chapter 4 section 4-1

CHAPTER 4SECTION 4-1

Consumer Purchasing

Why do you buy what you buy? What was the last thing that you

purchased? What was the last article of clothing? Was it to satisfy a want or a need?

Because of our high standard of living a large portion of the populations income is spent on wants and desires rather than on basic needs.

The process of buying a Product

1. Before you shop.1. What influences you to buy the product that

you buy. 2. Weighing the Alternatives

1. What is important to you.3. Making the Purchase

1. How do you get to a price that you are happy with?

4. After the purchase.1. Service Contracts?

Types of Consumer Purchase Decisions

Minor New Purchase – these purchases represent something new to a consumer but in in the customers mind is not a very important purchase.

Minor Repurchase- these are the most routine of all purchases and often the consumer returns to purchase the same product without giving much thought.

Major New Purchase – most difficult of all decisions. It is important to the consumer but the consumer has little or no previous experience making the decision.

Major Re-Purchase – these purchase decisions are also important to the consumer but the consumer feels confident in making these decisions since they have previous experience purchasing the product

Phase 1- Before you shop Identify your needs… Do you need the coach purse or the

purse that you can buy at Target? Gather information

Cost, options, and consequences.

Before you shop… Trade-offs and buying decisions

Opportunity cost for buying something

What things help you make your decisions? Economic Social Personal

What things would make you purchase the goods you buy?

Economic Factors Prices – can you purchase the same at a lower

price? SAMS WAREHOUSE Interest Rates Product Quality Supply and demand Convenience – 7-11, QT,corner grocery store Product safety – Recall, Volvo Brand name – Polo, FUBU, Maintenance costs – when it breaks how much Warranty – extended / what happens when it

breaks

Social Factors

Lifestyle Interest Hobbies Friends Culture

Advertisements Media (magazines, radio, television,

newspapers)

Personal FactorsGenderAgeOccupationIncomeEducation

Researching Consumer Purchases

4 Phases to a Research Based Approach

1. Before you shop2. Weighing alternatives3. Making the purchase4. After the purchase

Phase 1: Before You Shop1. Identify your needs

- Clearly define your needsDo I need a PC based phone or do I want a PC based phone

2. Gather information- Costs, options, consequences – insurance?- Advertising, media, Consumer Reports, friends

3. Become aware of the marketplace- Knowledge is power- Common myths

Sources of Consumer Information

People you know Ads and Packaging Reports Web sites

www.consumerReports.org

Reliable, complete, relevant & impartial

Phase 2 – Weighing the Alternatives

Identify what is important to you. Personal Values Available time for research Amount of money you can spend Convenience of buying the item immediately Pros and cons of a particular brand.

Compare Prices Price doesn’t always equal quality.

Phase 3 – Making the Purchase Now that you have made a decision. What is next?

1. Negotiating the price.1. Is the price that shows the price you are going

to pay?2. Credit vs. Cash

1. Can you get a better deal if you pay cash or using a store credit card.

2. Can or do you have to put a DOWN PAYMENT down?

3. How long do you have to pay?3. Is the price you see the price you get?

1. Additional charges, installation, 3 month trial period.

After the Purchase…A car for example will have to have additional maintenance

to it after the purchase.

After the purchase continued

What is the return policy if you so choose to return it?

Best Buy Return Policy

Phase 3: Making the Purchase

Negotiate the Price When can you negotiate price?

Decide on Cash or Credit Cash: Money is immediately taken out of your account Credit: buy something now and pay for it later (fees,

interest) Source of the loan -- Type of credit account Payment Period -- Down payment

Down Payment: a portion of the total cost of an item that must be paid at the time of purchase

Know the Real Price Installation or delivery fee Additional Equipment to buy – game controllers

Smart Buying Decisions How do you get the best deal for your

money? Timing Purchases Store Selection Brand Comparison Label information research Price Comparison Warranty Evaluation

Timing Purchases When is the best time to buy something.

Back –to-school sale Buying a pool? Buying a house? New CD comes out?

Store Selection Quality and variety of goods may

influence your decision. Reputation Cooperative Stores – not-for-profit

organizations owned and operated by its members for the purpose of saving money on the purchase of goods and services.

Direct Selling, On-line shopping, Home Shopping Network.

