Lesson 11.2 Spending Habits Learning Objectives LO 2-1 List and describe factors that influence spending. LO 2-2 Explain how to plan for major purchases. LO 2-3 Analyze marketing strategies that influence spending. Chapter 11 © 2016 South-Western, Cengage Learning  

Factors that Influence Spending Personal Factors Personal resources Position in life Customs, background, and religion A custom is a long-established practice that takes on the force of an unwritten law. Values and goals Chapter 11 © 2016 South-Western, Cengage Learning  

Factors that Influence Spending (continued) External Factors The economy The economy refers to all activities related to production and distribution of goods and services in a geographic area. Technological advances Environment Social pressures Chapter 11 © 2016 South-Western, Cengage Learning  

Planning Major Purchases Questions to ask before making a purchase: 1. Why do I want this product? 2. How long will this product last? 3. What substitutes are available and at what cost? 4. If I postpone this purchase, is it likely that I will choose not to buy it later? 5. What types of additional costs are involved, such as supplies, maintenance, insurance, and financial risks? 6. What are the trade-offs and opportunity costs of this purchase? 7. What is the total cost of this product? Chapter 11 © 2016 South-Western, Cengage Learning  

Planning Major Purchases (continued) Cash or credit? Research before buying Quality and price Chapter 11 © 2016 South-Western, Cengage Learning  

Marketing Strategies That Influence Spending Advertising Pricing Sales Promotional techniques Chapter 11 © 2016 South-Western, Cengage Learning  

Advertising Product advertising Advertising intended to convince consumers to buy a specific good or service is called product advertising. A target market is a specific consumer group to which the products advertised are designed to appeal. Chapter 11 © 2016 South-Western, Cengage Learning  

Advertising Company advertising Industry advertising (continued) Company advertising Advertising intended to promote the image of a store, company, or retail chain is known as company advertising. Industry advertising Advertising intended to promote a general product group without regard to where these products are purchased is called industry advertising. Chapter 11 © 2016 South-Western, Cengage Learning  

Pricing The price of merchandise depends on several factors. Supply and demand Cost of raw materials and labor Competitive pressures Seller’s need to make a reasonable profit Chapter 11 © 2016 South-Western, Cengage Learning  

Pricing Pricing devices are used to persuade consumers to buy. (continued) Pricing devices are used to persuade consumers to buy. Odd-number pricing is the practice of setting prices at uneven amounts rather than whole dollars to make them seem lower. Discounts are often available for buying in large quantities. Chapter 11 © 2016 South-Western, Cengage Learning  

Sales Stores advertise end-of-month sales, holiday sales, anniversary sales, clearance sales, inventory sales, and so on. A loss leader is an item of merchandise marked down to an unusually low price, sometimes below the store’s cost. The store may actually lose money on this item because the cost of producing the item is higher than the sale price. The loss leader is used to get customers into the store in the hope that they will buy other products as well. Chapter 11 © 2016 South-Western, Cengage Learning  

Promotional Techniques Displays Contests and sweepstakes Coupons Rebates Frequent-buyer cards Customer-loyalty programs Packaging Sampling Micromarketing Micromarketing is a strategy designed to target specific people who are likely to buy certain products. Chapter 11 © 2016 South-Western, Cengage Learning