1. © South-Western Educational Publishing Personal Decision Making

2. GOALS © South-Western Educational Publishing Personal Decision Making  Apply the decision-making process to solve consumer problems  Explain economic needs and wants that influence consumer decision making  List and describe factors that influence spending decisions  Analyze marketing strategies that influence spending decisions

3. © South-Western Educational Publishing The Decision-Making Process  Step 1 – Define the Problem  What problem are you trying to solve with the purchase  This allows you to look for ways to solve the problem that fits into your financial resources (as well as your budget)  If you cannot define the problem then perhaps you should not spend the money

4. © South-Western Educational Publishing The Decision-Making Process  Step 2 – Obtain Accurate Information  After defining problem, gather information on possible solutions  List alternative solutions and the cost of each o Know what products and services are available and the cost of each o Involves being aware of various sources of information and researching alternatives

5. © South-Western Educational Publishing The Decision-Making Process  Step 3 - Compare Choices  Be aware that resources are limited – time and money  Every choice involves a trade-off – buying one thing means giving up the opportunity to buy something else (or saving the money)  Whenever the make a choice, the value of your next best alternative is known as the opportunity cost of that choice

6. © South-Western Educational Publishing The Decision-Making Process  Step 3 - Compare Choices  When comparing costs, consider time and convenience as well as dollar costs  Affordability is always a consideration

7. © South-Western Educational Publishing The Decision-Making Process  Step 4 – Make a Decision  Decision should be based on o What meets your needs o Is within your budget o Gives you the most value for your money

8. © South-Western Educational Publishing The Decision-Making Process  Step 5 – Take Action  Take action to implement your chosen solution

9. © South-Western Educational Publishing The Decision-Making Process  Step 6 – Re-evaluate  Do changes need to be made  Will help you make better decisions in the future

10. © South-Western Educational Publishing Economic Wants and Needs  Basic Needs  Necessary things for maintaining life o Food o Water o Clothing o Shelter o Perhaps safety and security

11. © South-Western Educational Publishing Economic Wants and Needs  Life-enhancing Wants  Food, clothing, and shelter beyond what is necessary for biological survival  Medical care to improve quality and length of life  Education to achieve personal goals, both social and economic  Travel, vacations, and recreation to improve enjoyment of life  Gadgets and luxuries to make life more fun or comfortable

12. © South-Western Educational Publishing Economic Wants and Needs  Individual Wants  A person’s wants drive buying decisions  Best choice on what to buy is not the same for everyone  Wants vary among individuals and societies  Wants change throughout ones lifetime

13. © South-Western Educational Publishing Economic Wants and Needs  Individual Wants  Factors affecting individual wants o Values The principles that a person lives by Different people value things differently Education Time with family Etc Economic and purchasing choices are often based on values

14. © South-Western Educational Publishing Economic Wants and Needs  Individual Wants  Factors affecting individual wants o Personal Preferences Tastes, likes, dislikes, etc People make purchasing choices based on their own personal preferences

15. © South-Western Educational Publishing Economic Wants and Needs  Individual Wants  Factors affecting individual wants o Income Amount you earn affects buying choices Discretionary income – the amount you have left over after paying expenses The more you have, the higher the quality and quantity of products you can consider

16. © South-Western Educational Publishing Economic Wants and Needs  Individual Wants  Factors affecting individual wants o Income The ability to afford goods and services to fulfill the wants you consider important will affect your satisfaction in many areas Employment Personal life Goals Self-esteem

17. © South-Western Educational Publishing Economic Wants and Needs  Individual Wants  Factors affecting individual wants o Leisure Time Amount of free time and kinds of activities you enjoy affect how one spends their money

18. © South-Western Educational Publishing Economic Wants and Needs  Collective Values  Collective values are the things that are important to society as a whole o All citizens share in the costs and benefits of collective values  Society in which you live influences values, goals, and choices

19. © South-Western Educational Publishing Economic Wants and Needs  Collective Values  Examples of collective values o Legal protection Desire for preserving the legal and personal rights of people by protecting citizens from those who violate those rights. Illustrated by the importance placed on law enforcement

