Unit Seven Consumers in the Economy Chapter 22 The Informed Consumer Intro to Business Unit Seven Consumers in the Economy Chapter 22 The Informed Consumer

GOALS Describe the informed consumer in our economic system Identify three types of consumer organizations List ways in which businesses provide consumer information Outline questions which informed consumers should ask when selecting the best product or service.

The CONSUMER A consumer is a person who buys and uses goods or services. Without satisfied consumers… businesses would not make sales, earn profits, or remain in business. Your consumer behavior reflects and determines your lifestyle. Uninformed consumers may unnecessarily wasteful with limited resources.

Consumer Information Organizations Three Basic Types of Organizations: Product-testing organizations Print publishers Broadcast organizations Consumer = Customer mean the same may be used interchangeably.

Product-Testing Organizations Main Purpose: Testing of products and services Underwriters Laboratories Inc. tests electrical components of products from all over the work for fire and electrical safety.

Product-Testing Organizations Home Appliance Manufacturers (AHAM) develops and updates the performance standards of such appliances such as refrigerators, air conditioners, and freezers. AHAM Seal indicates that product has met performance standards

Print Publishers Report scientific, technical, and educational material about product and services. Some are Non-profit Organizations i.e. Consumers Union Inc. perform independent tests on consumer goods publish articles on the quality of the goods. Findings are published in Consumer Reports.

Print Publishers Magazines will endorse products but only after the products have been tested. i.e. Good Housekeeping or Parents Any products in these magazines can display the magazines seal Good Housekeeping Seal promises the product will be replaced or money will be refunded if the product is found defective within one year of purchase Consumer Digest & Bottom Line – specifically for providing objective consumer information

Print Publishers Financial Information for Consumers Money Kiplinger’s Personal Finance Fortune The Wall Street Journal Evaluate and report on performances of investments (stocks, bonds, mutual funds, real estate, art, coins, etc.) Specialty Magazines Help consumers understand complex products Comparative ratings

Broadcast Organizations Like magazines and newspapers, radio and television also are sources of consumer info. Provide regular segments to inform public of safety, care, use, shopping tips, sales, etc. Many broadcast talk shows are designed to help listeners with their consumer problems.

Consumer Information from Government Federal state, and local government also help people become informed consumers. Federal Government Consumer Information Center Headquarters for Consumer Information Issues catalogs four times a year Publishes results of Gov’t Research & Product Tests Office of Consumer Affairs Food & Drug Admin Federal Trade Commission Product Safety Commission

Consumer Information from Government USDA (U.S. Department of Agriculture) – information on food Grade food (indicates quality or size of product) USDA shield means product has been inspected and approved. Publications for consumers specialize in: judging quality, buying wisely, improve buying practices, planning meals, improving nutrition and other farm & home related topics.

Consumer Information From Business Businesses provide information to consumers by: Advertising, Product labels, Customer service departments, Business specialists Better Business Bureaus (Next 5 slides)

Consumer Information from Businesses Advertising: main purpose is to convince you to buy a product/service, you should use it with care as a source of consumer information. Product Labels: provides useful written information about the nature or content of a product.

Consumer Information from Businesses Customer Service Departments: special departments devoted to customer service. Business Specialists: consult expert advisors before buying products Complicated items, not familiar with them Houses, used cars, major equipment i.e. Home inspector

Consumer Information from Businesses Better Business Bureaus (BBB): supported by dues paid by member businesses. Work to maintain ethical practices in the advertising and selling of products and services and to combat consumer fraud. If consumers have reported problems with a firm, you could find out about these complaints. Only Give Facts, don’t recommend products or firms.

Effective Consumer Practices Answer the following questions when choosing the best product/service for you: Would you rather buy this item instead of another desired item that costs the same amount of money? Which business(es) should you visit? What quality of goods/services do you want? What price are you willing to pay? Should you pay cash? Do you really need this item? If you buy this, what do you have to give up buying?

Effective Consumer Practices Opportunity Cost The value of any alternative that you give up when you buy something else or make another choice. Example: I want to go out this weekend I could go to the Movies or to the Ball game I only have enough money for one option If I choose the Game I give up the Movie Part of the “cost” of the Game is opportunity to go to Movie (Trade-off Occurs)

Opportunity Cost

Consumers in the Economy Consumer Buying Decisions Intro to Business Unit Seven Consumers in the Economy Chapter 23 Consumer Buying Decisions

GOALS List steps to follow when making a buying decision. Explain the importance of a businesses‘ reputation and the value of brand names. Outline how a consumer becomes an efficient shopper Describe the Consumer Price Index

DECISION-MAKING STEPS Identify your needs and wants. State why you intend to buy something. Know your choices – price, quality, location, variety, reputation Determine the measure of satisfaction of your needs and wants. Consider the alternatives. Decide to buy the product from the criteria you have identified

Developing Buying Skills Good buying skills make you a better consumer get greater value for your money each time you make a purchase. (Savvy Shopper) Comparison Shopping means comparing: price, quality, services, and sales associated with one product with those of another product.

