Download Chapter 4

Chapter 4
Consumer Purchasing & Protection
Factors That Influence Buying
Decisions

Recognize the factors that influence your buying
habits. See Figure 4.1, p. 91.
– Economic
 Quality
 Cost
– Social
 Stylish
 Consider what others have
– Personal
 Consider your own income
 Likes/dislikes (preferences)
Trade-offs and Buying Decisions

Buying based on cost of item
– Sacrifice quality
– Sacrifice time

How to purchase the item
– Cash (may add stress with less in savings)
– Credit (may cost more with finance charges)
– Order
 Postage
 May be costly if you have to return it
Four Phases to Research-Based
Purchasing
1.
2.
3.
4.
Research before you shop
Weigh alternatives
Make the purchase
Review the purchase
Before You Shop

Lay a good foundation by researching
what you want to purchase
1. Identify your needs—You don’t always need
Brand A and Brand B may cost less
2. Gather information
3. Become aware of the marketplace—find out
if products are reliable and be aware of
return policies
Phase 1: Gather Information




Ask friends for recommendations
Consult consumer publications such as
Consumer Reports
Write down information for easy comparison
Gathering info. falls into three categories:
1. Costs—are costs different at different stores?
2. Options—what brands are available?
3. Consequences—how will the purchase affect my
budget?
Common Consumer Myths





I can return my car within
three days of purchase
It says I’ve won, so it
must be true
If I lose my credit cards
I’m liable for the
purchases
People cannot take
money directly from your
bank accounts without
your written authorization



An auto lease is just like
a rental. If I have
problems, I can just bring
it back.
You can’t repossess my
car. It’s on private
property.
A store has to give you a
refund if you request one
Advertisements that you
see or hear on TV,
newspapers, magazines
and radio are accurate or
they would not be in the
reputable media.
Alternatives to Purchasing
Renting
 Borrowing
 Doing without

Phase 2: Weighing the Alternatives
What are my personal values
 How much time do I have for research?
 What amount can you spend?

– Higher price does not always mean higher quality.
– Would it be better to finance larger purchases?
Is it worth the convenience to have the item
immediately?
 What are the pros and cons of a particular item?

When Should You Comparison
Shop?
When item is expensive
 When you purchase item often
 When you are using Internet,
advertisements or mail-order catalogs
(easy to compare)
 When different sellers offer different
prices and services
 When product quality or price varies
greatly

Phase 3: Making the Purchase

When should you negotiate the price?
– Real estate or cars
– Be sure you are dealing with the person who can
negotiate (manager or owner)

Decide on credit or cash
– Credit—type of loan
 Costs extra (interest)
 May require a down payment
– Cash—lose interest and safety net

Know the Real Price—what’s included?
Phase 4: After the Purchase
How to maintain and care for your
purchase requires same research as the
purchase itself.
 What should you do if you are
dissatisfied?
 Consider changes in your needs, lifestyle,
values, goals and financial resources.

Smart Buying Strategies
1.
2.
3.
4.
5.
6.
Timing Purchases
Store Selection
Brand Comparison
Label Information and Research
Price Comparison
Warranty Evaluation
Timing Purchases

Bargains occur at certain times of the year
– Seasonal
– Sales like back-to-school (event sales)
– Holiday sales

Supply and Demand
– Wait a few months before buying a popular
new item to purchase it when there is a
decreased demand
– Stores have clearance sales to reduce supplies
Store Selection




Quality
Price
Store hours & location
Store selection
– Cooperative
 Non-profit organization owned & operated by its owners (Sam’s)
 Few customer services
– Retail (Wal Mart)
– Convenience (Quik Trip)
– Direct selling
 Mail Order
 TV
 Online & home shopping
Brand Comparison

National Brands
– Offer consistent quality
– Readily available

Store-brands (generic)
– Usually sold by chain stores
– Quality is usually good
– Less expensive (less advertising)
When comparing brands consider price and
quality
 Avoid impulse buying—make a list of what you
need before you go shopping

Label Information
Labels include advertising
 Federal law requires they include factual
information

– Must indicate the common name of the
product
– Must include name of manufacturer
– Net weight of the product
– List ingredients in decreasing order of weight
– Have nutrition information
Label Information

Food labels must include:
– Calories per serving
– Amounts of nutrients
– Open dating to indicate shelf life if product is
perishable

Appliance labels much include:
– Information about operating costs
– Energy-efficiency
Price Comparison

Unit pricing
– Use of standard unit of
measurement to compare
the prices of packages that
are different sizes
– Unit pricing is usually
displayed with the product
in the store
– Calculate the unit price by
dividing the price of the
item by the unit of
measurement
– Lowest unit price may not
be the best for you, for
example, perishables may
spoil if bought in bulk
Discount coupons
 Manufacturers’ rebates

– Partial refund of the price
of a product
– Usually have to submit a
form, the original receipt
and the UPC symbol (bar
code)
Guideline for Comparing Prices
More convenience usually means higher
prices (trade-off)
 Ready-to-use products are usually priced
higher
 Large packages are usually the best buy
 Buying items “on sale” may not always be
the best buy

Warranty





A written agreement from the manufacturer
States the conditions under which the product
can be returned, replaced or repaired
Required by federal law for products costing $15
or more
Must be made available to customers before the
purchase is made
Often printed directly on the package
Types of Warranties

Implied
– Unwritten guarantees
that cover certain
aspects of a product or
its use
– Guarantees that a
product is fit for its
intended use

Express
– Usually written
– Two types
 Full—product will be
fixed or replaced at no
charge
 Limited—may cover
only parts or buyer
must cover some of the
costs like shipping
Service Contracts
Must be offered to you when you buy a
product
 Are separately purchased & cost extra
 Sometimes called extended warranties—
but aren’t really warranties
 Generally offered on large, expensive
items such as appliances and cars

Quick Check
What are three economic factors that
influence what people buy?
 Suppose that you are considering buying a
new laptop. What steps might you take
before you shop and as you weigh your
alternatives?
 What are at least five strategies followed
by smart shoppers?