20. © South-Western Educational Publishing Economic Wants and Needs  Collective Values  Examples of collective values o Employment Most people who are able to work will work because it is expected and demanded in order to survive There is a certain amount of pressure to perform in the work area and we strive to do the best we can and get a job that pays well and that we are satisfied with

21. © South-Western Educational Publishing Economic Wants and Needs  Collective Values  Examples of collective values o Progress State of progress will affect purchase decisions US places high value on technological advances and innovations Innovations – new ideas, methods or devices that bring about changes in the way we live

22. © South-Western Educational Publishing Economic Wants and Needs  Collective Values  Examples of collective values o Quality of Environment Environmental quality is important to society as a whole and individuals often respond by purchasing so the that environment is protected

23. © South-Western Educational Publishing Economic Wants and Needs  Collective Values  Examples of collective values o Public and Government Agencies People tend to place high value on government provided services for citizens (police protection, public parks, etc) and are usually willing to pay taxes to support these things

24. © South-Western Educational Publishing Factors that Influence Spending  Personal Factors  Personal Resources o Includes Time Money Energy Skills Abilities Available credit o The more you possess of these factors, the greater your purchasing power

25. © South-Western Educational Publishing Factors that Influence Spending  Personal Factors  Position in Life o Includes Age Marital status Gender Employment status Living arrangements Lifestyle o Spending patterns for people in the different stages of life will be quite different

26. © South-Western Educational Publishing Factors that Influence Spending  Personal Factors  Customs, Background, and Religion o Customs of the groups you are aligned with will influence buying patterns. Custom – a long-established practice that takes on the force of an unwritten law

27. © South-Western Educational Publishing Factors that Influence Spending  Personal Factors  Value and Goals o Choices that one makes are impacted by values (which are deep seated and slow to change) and goals (which change often as one goal is accomplished and another taken on). o These values and goals will affect choices of Entertainment Literature Sports Luxuries Etc. o Choices are reflected in decision to purchase goods and services and attitudes toward the accumulation of possessions

28. © South-Western Educational Publishing Factors that Influence Spending  Outside Factors  The Economy o Economy – all activities related to production and distribution of goods and services in a geographic area

29. © South-Western Educational Publishing Factors that Influence Spending  Outside Factors  The Economy o Condition of economy affects people and their purchasing habits will change accordingly Examples Interest rates high – people will tend not to make purchases where they have to borrow (cars, houses) Economy is strong and growing – people tend to be more optimistic and will spend more freely Economy is slowing down or in a recession – people hold back on buying, especially luxury goods

30. © South-Western Educational Publishing Factors that Influence Spending  Outside Factors  Technological Advances o People tend to be fascinated by new technological devices and many want the newest, most convenient gadgets o People see many gadgets as raising their standard of living and will purchase them

31. © South-Western Educational Publishing Factors that Influence Spending  Outside Factors  The Environment o Concern for the environment will affect many buying decisions o Many people will buy products that are ecologically safe, biodegradable, or recyclable

32. © South-Western Educational Publishing Factors that Influence Spending  Outside Factors  Social Pressures o Often induce people to buy beyond their ability to repay o People often influenced by Friends Relatives Co-workers Media o Social pressures to buy can be overwhelming

33. © South-Western Educational Publishing Planning Major Purchases  Ask These Questions  Why do I want this product  How long will this product last  What substitutes are available and at what cost

34. © South-Western Educational Publishing Planning Major Purchases  Ask These Questions  By postponing purchase, is it likely that I will choose not to buy it later  What types of additional costs are involved o Supplies o Maintenance o Insurance o Financial risks

35. © South-Western Educational Publishing Planning Major Purchases  Ask These Questions  What is the opportunity cost of this purchase? What next best alternative would I have to give up to make this purchase? Do I want this item more than any other choice I could make.  What is the total cost of this product o Cash price o Deferred price o Interest o Shipping charges o Etc.

