14 consumers in the marketplace chapter objectives explain how consumers can take advantage of...
TRANSCRIPT
14
Consumers in the Marketplace
Chapter Objectives
• Explain how consumers can take advantage of various selling methods.
• Identify different types of advertising and marketing techniques.
• Identify reliable sources of consumer information and protection.
continued
Chapter Objectives
• Recognize and guard against various forms of financial fraud.
• Write an effective letter to resolve a consumer problem.
• Outline steps to take in resolving consumer disputes.
• Describe the rights and responsibilities of consumers.
Selling Methods
• Sellers use various methods to make you want their goods and services
• By practicing consumer self-defense, you protect yourself against fraudulent practices
Advertising: Getting the Message to You
• Businesses spend billions on advertising to sell– goods– services– ideas– images
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Advertising: Getting the Message to You
• You win when you look for and find useful information in ads
• You lose when you let ads persuade you to buy what you do not want, do not need, or cannot afford
Common Advertising Appeals
• Insecurity appeal
• Testimonials• Celebrity
endorsements• Sex appeal• Bandwagon
• Puffery• Nostalgia• Humor• Statistics• Green ads
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Common Advertising Appeals
• By using an image that has positive associations, advertisers hope to link desirable traits to their products
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Common Advertising Appeals
• Advertisers look for new ways to grab consumers’ attention
• Product placement is when advertisers pay to have their product or brand appear in movies or television shows
Helpful Information
• Factual description of what is for sale
• Listing and demonstration of product features and qualities
• Statement of differences between advertised items and competitors
• Details on prices, special offers, terms of sale
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Helpful Information
• Signs of possible deception are the words free, one-time offer, valued at
• If it sounds too good to be true, it probably is
Infomercial
• An infomercial is a program-length advertisement that– offers easy payments and risk-free
trials– often claims a limited availability of
the featured item– can offer valuable information and
demonstrations, but consumers should do their own research
Direct Mail Advertising
• Direct mail advertising includes use of advertising circulars, catalogs, coupons, and other unrequested offers that arrive via mail
• Direct business-to-consumer advertising is also done via phone and e-mail
Special Sales and Promotions
• Price reductions and promotions can benefit sellers by increasing sales and profits
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Special Sales and Promotions
• When consumers buy things they need on sale, they benefit
• But when consumers buy sale items they don’t need, they lose
Buying Incentives
• Buying incentives include trading stamps, coupons, loss leaders, contests, games, rebates, premiums, and prizes
• Alert shoppers can recognize which incentives offer real savings that truly meet their needs
Packaging and Display Tools
• A product’s presentation:– Color– Size– Name– Logo– Label– Packaging
• Product’s location on store shelves
Consumer Credit
• Businesses often offer credit to consumers so they will buy more and higher-priced goods and services
• Credit use can be good for consumers, if used with forethought and planning
Deceptive Selling Techniques
• False and misleading statements about products, services, prices, or guarantees
• Advertising sale items that are not available
• Falsely stating that products are being sold at reduced prices
Bait and Switch
• Using bait and switch, a pricier product is shown to the customer instead of the affordable one advertised
Pyramid Schemes
• Pyramid schemes promise participants huge profits in a short time
• Each participant must buy into the plan and recruit others to do so
• The many at the bottom of the pyramid pay money to the few at the top
• Eventually the pyramid collapses
Chain Letters
• Chain letters or e-mails often involve a get-rich-quick scheme or an emotional plea
• Some threaten serious consequences for breaking the chain
• They are a waste of time• Those that promise money, valuable
items, and big returns are illegal
Sweepstakes, Lotteries, and Games of Skill
• Are forms of advertising that offer consumers opportunities to win prizes
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Sweepstakes, Lotteries, and Games of Skill
• Sweepstakes require no purchase or entry fees
• Lotteries award prizes in exchange for payment
• Skill contests may require a fee or purchase to enter; the winning skill is usually determined by judges
Protection Against Financial Fraud
• Financial fraud is on the rise • Includes
– crimes related to credit card accounts, electronic fund transfers, and identity theft
– unauthorized use of bank, credit, Social Security, and investment accounts
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Protection Against Financial Fraud
• Incidents of identity theft are rapidly increasing
• Identity theft is often committed online
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Protection Against Financial Fraud
• Online identity thieves use many techniques including pop-up messages and spam e-mails
• Phishing e-mails may look official and ask the receiver to send personal information that is then used to commit identity theft
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Protection Against Financial Fraud
• To minimize damage,– file a police report– immediately report missing checks,
credit and debit cards– contact the Social Security
administration’s fraud line– notify the three national credit
reporting agencies
Consumer Self-Defense
• Consumers need to heed the principle of caveat emptor
