Chapter 1 Addendum Consumer Sovereignty (part of day 19 lesson)

CONSUMER SOVEREIGNTY The belief that, in a market economy, it is the consumers who determine what goods and services are produced.

How consumer sovereignty works 1) Consumers vote with their dollars. I want that! Here’s my money!Pleasure doing business with you! Come again soon! MONEY GOODS AND SERVICES

How consumer sovereignty works 1) If there are enough dollar votes, a product will continue being produced. I want that! Here’s my money!Wow! Look at all these dollar votes! MONEY GOODS AND SERVICES Me too! MONEY

How consumer sovereignty works 1) If there are not enough dollar votes, a product will no longer be produced. Aw man! Nobody wants my stuff!

Given all those massive advertising expenditures, do you think consumer sovereignty is dead?

How we know it’s still alive Consumers change from New Coke back to Classic Coke The discontinuation of the IBM PC Jr. computer The Edsel automobile (Ford)

While consumers are still the ultimate decision makers, advertising can be an effective tool. Why do businesses advertise?

Businesses advertise to Increase sales Provide information Develop and protect brand loyalty

The 3 types of advertising: RATIONAL APPEAL Often found in print media. Have a logical approach. Offer basic product and price information. Allow for product comparison.

EMOTIONAL APPEAL Often found in tv or radio with an emphasis on feeling good. Aimed at human behavior. Less than reasonable claims. Little product information.

TESTIMONIAL OR CONFORMITY APPEAL Often have celebrities endorsing item. Very little product information. Encouraged to be just like everyone else. Use of gimmicks.