36. © South-Western Educational Publishing Planning Major Purchases  After you have made a purchase decision  Must determine whether to pay cash or use credit o Even if you have cash, may not want to reduce you cash reserves  Comparison shop o Get the best quality for the price

37. © South-Western Educational Publishing Planning Major Purchases  After you have made a purchase decision  Check for quality o Highest price does not always mean best quality o Various publications available to help you with this Consumers report Others that are specific to particular types of products

38. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Advertising  Primary goal is to create within the consumer the desire to purchase a product or service  Advertising can be false and misleading, while others can be informational and valuable

39. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Advertising  Various types of media used o Billboards o Television o Radio o Internet o Newspapers o Magazines o Leaflets o Balloons o T-shirts

40. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Advertising  Three Basic Types of Advertising o Product Intended to convince consumers to buy a specific good or service Repeat product name several times during the ad so that consumers will remember it

41. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Advertising  Three Basic Types of Advertising o Product Ads often feature famous people (athletes, actors, etc) Ads are planned to appeal to certain types of consumers Target market – the specific consumer group to which advertisements are designed to appeal Affects many decisions made about the advertisements and when and where they are presented

42. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Advertising  Three Basic Types of Advertising o Company Intended to promote the image of a store, company, or retail chain Typically does not mention specific products or prices, by emphasizes the overall quality, and reliability of the company and its products

43. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Advertising  Three Basic Types of Advertising o Industry Intended to promote a general product group without regard to a particular company

44. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Pricing  Price of merchandise depends on several factors o Supply and demand o Cost of raw materials o Cost of labor o Competitive pressures o Seller’s need to make a profit

45. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Pricing  Price also involves other aspects o Psychological aspects Pricing can persuade consumers to buy by making them believe they are getting a bargain or are paying a lower price than they actually are Odd-number pricing Setting prices at uneven amounts rather than whole dollars. (.99 rather than a 1.00) Discounts are often available on large quantities (though not always so). Must compare unit prices

46. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Sales  Stores advertise sales of many types o End-of-month sales o Anniversary sales o Clearance sales o Inventory sales o Holiday sales o Pre-season sales o Etc.

47. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Sales  It is important that you as a consumer can recognize if the merchandise is substantially marked down or not

48. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Sales  Stores often use loss leaders which is an item of merchandise marked down to a very low price, sometimes below the cost the store paid for it o Stores used loss leaders as a way to get people into the store so they may buy other items, thus making up for the loss they took on the one product o Cherry pickers – are customers who only buy the loss leader

49. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Displays Window displays Racks of new items Attractive arrangements using color schemes, decorations, music, special effects, etc Designed to attract attention to the product

50. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Contests and Games Use contests and games to get customers to come into the store on a repeat basis Game cards

51. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Coupons Manufacturer coupons – offer cents off on a specific product for a particular manufacturer and may be redeemed wherever the product is sold.

52. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Coupons Store coupons – offer discounts on a specific product, for a short period of time, and only at a specific store Coupons are often found In or on the package Newspapers Magazines Store shelf Online

53. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Frequent Buyer Cards Cards the store punches with each purchase and gives some reward after a certain number of purchases ( some are electronic)

54. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Frequent Buyer Cards Customer-loyalty cards are another version. Customers enroll in the program Receive a card Each time they buy their card is canned and they receive lower prices on certain items Store can use information gathered from scanning the card to target advertising to individual preferences

55. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Packaging Packages are promotional tools as well as product protection Packaging designed to Appeal to the eye Provide necessary consumer information

56. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Packaging Packages are designed to attract attention from competitive products Logos Brightly colored designs Pictures of people happily using the product Other attention getters Phrases (New and improved)

57. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Sampling Small sample-size free packages may be Sent directly to households Included with newspapers delivered to house Distributed within a store or shopping center Companies advertise in magazines and newspapers, with offers for free samples by mail

58. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores Micromarketing Many companies buy information about consumers in order to target information to those who are most likely to buy their products Use of psychographics which is information about a person’s lifestyle, marital status, family, age, and buying habits

59. © South-Western Educational Publishing Marketing Strategies that Influence Spending  Promotional Techniques  Stores use various promotional techniques to lure customers into stores o Micromarketing Micromarketers gather information from previous purchases using Credit cards or checks Customer-loyalty cards Public information Other sources provided by government, post office, banks, and credit bureaus Internet stores can discover your preferences by tracking what sites you go to. Purpose of tracking is so they know what products and services you are likely to buy so they can target you with the appropriate promotions