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Comparison Shopping Unit
Consumer Economics
Unit Overview
1.
Marketing Techniques
2.
Comparison Shopping
3.
Housing
I.
Marketing Techniques
Advertising
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Positive image – you want to be happy like people in the ad
Puffery – exaggerated claim not meant to be taken seriously (video)
Subjective claim – “Tastes great” (not provable by evidence)
Before-and-after comparison – used in weight loss programs
Endorsement – celebrity thinks you should use a product (video)
Testimonial – celebrity claims (s)he uses it and you should too (video)
Humor, jingles, slogans – advertiser hopes you will remember (video)
Bandwagon – “Everyone else is using it; you should too”
Group identification – Axe is aimed at teenage boys
Trendsetter – “Stand out from the crowd and be the first” (video)
Hidden fears – scare tactic to get you to buy a product (video)
Traditional values – “You remember how good things were. They can be that
way again.”
Marketing Techniques (cont’d)
Bait & Switch
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Bait - ad entices you into the
store with an unbelievable
bargain
Switch – they are “out” of
the advertised item and
steer you toward a more
expensive item
Marketing Techniques (cont’d)
Unit Pricing
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Items are stated in cost per unit
(12¢ per ounce) rather than per
jar
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Makes it much easier to
compare different size
containers
Marketing Techniques (cont’d)
Loss Leader
 Store sells an item for below
their cost to get buyers in
the door
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Used to lure you in to buy
other, more expensive items
Marketing Techniques (cont’d)
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Partial or full refund of
the purchase price
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Companies count on
people NOT to complete
the rebate form
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Keep copies of receipts
and all forms in case you
need to follow up
Marketing Techniques (cont’d)
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Form issued when store runs out
of advertised item
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You can get item later, when it
comes in, at the advertised price
Marketing Techniques (cont’d)
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Stores use this to get rid of
unwanted or seasonal
merchandise
Marketing Techniques (cont’d)
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Similar to a clearance, for
items the store no longer
plans to stock
Marketing Techniques (cont’d)
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When the store goes out of
business
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Also called a liquidation
sale
Marketing Techniques (cont’d)
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Offer used to get you to
enroll or subscribe in a
service
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Why so cheap?
II. Comparison Shopping
Fads vs. Trends
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Fads – temporary enthusiasm directed toward a product
Trends – more permanent attention for a product
New vs. Used
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Used items (like cars) are often much cheaper and very reliable
Warranties are often non-transferable, so you are taking chances buying used items
Leasing vs. Owning
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Similar to renting vs. buying
By leasing, you pay each month but have nothing to show for it at end of lease
By owning, you own the car at the end of the loan
Generic vs. Brand Names
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Generic items are often cheaper and just as good
A common misperception is that the quality is not comparable
Comparison Shopping (cont’d)
As-Is Merchandise (not in
book)
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No warranties, you are
taking a chance that the
item will break down or not
work
Generally not advisable
unless you know exactly
what you are getting
Comparison Shopping (cont’d)
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Impulse purchase made on
a whim, with no planning
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Marketers try to get
consumers to do this
through attractive displays,
locating items so they will be
easily seen
Comparison Shopping (cont’d)
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Food labels contain
nutrition information
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Clothing labels contain size,
fabric contents, and
laundering instructions
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Other products have labels,
be sure to read them for
product information
Comparison Shopping (cont’d)
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Don’t use a food product
after date on package
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Only advisory and have no
legal requirements
Comparison Shopping (cont’d)
Sticking to Your Budget
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Don’t spend more than you originally planned if you can help it
Don’t buy impulse items (i.e., go food shopping after dinner)
Negotiation
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With cars and houses, it’s in your best interest to negotiate the best
deal you can
Comparison Shopping (cont’d)
Maintenance
With items such as cars and houses, you should check into the
amount of maintenance necessary
 If you are not handy, you will likely need to pay someone to do
it for you
 Can be expensive if older or special, one of a kind items
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Warranties
Check for warranty information to make sure you are
protected
 Keep all receipts, forms, etc. at least until warranty expires
 Lemon laws – designed to protect buyers of defective cars
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Car has not been successfully repaired after four attempts
Car has been out of service for 30+ days in one year
Dealer must replace vehicle or refund money
III.
Housing
Types of Housing
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Condominium
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Apartment
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More privacy than apartment or condo
More control over property
Manufactured Home
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You pay rent and have no equity in the property
Single Family Home
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You own the unit and a share in the common areas (lawn, etc.)
You will typically also pay a monthly homeowner’s fee
Can be cheaper in cost and in quality
Location and Value
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Look at prices of comparable homes in your area
Is it close to work, family, shopping, leisure activities?
Housing (cont’d)
Renting a Home
 Advantages
Limited responsibility – don’t have to fix plumbing, etc.
 Predictable costs – only have to pay rent, not for repairs
or maintenance of property
 Greater flexibility – at the end of your lease you can leave
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 Disadvantages
Limited control – you have to abide by landlords’ rules
(no pets)
 Financial limitations – you build no equity in the property
 Fewer conveniences – no private laundry room, etc.
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Housing (cont’d)
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Legal agreement specifying
rights and responsibilities of
landlord and tenant
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Most are annual; others can be
month-to-month
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First time renters might need a
cosigner
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May be able to sublet, or rent to
yet another person
Housing (cont’d)
Responsibilities
Ensure electrical, heating, and plumbing work
 Keep common areas clean and safe
 Provide garbage cans for disposal of trash
 Provide hot water and heat during the cold season
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Right to privacy and respect others’ privacy
 Keep property clean and safe
 Respect rights of other tenants
 Pay rent
 May be evicted if there is a violation of the lease
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Housing (cont’d)
Buying a Home
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Advantages
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Independence – you can make any changes you wish (patio deck,
etc.)
Investment opportunity – will increase in value over time
Tax advantages – interest paid on home loans and local property
taxes is tax-deductible
Feeling of security – You feel you can settle down permanently
Disadvantages
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More maintenance – yard work, painting, repairs are your
responsibility
Unplanned expenses – leaky roof, replacing a furnace can be
expensive
Reduced flexibility – can be difficult to relocate (sell your house
and buy another)
Housing (cont’d)
Buying a Home (cont’d)
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Mortgage
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Can be at a fixed, adjustable, or graduated rate
Usually in 15-year and 30-year increments
Points
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One-time finance charges paid at the beginning of the loan
Each point is 1% of the loan amount
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3 points on a $100,000 loan = 3% of $100,000 = $3,000
If you pay points you may receive a lower interest rate
Closing Costs
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Various fees that are paid at the time the purchase is finalized
Can be thousands of dollars
Examples on page 593
Housing (cont’d)
Buying a Home (cont’d)
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Purchase Price Formulas (not in book)
 Can be at a fixed, adjustable, or graduated rate
Appraisal
 Estimate of the value of a house made by an expert
 Useful if you don’t know what to ask when selling your house
 Useful for insurance purposes also
Service Contracts
 Are there any existing service contracts with the home?
 Are there any you will need to implement?
 Examples: Heating oil, propane, landscaper, lawn service