Consumer Awareness: Marketing Tactics & Factors Influencing Consumer Decisions, Summaries of Finance

Download Consumer Awareness: Marketing Tactics & Factors Influencing Consumer Decisions and more Summaries Finance in PDF only on Docsity! What do other high school students know about consumer awareness? We asked other high school students to share their favorite television commercials. “I like the Super Bowl commercials. They show how much competition there is between companies.” Senior, Utah “I like the mayhem commercials the best.” Junior, Missouri “My favorite is the ‘Is it better to be faster or slower’ commercial.” Junior, Tennessee “I like the commercials with the baby talking about online investing.” Senior, North Carolina “I like the one where they ask the little kids questions and they come up with funny answers.” Sophomore, Alabama 6 CH AP TE R LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: Consumer Awareness M A R K ETING IS POW ER FU L! Think about it—almost every single purchase you’ve made started with advertising. But be careful. As you learned in Chapter 4, debt is also marketed to you. Some salespeople don’t want you to think about the product’s total cost; they want you to think in terms of how much down and how much a month. Buyer beware! *Marketingvox, Rand Youth Poll, Seventeen, Packaged Facts of teens say they are currently saving.* 40% of teens have placed an order online in the past three months.* 26% UNIT 2: CHAPTER 6 LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: WHY ARE WE SO MARKETED TO? The U.S. is the most capitalistic country in the world. Capitalism is an economic system based on a free market, profit motive, open competition and private ownership of the means of production. This market is driven by the economic law of supply and demand. Companies promote consumer demand by marketing their products. + TEEN SPENDING HABITS AT A GLANCE • 55–60% of teens say their parents contribute more than half of their spending dollars. • The fashion category accounts for roughly 40% of teen budgets. • Approximately 79% of females and 76% of males shop online, and respondents indicated that roughly 18% of their spending is online. 2013 Taking Stock With Teens Survey, Piper Jaffray Companies $ 6CHAPTER Section 1: Buyer Beware VIDEO 1.1 The Most Marketed-to Culture in History WE LIVE IN THE MOST marketed-to culture in the history of the world! If you are going to have financial peace, you are going to have to develop a resistance to that marketing. It’s not that buying things is bad. But buying too many things, with money you don’t have, to impress people you don’t really like—that’s a bad idea. » “Caveat emptor” means 1 . » We’re not saying that you can’t have a good time with your money. Remember, we want you to 2 like no one else so later you can live like no one else. » We want to sacrifice to win and then we want to 3 the winning. There’s nothing wrong with buying a good product. 130 Foundations in Personal Finance High School Edition SECTION 1 LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: “He who buys what he does not need steals from himself.” UNK NOW N “ The Super Bowl is known almost more for its commercials than for the football game. The average cost of a 30-second television spot during the 2013 Super Bowl was $4 million. These ads were viewed in roughly 53.3 million households. USA Today $ » A good salesman has a servant’s heart, knows how to sell, and is professional—all of which can make the whole process pretty 4 . » Companies use every angle to aggressively compete for our 5 . » Companies that are not sophisticated and aggressive in their marketing or do not have a marketing budget generally do not stay open. » Competition is 6 for the consumer dollar. JOURNAL QUESTION: VIDEO 1.1 Why is it important for consumers to be aware of marketing tactics? What’s Wrong With Financing a Purchase? “What’s wrong with buying things on 12-months-same-as-cash?” DAVE’S ANSWER: It’s a stupid idea. First off, if I buy the item with cash, I’ll get a better deal. Plus, if you play with snakes, you’ll get bitten. If they record your payment wrong and it’s late, they’ll backcharge you through the entire term of the deal at about 24–38% interest. You’ll spend the next year and a half cleaning up this mess. It actually happened with one of our clients here. If you can’t save up and pay for the item with cash, you can’t afford to buy it! 131Chapter 6: Consumer Awareness LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: For every hour of television per week you watch, you spend an average of $200 extra a year. Harvard