The goal of advertisements is to win your consumer dollars, and advertisers are willing to spend millions of dollars to attract your attention to their products. Because of the problems of scarce income and time, however, your goal should be to obtain the most satisfaction from your limited income and time. In this section, you’ll learn about three basic buying principles that can help you and all consumers achieve this goal.
Consumers should be well informed before making a purchase.
Economics & You Why do you think many people are reluctant to spend time researching a potential purchase? Read on to learn about why it is important to gather information before buying a product.
Suppose again that you want to buy a mountain bike. How should you go about selecting one? First, you have to obtain information about mountain bikes. You could ask for friends’ opinions, or you could go to different stores and discuss the good and bad points of various brands and models with salespeople. You could also conduct online research. Actually, as a wise consumer, you would do all of these things before making your purchase.
How Much Information Should You Obtain?
Information is costly because obtaining it involves your time. How much time should you spend? The buying principle to follow is: Obtain only as much information as is worthwhile. What, however, does worthwhile mean? The value of your time and effort spent gathering information should not be greater than the value you receive from making the best choice of product for yourself.
Developing a Consumer Knowledge Base
As you shop for different products, you will begin to develop a consumer knowledge base. Information you obtain looking for a mountain bike might help you someday to make decisions about choosing a car or a laptop. Simply getting salespeople to give you accurate information is a skill that you can acquire and sharpen over time. One relatively easy way to obtain much information in a short amount of time is to use a standard search engine on the Internet. You might also want to read reviews other people have written about different brands and models of the product you wish to buy.
Also, visit numerous sites that offer the product for sale and compare prices, warranties, and other information.
Using Advertising Wisely
Consumers should carefully consider the claims of advertisers.
Economics & You Has an advertisement ever persuaded you to buy a product you weren’t planning to buy? Why? Read on to learn about how to use advertising wisely.
Advertising is all around you —on television, the Internet, billboards, and so on. In general, advertising can be classified as competitive or informative. Advertising that attempts to persuade consumers that a product is different from and better than any other is competitive advertising. Companies use it to take customers away from competitors or to keep customers they already have.
Informative advertising aids consumers by providing useful information about a product. See Figure 3.3 below for more information on these types of advertising. Some companies use false advertising that misrepresents the quality, features, or true price of goods. A common example of this is bait and switch. The bait is an advertised item at an unrealistically low price. Then, when the consumer gets to the store, a salesperson points out all the bad features of the
advertised item. The salesperson then shows the customer higher-priced models and points out all their good features—the switch. This practice is both deceptive and illegal.
Figure 3.3 Advertising
When you are studying an advertisement for a product, it is important to carefully evaluate the information presented in the ad.
- Competitive Advertising Ads for well-established brand names and products, such as Dell computers and Nike shoes, are often of this type. Competitive ads, which may also be called persuasive ads, generally concentrate on appealing to people’s emotions.
- Informative Advertising This type of advertising may contain information about the price, quality, and special features of a product. Be careful, though— informative advertising may also be competitive in nature.
When you comparison shop, the most obvious influence on your decision will be price. Don’t forget, however, to find out which store offers the best warranty, or the promise made by a manufacturer or seller to repair or replace a product if it is found to be faulty within a certain period of time. Another consumer choice is between buying brand-name and generic products.
A brand name is a word, picture, or logo on a product that helps consumers distinguish it from similar products. Brand-name products are usually sold nationwide and are backed by major companies. With generic brands, there is no brand name at all, and it is difficult to know who made the product.
- competitive advertising: advertising that attempts to persuade consumers that a product is different from and superior to any other
- informative advertising: advertising that benefits consumers by providing useful information about a product
- bait and switch: ad that attracts consumers with a low-priced product, then tries to sell them a higher-priced product
- comparison shopping: getting information on the types and prices of products available from different stores and companies
- warranty: promise made by a manufacturer or a seller to repair or replace a product within a certain time period if it is found to be faulty
- brand name: word, picture, or logo on a product that helps consumers distinguish it from similar products
- generic brand: general name for a product rather than a specific brand name given by the manufacturer