Brand Comparison National-Brand products More expensive, but consistent quality & value

Kelloggs Nike

Store-brand Dierbergs Schnucks Oberweis

Generic Cereal Soup

Brand Comparison Impulse Buying

Buy items without thought to price . Honest Branding

Low-fat Light Low in calories Open dating: a labeling method that indicates

the freshness, or shelf life, of a perishable item

Labeling Information Research Federal laws also require labels to

present factual information. For example food labels must indicate the

common name of the product , name and address of the manufacturer or distributor, the net weight of the product and a list of the ingredients in decreasing order of weight.

Open dating – “Use before” or Best if sold before…..

Price Comparison Unit Pricing

Is the use of a standard unit of measurement to compare the prices of packages that are different sizes.

For example Which is the better deal – 12 ounces for $2.89

or 16 ounces for $3.39? Total Price / Unit of measure = unit price 2.89/12 ounces = .24 cents 3.39/ 16 ounces = .21 cents

Price Comparison con’t Two other ways in which you can save

money is through: Coupons Rebates

Rebate is a partial refund of the price of a product.

Warranty Evaluation Warranty Evaluation

Warranty: a written guarantee from the manufacturer or distributor that states the conditions under which the product can be returned, replaced, or repaired

Implied Elicit

Cell phone warranty…. Service Contract: a separately purchased agreement

made by the manufacturer or distributor to cover the costs of repairing the item Pay extra for

Anything with a cost of more than 15 dollars must have some sort of warranty.

Warranties con’t Types of warranties

Implied – are unwritten guarantees that cover certain aspects of a product or its use. Example – that a toaster toast bread.

Express warranties Which are usually written, come in two forms

Full warranty- states that a defective product will be fixed or replaces at not charge during a reasonable amount of time

Limited warranty covers only certain aspects of the product, such as parts. May have to pay for a portion of cost.

More on warranties Service Contract

Which is a separately purchased agreement by the manufacturer or distributor to cover the costs of repairing the item.

Another name is extended warranty

CHAPTER 4.2Resolving Consumer Complaints

Sources of Consumer Complaints

Sources of Customer Dissatisfaction Defective or Poor Quality Also unexpected costs, deceptive pricing, and

unsatisfactory repair service

Fraud Dishonest business practices that are meant to

deceive, trick, or gain an unfair advantage Examples? Free prizes, travel packages, work-at-home

schemes, scientific breakthrough, miraculous cure

Examples

Resolving Consumer Complaints

Five Methods:1. Return to the place of purchase2. Contact the company headquarters3. Consult a consumer agency4. Use mediation or arbitration5. Take legal action

1. Return to the place of purchase

Most common method Bring:

Receipts Keep calm and avoid yelling or threatening Explain the problem clearly explaining ALL

relevant info

2. Contact Company Headquarters

Send a complaint letter Consumer’s Resource Handbook Company Web sites Information number: 1-800-555-1212

Sample Complaint Letter Describe your purchase State problem Give history of problem State reasonable time for action

http://www.consumerlaw.com/sample.html

3. Consumer Agency Assistance

National Organizations Local Organizations Better Business Bureau

Most useful BEFORE you buy the product

Government Agencies Food and Drug Administration Consumer Product Safety Commission

4. Dispute Resolution Mediation

The attempt by a third party to resolve a conflict between a consumer and a business through discussion and negotiation NOT legally binding

Arbitration A process where a conflict between a business and a

consumer is resolved by a neutral third party Legally binding

5. Legal Action Small Claims Court

A court that deals with legal disputes that involve amounts from about $500-$10,000 No juries or lawyers Low cost Final decision

5. Legal Action Class-Action Suits

Legal action on behalf of all the people who have suffered the same injustice All parties must be notified of the suit Favor of the class action = $ divided among

claimants or put into public funds

Other Legal Alternatives Lawyer (American Bar Association) Legal Aid Society: a network of community law

offices provided for no or low-cost legal assistance Legal office

So……… There are many tools to protect your

rights = use them!

Research companies before you do business with them

Understand contracts before signing

Poster Assignment Do you know what I would like to

have????? Any Questions

Should have a poster A one to two page paper explaining the

questions that I have asked you from the handout, explaining the concepts from the chapter and applying them to your products.