Ryan Honeck
Mrs. Straub
Economics
31 March 14
The Intense and quite Seductive Economics of Chapstick
Every American has used chapstick or lip balm at least once in their life, if not you must be a unique subspecies of the human race, the average tube of chapstick runs in a 1 to 3 dollar range, depending on how much one is willing to spend to get ride of their dry, crackly lips, or if they just are feeling super spunk and sassy and decide to purchase an egg shape of lip balm. As I was saying, they all carry their own in popularity and personal preference dominates the monopolistic competitive market. But are we really getting the bang for our buck? I have yet to find a person that consistently finishes their tube of chapstick without losing for a brief period of time or having it fall into oblivion, never to be seen again. A small wager of 3 dollars for a stick of chapstick can seem miniscule at first glance, but when you go onto your 3rd or 4th stick in one month, the numbers start to add up, benefiting the producer, but frustrates the consumer.
The production of chapstick costs around .28 for the most prestige of lipbalm, allowing room for a 1250% profit. The international lipbalms companies of the world (ILCOTW) have found the perfect equilibrium price for a necessity to a large majority of Americans, this allows them to exploit of necessities, while avoiding being burdened with a surplus. The lip care business is booming, with a mind boggling stat that “Americans spent about $417 million on lip care”. This is dominated by the brand Abreva, racking in 90 million dollars, which is still significantly higher than the ever popular and ever booming WNBA.
The lip care business will never decline, unless Americans stay inside the rest of their lives and never lick their lips and even if everyone were to be free from the clutches of having dry lips, the companies will be gaining money because chapstick and lip balm are actually, there is a chapstick anonymous group and they even provide a 12 step program, very similar to the one use for substance abuse addicts for the struggling addict. The psychological dependence on chapstick not only benefits the companies, but it can also bring in some extra Benjamins for the struggling psychologist. It has not been proven whether the chapstick companies purposely made the sensation of chap stick release addicting, but that’s a different story.
If chapstick companies were as half as smart as Mrs. Straub, they would cut the price in half, and the amount of chapstick in the tube provided, then this would make the people more likely to finish their products, and they won’t feel a certain hatred toward the company. This would change the equilibrium price, while keeping their percentage of profit.
The lip care business is a tricky business to avoid, no one has the willpower to not lick their lips in a dry environment, so the businesses will continue to make millions and they will continue to keep the price of lip balm a little to high for the comfort of my 3 dollar a month income.
http://www.statista.com/statistics/195299/leadinguslipbalmbrandsin2010and2011basedo
nsales/
http://www.everydayhealth.com/healthyliving/
islipbalmaddictionreal.aspx
http://www.bulkapothecary.com/createlipbalmbrand/
http://www.lipbalmanonymous.com/islipbalmaddictive/
I never thought of chapstick as an economic factor in this world but I guess it actually is. I never realized how much I spend on chapstick, I have a bunch of chapsticks either in my purse or sitting around my room. I have only ever once finished a tube of chapstick. Yet I go out and spend more money on another tube because it just randomly disappears. Its amazing to think there is an economic thing behind this. And also a 12 step program for chapstick addicts.
ReplyDeleteIt is nice to read a blog post about something that no one else has done a topic even close too. I think it would be a great idea to split the tubes in half because I have only ever finished a tube of chap stick once and it took me like 3 years. So yes I think that cutting them in half would be better. Or maybe do it so that you can buy both sizes. It was also nice to see a blog post with a little more humor and less seriousness than the average blog post. Great Job Ryan!
ReplyDeleteI would never think that Chapstick could have any sort of effect on the economy. 417 million dollars on lip care? That is a lot of sticks of Chapstick. I really liked your idea about cutting the price and amount of Chapstick in half so it actually gave consumers a slightly larger chance of actually using all of what they paid for.
ReplyDeleteGood vocabulary and good voice all throughout your post. Good job!
This was a great article to write about because I feel as if everyone connects to it - I know I do. I never knew that chap stick brought in that much income, that's crazy. 3 dollars doesn't seem a lot these days, but as Ryan said in the post the numbers add up from the amount you lose and that's exactly true. I could only imagine the amount of chap stick I have bought throughout my life time and I have yet to finish one tube yet. They always seem to disappear when I'm halfway through leaving me to buy another one. Like Ryan said I would like if they cut the tube in a half and didn't have so much in there at once allowing us to finish one at a time and maybe that would reduce the amount too of them. I'm willing to buy chap stick, but if I keep losing and not finishing them I doubt I will keep buying them as often as I do. What a wonderful article Ryan! You're so awesome.
ReplyDeleteThis was a really good article, I really enjoyed reading it. I never thought of how chap stick could be an addiction but it makes sense that a company would put an addictive substance in something that everyone uses. It's funny how they have a program for chap stick addicts, i'm not sure if it's an actual addiction or people might just like not having dry lips.
ReplyDeleteRyan, I can tell that your vocabulary is as voluptuous as it is immaculate. I can tell you spent numerous hours, slaving over the keyboard and the history books to make this masterpiece what it is, a work of art. I don't know where the world would be without you. Probably turmoil. The combination of Ryan Honeck and chapstick is truly the winning recipe to keep the world in check and the Russians at bay.
ReplyDeleteSolid comment, but I would have to disagree. Mr. Honeck stated, "The production of chapstick costs around .28 for the most prestige of lipbalm," But I'm left thinking, ".28 what? .28 dollars? .28 million? .28 cents? .28 sheep? I'm sorry but I'm not sure if any one knows, even Mr. Honeck. I would have to disagree almost completely with this article, because the demand is high for chapstick in the winter and spring seasons because of the dry weather and allergies. This means that the chapstick companies should raise their prices, because in these times of the year, chapstick is an inelastic good. Meaning that no matter what people will buy it.
DeleteI think I might need that 12 step program to end my dependence on chap stick, as I constantly have a tube always near me and ready to go. The fact that the industry for chap stick is almost at a half billion proves that much of the other consumers are like me, and feel the need to have this accessory with them at all times. It also seems like a perfect business plan by the companies to have a small tube as such a necessity, as they know almost every time, the consumer will lose it.
ReplyDeleteWell Christopher, we may as well carpool , for I am also addicted to this wonderful lip moisturizer. I had no idea that I was being this well scammed by the companies however. For all 59 tubes in my collection, I had no idea that the companies were sitting, laughing under there breathe at this lonesome boy in Pewaukee with a chapstick addiction. It was interesting to see how much money that make, and also makes me wonder what other companies are running the same type of ponzi schemes. Any company could do this with a product they know consumers will continue to purchase.
DeleteI knew chaptstick was a popular product, but I didn't think it brought in that much money! It makes sense though because there may be many chapstick brands, but there isn't any substitutes to chapstick itself. If the prices were to increase, the product would be inelastic because I would still pay for it personally because it is such a necessity to me! I'm one of those people that constantly need to have a tube of chapstick around, so they are surely getting a lot of my money. The income on chapstick is large, but not much of a surprise. This was a very interesting post to read, especially with your humor, because everyone can relate and it puts into perspective just how important chapstick is!
ReplyDeleteObviously, as seen in your article, Chapstick is a product with a very high demand. The Chapstick market is perfect competition: there are many buyers, as you have said, and many sellers, and all of the products are identical and sold almost at the same price. Yet, these high prices do not necessarily drive demand for Chapstick down; Chapstick seems to be a pretty inelastic good. And why wouldn't it be? People get decent use out of it and feel better when they use it. And for the record, I have never lost a tube of Chapstick and I have finished them, so for the responsible people, maybe you are getting the bang for your buck!
ReplyDeleteThis was a very good topic because it is very relate able the need for chapstick will never go away and people will always be buying it and needing it so even is the price of chapstick is raised there is a large amount of people that will continue to buy it.
ReplyDeleteAfter reading this I wonder something, you said going outside makes your lips chap. I however am outside all winter and I never use chap stick. I read somewhere(not knowing if this is completely true or not) that there is an ingredient in lip balm that actually makes you lips more chap. Therefore the consumer will buy more and more. I don't know if it is true or not however I personally don't get too chap of lips and I don't use chap-stick.
ReplyDeleteChapstick is a very interesting topic to discuss because not very many people, like me, know about the high demand for this product. It is a very smart business to get into because it will never fall out of demand and the supply will always stay increasing. I never knew that such a simple topic could bring in this much capital, nice work Ryan.
ReplyDeleteI've already gone through 3 sticks this month. I tell you, the addiction is real. The lip balm companies have to be doing something to keep their customers coming back. In the long scheme of thing, the companies only care about revenue so they are better off selling the larger sizes for more money because they figure that 75% of the lip balms will get lost or run through the washing machine.
ReplyDeleteI really liked your aritlce, I thought you found a great way to talk about a topic that may don't think about. I never have before but actually last week finished my first tube of chapstick and can see how it is quite challenging not to loose it. I think that your absolutely right talking about how they are going to conitnue to make money because people are still going to lick their lips. It is clear that the marginal cost of people being 'angry' to loosing their chapstick is still going to give them a great benefit showing that their already making an over 1200% profit from chapsticks. These are something that are constanty going to be in demand because of all the topics you brought up. Overall great job!
ReplyDeleteClearly the demand for chapstick is very high and people will pay the high price for it. As the price keeps increasing the people are still buying chapstick so the businesses who are producing these are bringing in a lot of money for such a simple task. Along with that, I never knew chapstick brought that much money in and it was a very interesting topic to read about.
ReplyDeleteWow, it is interesting to see how much profit these Chap Stick companies are making on their product. Because Chap Stick is a necessity, this means the demand for the product will always be present. As well, because it is so easy to lose, the demand will continue to increase, unless people get irritated because they keep losing their Chap Stick and in which case the demand would decrease. However, I wonder if a determinant of demand, such as expectations has a large influence in the demand. For example, when consumers know winter is coming, they probably are more likely to buy Chap Stick because that is when they will need it the most.
ReplyDeleteThis was an all around great article. It was interesting to see how much these companies really make as people all around the world are using them everyday 24/7. I personally am not a chap stick person but I believe companies should sell bigger sizes for more money. This would increase their revenue and still bring consumers back because people lose them so often.
ReplyDeleteThis topic is so easy for everyone to relate to. I never knew how much something as small and cheap as chapstick could affect the economy. I know for me and millions of others, actually finishing a tube of chapstick is a huge accomplishment. And not losing it is even harder. I'm sure as prices of chapstick climb higher so will the demand. Chapstick is a necessity and will continue to be no matter how high they jack up the prices.
ReplyDeleteWow, who knew that Chapstick could have any effect on the economy. Like many other products such as sunglasses and shoes, the mark up for profit is incredible. I believe you said it was something like 1250% profit providing a large 417 million to the economy. The demand for Chapstick will always be high, cutting the price as well as the amount in the tube will be a great idea bringing satisfactory to all those who use it. Nice Job!
ReplyDeleteChapstick is really interesting, Sometimes I wonder how much chapstick I would have if I had magically found all of my long lost Chapsticks. I totally agree, the demand for this product is incredibly huge. They have these prices that they control because everyone has their own preference. The chapstick companies have a perfect competition market. They all have almost identical high prices and a lot of brands/sellers.
ReplyDeleteVery good points about Chapstick. While reading the article I thought back to how much Chapstick I must have bought just over the past year. The low cost of Chapstick gives me a reason to buy a lot and not really care if I lose it. The Chapstick companies have the best market because everyone needs and can afford a lot of Chapstick.
ReplyDeleteAs a former chapstick addict myself, I know firsthand how terrible the ramifications of chapstick addiction can be. I lost my job, my car, and my wife gambling so that I could get more money to buy chapstick. I sold my children to a chapstick factory for one tube. However, I have come up with theory that exposes these fascist chapstick corporations for what they really are. Have you ever noticed that most chapstick comes in a round tube? Not a square container or a triangle shape, but a round tube. This makes the chapstick much more likely to roll away and get lost, thus requiring you to buy another one. These chapstick companies are purposely manipulating the American consumer in order to sell more chapstick.
ReplyDeleteWhat intrigues me most about your story is the fact that you lost your job, car, and wife. I feel so sorry for people like yourself. I hope that you can somehow redeem yourself by finding a triangular tube or square tube of chapstick, just so you can afford to have nice things again. I wish the best for you.
DeleteWow, this was a really interesting article; it has a new, fresh perspective. It’s amazing that no one has thought of this before considering the obscene amounts of ChapStick that every high schooler seems to go through. I knew that ChapStick was probably a big market, but the fact that these companies rack in over $400 million a year is insane. With that kind of income and the profit those companies are making, it is not actually that surprising that ChapStick can have such a heavy effect on our economy.
ReplyDeleteIt's interesting seeing the extent American's do go to to provide lip care; these millions of dollars add up as you mentioned, but it is a staple in most people's lives that we merely look past. The exponential increase in purchasing of chapstick for one person adds up more than we realize. That makes me wonder though, does the income for companies increase over the winter considering this is when the air is most dry? Also I wonder how competitive the market of chapstick advertisement truly is because the marketing does not seem nearly as vicious as popular brand names in the food, soda, and car industries. It's impressive the numbers chapstick does bring in and I'm sure it is a field that will not be going away anytime soon.
ReplyDeleteI never thought about how much Chapstick factories make and this is rather interesting to read about. I personally do use Chapstick rather often and never thought about how many different kinds and brands there truly are but rather just the flavor we I may like. It seems to be that brand doesn't really matter in the Chapstick market but more of the flavors; better flavor=more customers. I have seen those egg Chapstick things and think about why would someone pay $3.50 for a thing of Chapstick when you can go buy a normal tube for $0.75-$1.50 saving yourself more than $2.00 which you could go spend on a pack of gum as well.. I am also wondering the same thing as Amanda, does the Chapstick market rise during the winter due to the dry air?
ReplyDeleteHonestly, anyone that remotely knows me knows that I am a chap stick fiend. I am probably responsible for a huge chunk of chap stick companies profits. However, I never knew that such a small little tube of chap stick ends up bringing in millions and millions of dollars. The companies also really get people like me who lose their chap stick frequently and always want to replace it. I definitely see this as an inelastic good, because I cant imagine anyone being totally comfortable suffering with chapped lips all the time. I love learning about the random products that help stimulate our economy and rake in tons of money that people don't really think about.
ReplyDeleteAlso, you can get addicted to Chapstick. A lot of chapstick producers still make them in the same way which actually causes the lips to get irritated more, which means they dry out and we put on more chapstick. So, here is a way to get money is by not really changing the way you make them. Also like Johnathon said, flavour is a big factor. What happens when something tastes good? you lick it, and if it's on your lips you can slowly lick it off. It's a never ending cycle that will just keep pumping out money. And they can sell it for these high prices because people will buy them for it.
ReplyDeleteIn a way, at least for me, I am not surprised the least bit about where the chapstick demand is at. I always feel like I am losing my chapstick all the time, sometimes losing one or two every week. I have the worst luck with keeping up with where I misplace my chapstick. Because of the lack of responsibility of others for losing their own chapstick rolls, people are forced to go out and purchase more, thus making the chapstick companies more money than what they should make.
ReplyDeleteThis was really surprising. Although i rarely ever use lip balm, i do know that the price is kind of high. However, i did not know that the cost to make it was as low as $0.28. And because of that, I'm glad that I don't have an addiction to it, and buy it often. Also, about them making it addictive, its the Illuminati.
ReplyDeleteWe subconsciously are victims in this business. Obviously living in the dry Wisconsin air for the 9 months of winter weather makes us the perfect target. I'm pretty sure I have at least 10 tubes of chapstick at home in all different flavors and brands so I can have one in any location I need it: in my purse, on my night stand, in the bathroom drawer, in my mom's purse in case I don't have mine, in my zipper pocket, in my pencil pouch, and several different types of chapstick, lipgloss, and lipstick in my makeup bag. I go through chapstick fast and lose them all the time too. It's weird to think about how much I contribute to the revenue of chapstick. If everyone in the world is as big of a chapstick fanatic like me, those at the head of the chapstick industry that is rolling in $400 million per year is lucky and is sure to continue to be successful.
ReplyDeletePersonally, I actually tend to use up an entire stick of chapstick eventually, but most of my needs for replacing them are either from losing them or wanting some sort of new flavor that appeals to me. 1250% is an insane profit reel, though. They're really making a lot of revenue off of gullible consumers like myself.
ReplyDeleteThank you for sharing this blog post :-)
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