University $ THE ECONOMIC LAW OF SUPPLY AND DEMAND The theory that, in a free market economy, prices are determined by the interaction of supply and demand; an increase in supply will lower prices if not accompanied by increased demand, and an increase in demand will raise prices unless accompanied by increased supply. + VIDEO 1.2 Four Common Marketing Tactics When you turn on the TV, listen to the radio, surf the web, or walk into the mall, you are stepping into battle—a battle for your dollars. Today, companies use every angle imaginable to aggressively compete for your money. The purpose of advertising is to inform, tease and persuade consumers to purchase products. When you’re aware of these techniques, you are more 7 as consumers. Here are four common marketing strategies: 1. One of the techniques is 8 selling. People who know how to sell spend thousands of dollars and hours sitting in a classroom learning how to talk to you—to serve you, to 9 you in your decision to buy their stuff. 2. The second technique is 10 . They use money and easy payments as a marketing tool. They don’t want you to think about how much something actually costs, rather how much down and how much per month. I Want to Buy Something, But Can I Afford it? How do you know when you can afford something? When you have the cash to pay for it! Here are two common financing plans you should avoid: 90-Days-Same-As-Cash If you pay within 90 days, there are no finance fees. But if you pay late, you will be charged interest for the entire 90 days. What if you have good intentions of paying it off before the 90 days is up? On average, about 80% of customers do not pay it off in 90 days. Life happens. The best intentions are often interrupted by life. Zero Percent Interest Look out for the 0% interest trap on car loans! The truth is that 0% financing is nothing more than a really good marketing tool. It has worked so well for the auto industry that other types of retailers, particularly in furniture and electronics, have adopted this method of marketing. In reality, less than one third of all consumers qualify for 0% financing. For the other two thirds, well, they’ve got you where they want you: in the store and wanting to buy. For those that do qualify for 0%, sellers often make up for the lost finance charges by increasing the price of the product. 132 Foundations in Personal Finance High School Edition SECTION 1 LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: The average U.S. household has 52 unused items around the house worth a total of $3,100. eBay/Nielsen Survey $ Describe a money goal that you currently have. “Saving up enough to buy a nice used car.” Sophomore, Kansas “Saving $20 per week.” Junior, Washington “I’m trying to save up $800 for a new set of tires.” Senior, Massachusetts “My current money goal is to pay off my car and save more money for college.” Junior, Pennsylvania Section 2: Buyer’s Remorse VIDEO 2.1 Significant Purchases Your body goes through physiological changes when you make a significant purchase. You sweat. Your eyes dilate. Your pulse rate changes. Proteins and endorphins are released. » A “significant purchase” is normally anything over $ 18 . » Buyer’s 19 is when you wake up the next day and regret your purchase. » We all have that spoiled, grocery store kid living inside of us. His name is 20 . » When it comes to spending, adults devise a 21 and 22 it. » When it comes to big purchases, the right way to do it is to 23 and pay cash. JOURNAL QUESTION: VIDEO 2.1 Can you think of anything in your home that was bought but never or rarely used? 135Chapter 6: Consumer Awareness LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: “Many a man thinks he is buying pleasure, when he is really selling himself to it.” BENJA MIN FR A NK LIN Author, inventor and political theorist “ Budget Builder Thinking about making a significant purchase? You’ll need to save up for that! Go to foundationsU.com/6 to add a sinking fund to your budget. OPPORTUNITY COST The true cost of something in terms of what you have to give up to get the item; the benefits you would have received by taking the other action. + Section 3: Opportunity Cost VIDEO 3.1 Develop Power Over Purchase Because it’s always easy to spend more than you make, you must develop 24 over 25 . It doesn’t matter how much money you make. If you have a spending plan and power over purchase, you can win with money. Having power over purchase involves following these steps: 1. Wait 26 before making a purchase. Take the time to consider whether it is a need or a want. And make sure you’ve budgeted for it! 2. Consider your buying 27 . No amount of stuff equals 28 or fulfillment. People sometimes get 29 and 30 confused. You buy fun, but you can’t buy happiness. Happiness is where you are right now. Claim it for yourself! 