Comparing Unit Prices Unit Price – price per unit of measure To calculate a unit price, you must divide the product. Example: Price tags show cost per ounce. You could easily tell whether 12oz or 6oz is the better bargain regardless of the size of the containers. (Image Next Slide)

See the Math .72 / 6oz = .12 1.62 / 32 oz = .05

Comparing Quality Examine a product before you buy it and make sure it will satisfy your needs. Buying lower quality items can sometimes turn out to be more expensive than buying the higher quality items. Example: buying a low quality pair of tennis shoes, will wear them out in a shorter period of time than higher quality shoes. May end up buying 2 pairs.

Comparing Service Most businesses try to give good service, but types of services may differ. Some businesses: Cash Only Businesses vs. Offer Credit Deliver Goods vs. Pickup Only Large Stock of Items vs. Fewer Items Service is important, but do not pay for more service than you actually need. Know what you are willing to pay for.

Comparing Sales ‘Sales’ are used so often to try to sell goods that they are sometimes ineffective. (Overused word, less trusted) When an item is really on sale, it is offered at a lower price than its normal selling price. 3 Types of Sales: Promotional – temporary price reductions of regular merchandise Opening a new store Publicizing new location Build acceptance for new products (low introductory price) Buy low  like them  continue buying at regular price in future Attract customers who will buy additional items that are not on sale

Comparing Sales 3 Types of Sales: Promotional – previous slide Clearance – clear merchandise no longer needed End of season Odd sizes or model/display items Line of merchandise they no longer carry Bargain deals – but make sure you actually need the items Special-Purchase – bought for a special sale rather than regular merchandise that has been reduced. overstocked goods goods no longer made (discontinued) stock from a company that is closing / going out of business

DECIDING HOW TO BUY The competitive market provides a variety of choices of where to buy a product/service. When selecting a place to make a purchase, you should consider: Business Reputation Learn Brand Names Then Plan Where to Buy

BUSINESS REPUTATION Most valuable business asset is a good reputation A satisfied customer is likely to come back Businesses with good reputations have salespeople who: know the uses and the quality of the goods are concerned about matching the appropriate goods with customers’ needs

BRAND NAMES Name given to a product or service that is intended to distinguish it from other similar and/or competitive products/services. Created by the business selling it Designed to help build customer loyalty to a product or service

BRAND NAMES National brand goods and services are advertised nationally and sold in almost every community help consumers by: can be expected to have uniform quality, even when from different businesses make comparison shopping possible Store brands & house brands Costco = Kirkland Walmart = Great Value Usually sold at lower cost than national brands Save money and offer good quality products

TYPES OF MERCHANTS Full-Service Stores Discount Stores Wide variety of goods / emphasize customer service, personal shopper, deliveries, gift wrapping (e.g. Macy’s) Discount Stores Emphasize low prices (e.g. Dollar Tree) Specialty Stores Special line of products, wide variety of products from a narrow line (e.g. Crafts = Michaels) Factory-Outlet Stores High quality at low prices (e.g. Outlet Malls)

TYPES OF MERCHANTS Food Retailing Stores Supermarket Warehouse Market Large, full-service store that carries a wide variety of national & store brands (Giant Food Stores) Warehouse Market Non-frills, food outlet emphasizing large quantity items at reasonable prices (Costco Warehouse) Convenience Stores Small stores emphasize sale of food items, an accessible location, and long operating hours (Wawa)

DECIDING TO BUY Take your Time – Pace yourself Time your Purchase – Visit more stores, browse online, look for the best values) Time your Purchase – For some goods, prices are lower at predictable times (Fresh fruits, & vegetables in season, Cars - end of model year (Sept), Winter clothing in Spring, Firewood in Summer) Avoid being Impulsive – Impulse Buying usually happens when an item is attractively displayed and a consumer suddenly decides to buy it. candy at checkout lines – small / harmless Avoid by making a list and sticking to it

EFFICIENT SHOPPING Save Time, Energy & Money by PLANNING Plan your purchases carefully and make a shopping list – make better decisions, avoids impulse buying Use the Internet. Research businesses to find out if they have what you need. Maybe in buy item online Carefully plan the route of your trip – saves time, fuel & cost

Effect of Economic Conditions on Buying Decisions Price Index Help consumers understand what is happening to prices in economy. How prices have changed over a period of years Consumer Price Index (CPI) Show the changes in the average prices of goods and service bought by consumers over a period of time.

