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Factors Influencing Buying Decisions: Wise Money Management

Discover the economic and social factors that can influence buying decisions and learn smart buying strategies for effective money management.

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Factors Influencing Buying Decisions: Wise Money Management

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  1. Buying Goods & Services Ch. 3 PERSONAL FINANCE

  2. Factors that Influence Buying Decisions • Wise Buying Decisions are smart money management • Help to get the most out of products • Enable you to meet your long term financial goals

  3. Factors that Influence Buying Decisions • Activity • Make a list of economic factors and social factors that can influence buying decisions

  4. Factors that Influence Buying Decisions • Economic Factors • Prices • Interest rates • Product quality • Product safety • Convenience • Maintenance costs

  5. Factors that Influence Buying Decisions • Social Factors • Lifestyle • Interests, Hobbies • Friends • Culture • Advertisements

  6. Factors that Influence Buying Decisions Trade-offs and Buying Decisions • Needs vs. Wants • Price vs. Quality • Online time saving vs. Return hassles • Buy now on credit vs. Higher Cost

  7. Online Shopping • http://www.cbsnews.com/news/do-companies-charge-online-shoppers-different-prices/

  8. Research Based Approach to Consumer Purchases • Before You Shop • Weighing Alternatives • Making the Purchase • After the Purchase

  9. Phase 1: Before You Shop • Identify Your Needs • Gather Information • Costs • Options – what is produced and where is it available • Consequences – Is It In My Budget? • Routine vs. Expensive Purchases • Sources of information: recommendations, ads and packaging, reports, websites • Be Aware of the Marketplace

  10. Phase 2: Weighing the Alternatives • Identify What is Important to You • Compare Prices • Do Comparison Shopping

  11. Phase 3: Making the Purchase • Negotiate Price • Decide on Credit or Cash • Source of Loan (parents, bank, credit card) • Type of Credit Account • Payment Period • Amount of Down Payment • Know the “Real” Price • Consider extra fees (installation, delivery)

  12. Phase 4: After the Purchase • Manage Additional Costs Responsibly • Know what to do in case you are not satisfied with the product • Return Policies • Customer Complaints • Know How to Maintain the Product

  13. Smart Buying Strategies • Timing of Purchases • Price variations by time of year (season) • Examples? • Store selection • Location • Price • Selection • Services

  14. Smart Buying Strategies • Brand Comparison • National Brand • Private Label or Store Brand • Label Information • Open Dating (shelf life of products)

  15. Smart Buying Strategies • Price Comparison • Unit pricing = standard of measurement • Large not always the best buy (check unit price, usage) • Coupons and rebates • More store convenience higher prices • Ready-to-use products higher prices • “Sale” prices not always a savings • Online sources can save time

  16. Unit Pricing example

  17. Smart Buying Strategies • Warranties • Written guarantee from manufacturer or distributor specifying conditions under which a product can be returned, replaced or repaired. • 2 Categories: • Express • Implied

  18. Smart Buying Strategies • Express warranty (usually written) • Full Warranty (covers entire product, period of time) • Limited Warranty (covers only certain parts of a product) • Extended warranty

  19. Beware of Extended Warranties

  20. Smart Buying Strategies • Warranties (continued) • Implied warranty (covers intended use) • Warranty of title – seller has a right to sell a product • Warranty of merchantability – product is fit for use • Exceptions: “as is” or “with all faults”

  21. How Are Prices Set in a Market Economy? • Cost-recovery pricing is used to recover R&D costs. • Cost-plus pricing iscalculated usingproduction costs plus a markup. • Value-based pricing isbased onwhatconsumers are willing to pay. • Market-based pricing isset to be competitive with similar products. 3-2 Prices and Consumer Choices Slide 21

  22. Activity • Assume that your family recently bought the following items: • Loaf of bread • Blu-ray player • Ipad mini 4 Slide 22

  23. How Do Buying Strategies Affect Prices? • Rational buying: the process of selecting goods and services based on need, want, and logical choices • Economizing is saving money and spending only when necessary. • Optimizing is getting the highest value for money spent. 3-2 Prices and Consumer Choices Slide 23

  24. Smart Buying Strategies cont. • Emotional Buying: the process of purchasing products based on desire rather than logic • Impulse Buying: buying something in the spur of the moment without thinking it through or planning your purchase • Buyer’s remorse: sense of regret after making a large purchase Slide 24

  25. Creating demand • Advertisingis informing consumers about products and encouraging them to buy. • Advertising sources: newspapers, magazines, TV, radio, Internet, billboards, signs, direct sales • Thetarget audience is a specific group of people who are likely to buy. • Customer Loyalty Program: designed to encourage a customer’s repeat business by providing special discounts and other incentives 3-3 Getting More for Your Money Slide 26

  26. Cookies • WSJ Video • “Sponsored” ads on Instagram • “Suggested” posts on Facebook Slide 27

  27. How Are Consumers Defrauded? Deception involves false or misleading claims made about a product. • Bait and switch • Fake sales • Low-balling • Pyramid schemes • Acceptance by default • Infomercials 3-4 Consumer Rights and Responsibilities Slide 28

  28. Deceptive Advertising • Find an infomercial • What claims are made about the product? • What gimmicks are being used to sell the product? • How effective is the commercial? Slide 29

  29. Deceptive Advertising

  30. Resolving Consumer Complaints • What are some sources or examples of consumer complaints? • Defective product or poor quality • Deceptive advertising • Unexpected costs • Contact the Better Business Bureau

  31. Your Purchasing Power • With a partner: • Page 99: #10-18 • Page 100 #20 Slide 33

  32. What Are Consumer Rights? Many laws protect consumers. • Consumer Bill of Rights • Airline Passenger Rights • Consumer Technology Bill of Rights • Patients’ Bill of Rights • Consumer Protection Laws • Examples: Food, Drug, and Cosmetic Act; Hazardous Substances Act; Cigarette Labeling and Advertising Act; Nutrition Labeling and Education Act; FERPA; HIPAA 3-4 Consumer Rights and Responsibilities Slide 34

  33. Consumer Bill of Rights • Right to safety • Right to be informed • Right to choose • Right to be heard • Right to reparation • Right to consumer education Slide 35

  34. Sources of Consumer Protection • Federal Agencies • USDA • FDA • CPSC • FCC • FTC • FAA • SEC Slide 36

  35. Sources of Consumer Protection • State and local assistance • Private Organizations • Examples: BBB, National Consumers League, Consumers Union 3-4 Consumer Rights and Responsibilities Slide 37

  36. International Studies • With a partner, select another country and research its consumer protection laws. Report the following to the class: • What laws are in place? • How are they different from the U.S.’s laws? Slide 38

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