3. Never buy anything you do not 31 . Particularly financial products like insurance or investments. 4. Consider the “ 32 cost” of your money— which means that money spent here cannot be spent there. Whenever you make a choice, you must pass up other opportunities. Take your time and make the right decision. 5. Seek wise 33 . Young adults who are not yet married should find an accountability partner—someone with whom you can discuss big purchases. Once you are married, you should seek the counsel of your spouse. 136 Foundations in Personal Finance High School Edition SECTION 3 LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: “A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” W ILLI A M FE ATHER American publisher and author “ If you follow these steps, you will limit your spending and make purchases that you’re proud of—and you will have financial peace. * NOTE: You’ll learn more about investing and retirement planning in Chapter 8. JOURNAL QUESTION: VIDEO 3.1 Explain why it is important to develop power over purchase. How Does Inflation Affect Your Buying Power? INFLATION can be described as the persistent increase in the cost of goods and services or the persistent decline in the buying power of money. Regardless of how you describe it, inflation basically means your dollars buy less than they used to. You must consider inflation when planning for future expenses, especially retirement. So what should you do? 1. Pay attention to the long-term rate of inflation. This can make inflation trends more predictable. 2. Be sure to consider inflation in your investment planning. 3. Factor a realistic inflation expectation into your financial planning. For instance, what might you expect your cost of living to be by the time you retire? 1913– 1919 1970– 1979 1940– 1949 2000– 2009 1920– 1929 1980– 1989 1950– 1959 2010– 2012 1930– 1939 1990– 1999 1960– 1969 10.0% » 6.0% » 2.0% » -2.0% » 8.0% » 4.0% » 0.0% » 9.8% 5.5% 2.0% 2.3% 5.5% 3.0% 2.6% 2.3% 1913– 2012 -0.1% -2.1% 12.0% » Average Annual Inflation by Decade 7.1% 3.2% Lo ng -Term Average 137Chapter 6: Consumer Awareness LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: Money in Review a Opportunity Cost b Significant Purchase c Branding d Buyer’s Remorse e Financing f Caveat Emptor g Marketing h Brand Recognition 1.  _____ To buy an item with credit; paying over time 2.  _____ The promotion of a product or service by identifying it with distinct characteristics (usually associated with public perception, quality or effectiveness) 3.  _____ Latin term for “buyer beware” 4.  _____ An amount of money you spend, usually $300, that causes some pain to part with 5.  _____ Refers to the financial opportunity that is given up because you choose to do something else with your money 6.  _____ Feeling regret or concern after making a large purchase 7.  _____ Refers to the public’s ability to recall and recognize a brand by its logo, jingles, packaging, etc. 8.  _____ The process of communicating the value of a product or service to customers Matching Match the following terms to the correct definition below. Illustration Draw a picture representation of each of the following terms. Inflation Power Over Purchase 140 Foundations in Personal Finance High School Edition RECAP & REVIEW LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: Multiple Choice Circle the correct answer. 9. As a consumer, you should consider inflation in your investment and retirement planning. a True b False 10. If you don’t have cash on hand, financing a significant purchase is a good option. a True b False 11. Which of the following is not a need? a Food b Housing c Eating out d Utilities 12. The purpose of advertising is to: a Inform the consumer b Tease the consumer c Persuade the consumer d All of the above 13. Which of the following is not a common marketing strategy? a Providing financing options b Making the customer do product research c Personal selling d Repetition Short Answer Respond in the space provided. 14. Explain why financing a purchase is a bad idea. 15. Why should you always consider the opportunity cost when making a significant purchase? 16. What are the five steps you should take before making a significant purchase? 17. What effect does inflation have on purchasing power? 18. Summarize factors that influence consumer decisions. 141Chapter 6: Consumer Awareness LICENSED FOR 2014 –2015 SCHOOL YEAR ONLY SPONSORED BY: