Chapter 3 Your Purchasing Power

How Are Prices Set in a Market Economy? Cost-recovery pricing is used to recover R&D costs. Cost-plus pricing is calculated using production costs plus a markup. Value-based pricing is based on what consumers are willing to pay. Market-based pricing is set to be competitive with similar products. 3-2 Prices and Consumer Choices Slide 2

Activity Assume that your family recently bought the following items: Loaf of bread Blu-ray player Ipad mini 4 Slide 3

How Do Buying Strategies Affect Prices? Rational buying 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 4

Smart Buying Strategies Customer Loyalty Program: designed to encourage a customer’s repeat business by providing special discounts and other incentives Emotional Buying: the process of purchasing products based on desire rather than logic Slide 5

Smart Buying Strategies cont. Rational Buying: the process of selecting goods and services based on need, want, and logical choices 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 6

What Are Selling Strategies? Meeting demand Convenience Customer service The right product and price Examples: meet basic needs, offer brand names, use discount pricing 3-3 Getting More for Your Money Slide 7

What Are Selling Strategies? Creating demand Advertising is informing consumers about products and encouraging them to buy. Advertising sources: newspapers, magazines, TV, radio, Internet, billboards, signs, direct sales The target audience is a specific group of people who are likely to buy. 3-3 Getting More for Your Money Slide 8

Cookies WSJ Video “Sponsored” ads on Instagram “Suggested” posts on Facebook Slide 9

What Are Consumer Buying Strategies? Prepare a shopping list. Do not let a salesperson influence you. Stick to your list and avoid impulse buying. Shop when you are most alert. Comparison shop among several sellers. Keep receipts, warranties, and packaging. 3-3 Getting More for Your Money Slide 10

Your Purchasing Power Page 99: #10-18 Page 100 #20 With a partner Individual answers Slide 11

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 12

Sources of Consumer Protection Federal Agencies USDA FDA CPSC FCC FTC FAA SEC Slide 13

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 14

Sources of Consumer Protection State and local assistance Private Organizations Examples: BBB, National Consumers League, Consumers Union 3-4 Consumer Rights and Responsibilities Slide 15

How Are Consumers Defrauded? Deception involves false or misleading claims made about a product. Bait and switch Fake sales Low-balling Pyramid schemes Ponzi schemes Pigeon drop Infomercials 3-4 Consumer Rights and Responsibilities Slide 16

Deceptive Advertising Video What claims are made about the product? What gimmicks are being used to sell the product? How effective is the commercial? Slide 17

How Can Consumers Protect Themselves from Fraud? Shop smart Be aware of prices Understand sale terminology Compute unit prices Read labels Check packages carefully Read contracts Keep receipts and warranties Compute total cost Research businesses 3-4 Consumer Rights and Responsibilities Slide 18

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 19