section 6-1 consumer purchasing. factors that influence buying decisions, “what influences you to...
TRANSCRIPT
Section 6-1
Consumer Purchasing
Factors that Influence Buying Decisions, “What Influences you to make a Purchase?”
No matter how much of how little you shop, wise buying decisions help you get the most of your purchases
Buying decisions based on economic, social, and personal factors
See Figure 1 pg. 153
Marginal Cost and Marginal Benefit Consider Marginal Cost and Benefit before making a
purchase Marginal Cost: Increase of decrease of the cost of a
particular action Marginal Benefit: The increase or decrease of the
benefit of the action Ex: If 2 items are identical and priced differently, the
marginal benefit increases when the lower priced option is selected
Ex: If 2 items are similar but not identical you would have to assess the costs and benefits of each more
If marginal cost exceeds the marginal benefit you should not purchase the item or consider another option
Trade-Offs and Buying Decisions
Think about the use of buying using credit before you buy with credit
You get what you pay for (agree?) Buying decisions always involve trade-
offs Pg. 152 Economics and you
Factors That Influence Buying Decisions
To get most for your money you need to recognize elements that affect your buying habits
Credit Advantages: Can get item before you have full amount saved. Important to est. credit for future purchases.
Credit Disadvantage: May pay more in the long run
Consumer Purchasing: A Research-Based Approach
Approach = A method Doing research will enable you to get more
for your money Especially beneficial for high priced items
(computer, memberships, cars) By using this process with large items, it will
help you make more practical decisions for smaller items
Examples of research for large items?
4 Phases to Researched Base Buying
PHASE 1) Before you Shop Identify your needs Gather Information Become aware of the market place
Identifying Your Needs
Do you need name brand, or do you just need the product
Example: Sneakers, IPod
Gathering Information Look at different models and prices Usual Categories: Costs, Options,
Consequences Possible to do too much research For expensive items, talk to people you
know who purchased, look at advertisements, Consumer Reports (pg. 155)
Take notes on what you find
Becoming Aware of the Marketplace
After research, you should know of a couple different places to buy the item
Should then know brand and features you want to buy and average prices
Become aware of common sales, returns, and credit myths (see pg. 157)
Phase 2) Weighing the Alternatives
Rent, borrow, or do without Special deals that delay payment Pay with credit card
Decide what’s important to you
Features, performance, design Match features with your needs Things to consider: Time for research,
money available, do you buy right away, and what brand do you like
Importance may change with major purchases: Options (performance and convenience) Visual appeal
Compare Prices Products vary greatly in price Quality could be reason for price
difference What items will you buy lower
priced/generic items When prices and quality vary you have
two options: If can afford all choices, buy the highest quality item. Or if not enough, consider item that gives best value per dollar spent
Do Some Comparison Shopping
Comparing prices and features of similar items at different stores
Some people see as a waste of time Methods? See used car example pg. 156
Phase 3) Making the Purchase
If at all possible, negotiate the price Will need as much information as
possible for negotiation and deal, should also talk to manager or supervisor
What would you need to know to negotiate the price of a car?
Comparing Financing Options
2 Options: Cash or Credit Credit acts as a loan, buy now pay later Often pay additional fees Cash, no extra fees however money no
longer on hand or earning interest Also lose from emergency fund Do you need a down payment? Ex: What are your choices when buying a
used vehicle?
Do you know what the real price is?