• Be cautious and follow up when products and services don’t meet your expectations or a seller’s claims
Successful Complaining
• The art of complaining is an essential self-defense tool
• Complain to the right person in the right way
• Simple exchanges and returns of unsatisfactory merchandise can often be handled by taking purchases back to sellers
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Successful Complaining
• For more complicated matters,– put your complaint in writing– be prompt– address the right source– be specific and factual– suggest a solution– be reasonable, businesslike, and
persistent
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Successful Complaining
Consumer Advocates
• If you can’t settle differences directly with sellers, an outside party can help
• One such party is a consumer advocate
• A government regulatory agency can help when dealing with dishonest and fraudulent business practices
Difficult Cases
• A last resort is legal action:– Binding arbitrati
on– Small claims co
urt– Class action law
suits– Individual
lawsuits
The Informed Consumer
• Consumers need to know the available data sources that can help them make wise economic decisions
• Community resources include local newspapers
• The Internet provides much valuable information; check reliability of sources
Dealing with Distance Sellers
• Understand the details of the sale: what you are buying? from whom are you buying?
• Maintain your security when shopping online
• Check the privacy policy • Keep a complete record of each
transaction
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Dealing with Distance Sellers
• Pay by credit card
• Know your rights
• Take your time• Don’t fall for
the unbelievable
Evaluating Consumer Information
• Create a file to help you make intelligent consumer decisions
• Evaluate filed materials periodically– Use reliable and informed sources– Determine their primary purpose; ads
give only positive facts– Review the data’s usefulness and
discard outdated material
Consumer Rights and Responsibilities
• Eight consumer rights have been endorsed by the United Nations and Consumers International, a worldwide consumer organization
• Each right carries responsibilities for consumers
Safety: Rights and Responsibilities
• Consumers are entitled to protection from dangerous goods and services
• Government’s role is crucial
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Safety: Rights and Responsibilities
• Consumers are responsible for– reading and following product
directions– safe use, storage, and disposal of
potentially dangerous products– reporting product-related health and
safety problems to seller, manufacturer, and sometimes the proper government agency
Truthful Information: Rights and Responsibilities
• Consumers are entitled to accurate information on which to base choices and decisions
• Government also plays an important role
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Truthful Information: Rights and Responsibilities
• Consumers are responsible for – investigating a seller’s policies – checking a store’s reputation – evaluating advertising claims and
product performance– comparing quality and prices
Choice: Rights and Responsibilities
• Consumers are entitled to choose which goods and services to buy and where to shop
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Choice: Rights and Responsibilities
• Consumers are responsible for – carefully choosing products and
services that best meet their needs at prices they can afford
– dealing only with reliable, reputable businesses
A Voice: Rights and Responsibilities
• Consumers are entitled to speak up, be heard, and expect results when they have legitimate problems or concerns
• Business and government are required to respond
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A Voice: Rights and Responsibilities
• Consumers are responsible for– speaking out and expressing
concerns to appropriate business and government representatives
– learning and using appropriate and effective means of communication
– letting businesses know what they like and want, as well as what they dislike
Satisfaction of Basic Needs: Rights and Responsibilities
• Consumers are entitled to satisfying their basic needs
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Satisfaction of Basic Needs: Rights and Responsibilities
• Consumers are responsible for – putting essential needs ahead of
other items when spending– learning about and taking advantage
of basic services – getting the training and education
that enables them to earn a living wage
Redress: Rights and Responsibilities
• Consumers are entitled to receive fair settlement of disputes, including compensation for – misrepresentation – shoddy goods– unsatisfactory services
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Redress: Rights and Responsibilities
• Consumers are responsible for– presenting their disputes clearly to
the appropriate authorities– making their demands reasonable
Consumer Education: Rights and Responsibilities
• Consumers are entitled to consumer education so they can make informed, confident choices
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Consumer Education: Rights and Responsibilities
• Consumers are responsible for seeking the knowledge and skills to make informed choices by – taking a consumer education or
personal finance course– becoming aware of basic consumer
rights and responsibilities
Healthful Environment: Rights and Responsibilities
• Consumers are entitled to live and work in an environment that is nonthreatening to the well-being of present and future generations
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Healthful Environment: Rights and Responsibilities
• Consumers are responsible for– learning about environmental issues – conserving and preserving resources– minimizing any negative impact they
have on the environment
In Your Opinion
• Do most consumers understand their rights and responsibilities? On what experiences do you base your opinion?
