second-best option would be to compete on store shelves. That can't profitably do that now, apparently.

If we replace the irrational behavior (supporting a charity through cookies) with the rational one (just buying cookies that you like for an acceptable price), the price should fall pretty substantially - in fact, it should fall to the point where the company is indifferent about it's charity-branch and will begin to sell the cookies at a better price through easily accessible channels. Thus, if we accept the negatives of breaking apart cookie-buying and scout-supporting in the short term, we'll end up with richer scouts and easily accessible (and cheaper) cookies in the long term. In theory... Unless I'm missing something...

---
I'm going to assume I'm forgetting something & admit that my argument probably does have a flaw, just to even the playing field. Right now, it's uneven because I've got nothing else to do but argue about Girl Scout Cookies. I know you, Chris, actually have more important economics to get to.

And that reminds me - dear readers, if you're looking for the best economics blog that is not written by a famous person (good econ professors & their blogs are famous, in my opinion...), check out Chris's profile link in his comment or just go here:

www.chrisjeffords.blogspot.com

Thank you, Chris, for joining the fray. I hope you don't mind if I reciprocate [more often] on your blog...

Chris Jeffords said...

Well played.

I tend to disagree with time not impacting decisions regardless of the term, unless we are talking about abstractions from reality like models and such where you can account for time or hold it fixed. In reality, I cannot hold time fixed even if I tried with all of my might. Opportunity costs are quite subjective.

If the plan of the Girl Scout’s is to only expand into markets when forced, then they need a new CEO. The idea behind the Girl Scouts is really quite novel given its premise. They have succeeded in using the cheerful faces of growing children to seduce people into buying expensive cookies for a “good” cause (that is if a person knows the cause vs. just assuming they do something “charitable” with the cookie money). It doesn’t stop there however, because a good deal of people who purchase Girl Scout (GS) cookies do not do so directly through an actual scout but through the scouts’ parents because they are either acquaintances at work, friends in general, or family members of the scout – so you might never even see an actual scout despite knowing of their presence. The children are also competing against each other, from what I know, and those who sell the most cookies get some sort of recognition for doing so.

Super-market shelf space is not that expensive once you have the capacity to fill it. As far as I know the GS operate as a charity and as such are not “allowed” to make profits beyond what is reasonable to maintain their business plan and fulfill their charitable responsibilities. So, it is probably not the case that entering the super-market market is too expensive or unprofitable, but that the GS value their comparative and competitive advantage being one of the only charities who sells branded cookies. Think about it, part of the purpose is to make the children happy and to let them feel like they are making a difference. If you simply put GS cookies in stores, you eliminate the need for the happy children and their cookie-selling ways. Ah, but before I said that you hardly even see the actual children. You need not to see the children but they at least need to be a part of the GS otherwise I doubt you would be able to convince parents to sell GS cookies without even having even one daughter in the GS.

The GS have a done a good job at convincing us that their cookies are very delicious and worth the $3.50 per box despite better judgment. But if a consumer values purchasing cookies from the GS at $3.50 per box, is it the economists place to say that is a bad decision or is it the economist’s place to say that consumers made the decision which they valued the most regardless of the costs (as costs are not a main driver for all human beings even though we would like it to be that way)? Furthermore, the ability to inform and convince a given amount of the current GS cookie purchasing population that they are being irrational by purchasing GS cookies will be a difficult task. The amount of people you would have to convince would, at a minimum, have to be enough to drive the GS out of the charity business and into the cookie selling business for your price scenario to come to fruition. Finally, what about the charity and the goodwill there – how can we make this up?

I do agree with your argument about the purchase of cookies being irrational from a cost perspective.

Thanks for the mention of my blog on yours. I will do the same in my next response.

-Chris

Disposable Info said...

That's an excellent argument, though I've agreed with the majority of the first few paragraphs.

One problem, I think, is that I viewed the cookies as a non-verbal request for donations (they don't need to be sold, just held in hand), while you are viewing them as THE necessary exchange mechanism. Unfortunately, your example of parents getting involved (especially at work) blows my previous arguments away... Damn you...

You've pinpointed my basic purpose: Changing consumer preferences. I know it's logically deranged (even in my opinion), but it makes for fun - but shallow - blog posts.

By the way, Chris, I'm absolutely proud that you'd engage this debate with me, and I hope it's not the last time. I should warn you, though, that I really do have nothing else to do with my time these days, and I have a propensity to try to argue things to their bitter end...

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Disposable Info said...

Ah, nothin' better for companies than figuring out ways to find employees willing to work on commission and take on all the risk of selling their products. Genius.

While the liberal side of me feels bad that companies can/will push their risk onto the backs of so-called "employees," - especially vulnerable single mothers, the rational, much more libertarian side of me welcomes opportunities. Who the hell am I to say that a single mother should be denied the opportunity to be a risk-takin' loan-selling profit-making ass kicker?

At least the company is not subverting child labor laws, right?

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