Chapter 4 Section 4-1

1. Chapter 4Section 4-1 Consumer Purchasing

2. 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.

3. The process of buying a Product • Before you shop. • What influences you to buy the product that you buy. • Weighing the Alternatives • What is important to you. • Making the Purchase • How do you get to a price that you are happy with? • After the purchase. • Service Contracts?

4. 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

5. 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.

6. Before you shop… • Trade-offs and buying decisions • Opportunity cost for buying something • What things help you make your decisions? • Economic • Social • Personal

7. 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

8. Social Factors • Lifestyle • Interest • Hobbies • Friends • Culture • Advertisements • Media (magazines, radio, television, newspapers)

9. Personal Factors Gender Age Occupation Income Education

10. Researching Consumer Purchases • 4 Phases to a Research Based Approach • Before you shop • Weighing alternatives • Making the purchase • After the purchase

11. Phase 1: Before You Shop • Identify your needs - Clearly define your needs Do I need a PC based phone or do I want a PC based phone • Gather information - Costs, options, consequences – insurance? - Advertising, media, Consumer Reports, friends • Become aware of the marketplace -Knowledge is power - Common myths

12. Sources of Consumer Information • People you know • Ads and Packaging • Reports • Web sites • www.consumerReports.org • Reliable, complete, relevant & impartial

13. 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.

14. Phase 3 – Making the Purchase • Now that you have made a decision. • What is next? • Negotiating the price. • Is the price that shows the price you are going to pay? • Credit vs. Cash • Can you get a better deal if you pay cash or using a store credit card. • Can or do you have to put a DOWN PAYMENT down? • How long do you have to pay? • Is the price you see the price you get? • Additional charges, installation, 3 month trial period.

20. After the Purchase… A car for example will have to have additional maintenance to it after the purchase.

21. After the purchase continued • What is the return policy if you so choose to return it? • Best Buy Return Policy

22. 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

23. 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

24. Timing Purchases • When is the best time to buy something. • Back –to-school sale • Buying a pool? • Buying a house? • New CD comes out?

25. 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.

26. Brand Comparison • National-Brand products • More expensive, but consistent quality & value • Kelloggs • Nike • Store-brand • Dierbergs • Schnucks • Oberweis • Generic • Cereal • Soup

27. 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

28. 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…..

29. 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

30. 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.

31. 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.

32. 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.

33. 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

34. Chapter 4.2 Resolving Consumer Complaints

35. 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

36. Examples

37. Resolving Consumer Complaints • Five Methods: • Return to the place of purchase • Contact the company headquarters • Consult a consumer agency • Use mediation or arbitration • Take legal action

38. 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

39. 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

40. 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

41. 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

42. 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

43. 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

44. So……… • There are many tools to protect your rights = use them! • Research companies before you do business with them • Understand contracts before signing

45. 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.