Consumer Price Index

Consumers in the Economy Consumer Rights and Responsibilities Intro to Business Unit Seven Consumers in the Economy Chapter 24 Consumer Rights and Responsibilities

GOALS Describe the consumer movement Identify and explain seven consumer rights Discuss five consumer responsibilities

Consumer Movement Pleasant relationship between consumers and businesses did not always existed. In the past, some businesses were viewed as trying to take advantage of consumers False information was given to a customer in an effort to make a sale – fraud. Product info misleading, Prices too high, Products unsafe Consumer movement was formed to fight against unfair business practices

Consumer Movement Highlight of the Consumer Movement: As a result, many new laws were passed Fair Packaging and Labeling Act National Traffic and Motor Vehicle Safety Act Truth in Food Labeling Act Fair Debt Collection Practices Act And many others. Highlight of the Consumer Movement: President John F. Kennedy, 1962, presented Consumer Bill of Rights (4) Nixon, Ford, Clinton continued to add to them

Your Consumer Rights Every consumer has the following rights: The right to be informed: to be given the correct information to make an informed choice The right to safety: to be protected from goods and service that are hazardous to health of life The right to choose: to be assured of the availability of a variety of goods and services at competitive prices

Your Consumer Rights The right to be heard: to be assured that consumer interests will be fully considered by government when laws are being developed and enforced The right to a remedy: the assurance of the right to legal correction of wrongs committed against consumers The right to consumer education: to learn about consumer rights and responsibilities as economic citizens The right to service: to be entitled to convenience, courtesy, and responsiveness to problems and needs.

Exercising Your Consumer Rights Skillful consumer Knowing the Consumer Bill of Rights and how to exercise them Details on each “Right” over the next 7 slides

The Right to be Informed Fraud is committed when false information is given to a customer in an effort to make a sale. However, when a salesperson exaggerates the good qualities of a product and says, “It’s the best”, there is no fraud. If the salesperson tells you a car has new brakes and it does not, this is fraud.

The Right to Safety Several agencies work to assure safety of consumers: The Consumer Product Safety Commission (CPSC) Set safety standards, Ban hazardous materials Recall dangerous products Food and Drug Administration (FDA) Prevent misbranded food, drug & cosmetics Prevent product labels from misleading consumers United States Department of Agriculture (USDA) Standards of grading farm products Controls processing, inspection and labeling

The Right to Choose One of the main activities of the Federal Trade Commission (FTC) is to prevent one firm from using unfair practices to force competing firms out of business. Monopoly: when a business has no competitors and controls the market for a product or service. Monopolies limit the right to choose.

The Right to be Heard Office of Consumer Affairs (OCA) coordinates and advises other federal agencies on issues of interest to consumers. Primary Concerns: Represent the interests of consumers To develop consumer information materials To assist other agencies in responding to complaints. Other Agencies: Federal Trade Commission (FTC), Office of the Attorney General, Department of Consumer Affairs, Better Business Bureau

The Right to a Remedy As a result of the consumer movement, many new laws were passed to provide assurances that consumers could seek a legal remedy if they were wronged. A form of remedy that consumers have is the protection provided through a guarantee (or warranty). A guarantee is a promise by the manufacturer or dealer, usually in writing, that a product is of a certain quality. May promise defective parts be replaced only if it occurred within state a limited time offering NO guarantee covers damages from misuse. Keep a copy for evidence if ever needed.

The Right to a Remedy Express Warranties Implied warranties A guarantee made orally or in writing and promise a specific quality of performance Frequently in the form of statements like these: “The sweater will not shrink more than 3 percent” Implied warranties are not written and are imposed by law. They are understood to apply even through they have not been stated either orally or in writing. (i.e. healthcare products over the counter will not harm you as long as you use them as directed)

The Right to Consumer Education Educated consumers are aware that their decisions not only affect their lifestyle, but also have economic implications.

The Right to Service Consumers can expect: convenience, courtesy, and responsiveness to consumer problems/needs. Encourages businesses to take steps necessary to ensure that products/services meet the quality and performance levels claimed for those products and services.

Your Consumer Responsibilities Be Honest Be Reasonable Report Unethical Practices Be Informed Be Involved

Be Honest As a responsible consumer, you must be as honest with a business as you it to be with you. (i.e. tell the cashier that you received too much change) Dishonesty, in addition to being illegal and unethical, usually results in higher prices for all consumers. (shoplifting = higher prices)

Be Reasonable If you are dissatisfied with a product or service, you should complain in a reasonable way. If you believe that your complaint is not handled fairly by the sales person or the customer service department, take the matter up with the owner or an official of the firm. If you fail to receive a fair adjustment, you can contact one of the following: Better Business Bureau (BBB) Local or state consumer affairs agency or the attorney general’s office in your state A lawyer or the Legal Aid Society if the problem is quite serious. In larger cities, the small claims court, which is operated for filing small claims only A consumer help department

Report Unethical Practices As a responsible consumer, you should report unethical business practices to prevent other consumers from becoming victims.

Be Informed The most important responsibility you have as a consumer is to be informed. Find and use the information available to you. Keep informed about your rights as a consumer Learn about the laws and agencies that protect your rights and how to report a violation of your rights

Be Involved Involvement is important Citizen Responsibility - Only when you become involved as a consumer can agencies do their jobs and legislative bodies pass appropriate laws.