Sometimes what appears to be a bargain, actually isn’t
Extra costs can be added Installation/delivery fee Check conditions over carefully
Phase 4) After the Purchase
After purchase you may have additional costs Ex: After you buy a vehicle? Pg. 160 How do you handle any problems that may
arise? Or Complaints? Feelings/values may change overtime and
item might not have as much appeal Avoid problems before hand (reputable)
Smart Buying Strategies
Timing Purchases: Look for seasonal items and sales
Supply and demand, if possible wait to buy
Selecting the Store Quality and Variety may affect the store you
choose Hours, location, prices, reputation, policies and
services as well See. Fig. 5 pg. 165 Cooperative: Nonprofit organization owned and
operated by its members for the purpose of saving money and purchasing goods and services
Direct Selling: Buying online, TV, and catalogs (advantages/disadvantages)
Comparing Brands National well name brands are available
in most stores Usually also non brand less expensive
items offered that offer good quality as well
Often made by the national brand Impulse Buys: Purchasing items on the
spur of the moment, often from displays Ex: Lines/Grocery shopping
Label Information Advertising, sometimes for other
products Food labels: Weight, main ingredients,
nutritional information etc. May stress what is good for you, only is
scientifically proven Open Dating: Freshness or shelf life Appliances must tell how much
electricity they use
Comparing Items
Unit Pricing: Use of a standard unit of measurement to compare the prices of packages that are different sizes
See pg. 167 Sometimes the best buy isn’t the best
option, because of waste Coupons/Rebates See pg. 166 For comparing guidelines
Evaluating Warranties
Warranty: Written guarantee from the manufacturer or distributor that states the conditions under which the product can be returned, replaced or repaired
If over $15 and offers a warranty must be made known to customers
Warranty Types 2 Types 1) Implied: Unwritten guarantee that cover
certain aspects of a product or its use. Ex: Toaster toasts, CD plays CD
Express: Usually written come in two forms– Full Warranty: Says defective product will be
remedied within a given time frame free of charge– Limited Warranty: Covers only certain aspects of a
product Service Contract: Extended Warranty, need
to pay to obtain
Section 4-2
Resolving Consumer Complaints
Sources of Common Consumer Complaints
You don’t expect to have problems with purchases that you make, however all purchases involve some degree of risk
Most dissatisfaction comes from defective items or poor quality
Also complain about unexpected costs, deceptive pricing, and poor repair service
Fraud: Dishonest business practices that are meant to deceive, trick, or gain an unfair advantage
Common Types of Fraud
Fraud costs consumers tens of billions of dollars annually
Telephone and mail scams, fraudulent diets products. Attract customers with saying such as “miraculous cure”
Try to recognize fraud before it occurs, and report it if you come across it
Resolving Differences Between Buyers and Sellers If you are dissatisfied and make a
complaint, document everything you do What should you document? Usually 5 different ways to resolve
complaints
1) Return to the Place of Purchase
Return to place of original purchase Best if you have a receipt and stay calm Store want to keep reputation
2) Contact Company Headquarters
If local store wont settle, contact the company headquarters
Address usually found on package, or on website
Make use of a complaint letter (pg. 171)
3) Get help from a consumer agency
If company doesn’t answer your response, contact outside agency for help
Better Business Bureau one of the most commonly known
Deal with complaints against local merchants Most valuable to use prior to purchase FDA, Consumer Product Safety Commission
4) Dispute Resolution
Mediation: Use of a neutral third party to resolve a conflict. Not legally binding
Arbitration: Same as mediation, only this is legally binding
Quicker, less expensive, and less stressful then going to court
5) Take Legal Action
Last resort, usually
Legal Options for Consumers
Small Claims Court: Used to settle minor disagreements, usually for no more then $5,000. However, in some states $10,000 or less
No lawyers, no juries Be polite, have proof (contracts,
receipts, pictures)
Class Action Suits Number of people who all have the
same complaint. Legal action on behalf of all the people who have suffered
Represented by same law firm or lawyer All affected parties are notified of the
suit You may take part in your own suit
instead Split the winnings
Hiring a lawyer & other legal alternatives Make sure your lawyer is experienced in your
type of case Check on fees and policies May not be worth the price of hiring a lawyer to
pursue action Legal Aid Society: Help provide free or low-
cost legal assistance. Not everyone is eligible for this service
Deal with companies that have a strong reputation
If offer seems too good to be true, it probably is