Central Ideas of the Chapter
• Consumers need a set of basic skills to navigate the marketplace.
• Businesses use a variety of methods to sell products to consumers.
• Consumers need to know what options they have for protecting themselves against fraudulent practices.
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Central Ideas of the Chapter
• Consumers are guaranteed certain rights in the marketplace, but they also have responsibilities to know and exercise these rights.
Glossary of Key Terms
• bait and switch. A fraudulent sales technique that involves advertising an attractive offer to bring the customer into the store. The item is either sold out or is undesirable. The seller then presents a more expensive substitute.
• binding arbitration. A method of settling disputes outside of court in which the parties involved agree to accept the decision of a third party.
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Glossary of Key Terms
• buying incentives. Trading stamps, coupons, store games, and prizes offered by sellers to help sell goods and services.
• caveat emptor. A principle meaning the risk in the transaction is on the buyer’s side; literally, let the buyer beware.
• chain letters. Letters or e-mails that generally promise big returns for sending something, such as a postcard or a dollar, to the first person on the list.
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Glossary of Key Terms
• class action lawsuits. Legal actions in courts of law brought by a group of individuals who have been similarly wronged.
• consumer advocates. Individuals or groups who promote consumer interests in areas such as health and safety, education, redress, truthful advertising, fairness in the marketplace, and environmental protection.
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Glossary of Key Terms
• direct mail advertising. Advertising circulars, catalogs, coupons, and other unsolicited offers that arrive through mail or another delivery service.
• identity theft. The crime of stealing someone’s credit cards, bank and investment account numbers, or social security number and using the information to commit theft or fraud.
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Glossary of Key Terms
• infomercial. A program-length form of paid television programming designed to sell a service, product, or idea.
• lawsuit. Civil action brought by a person who claims to be damaged, or negatively impacted, by another person.
• loss leader. An item that is priced at below cost to attract buyers who will then purchase other merchandise.
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Glossary of Key Terms
• lottery. A form of advertising in which prizes are awarded to participants by chance in exchange for some form of payment.
• phishing. A crime committed online with messages that seek personal information.
• product placement. A type of advertising in which a brand name product or its trademark is shown in movies and television programs.
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Glossary of Key Terms
• pyramid schemes. Scams calling for each participant to buy into the plan for a given amount of money and to sign up a certain number of additional participants to do the same. The only way you can move up the pyramid and collect the promised profits is to recruit new participants who in return will recruit other participants. The many participants at the bottom of the pyramid end up paying money to the few at the top.
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Glossary of Key Terms
• rebate. A deduction in price that is returned after a product has been purchased.
• skill contest. An opportunity to win prizes in which contestants pay an entry fee or make a purchase to enter, and the winners are determined by skill.
• small claims court. A simple, inexpensive way to settle minor differences involving small amounts of money without the aid of lawyers.
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Glossary of Key Terms
• spam e-mails. Unrequested e-mails usually sent by a company to a variety of e-mail addresses as a form of advertising, but may also be sent by criminals.
• sweepstakes. A form of advertising in which the chance to win items of value or prizes is offered to consumers with no purchase or entry fee required to participate.
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