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What do other high
school students know
about consumer
awareness?
We asked other high school students
to share their favorite television
commercials.
“I like the Super Bowl commercials. They show how much competition there is between companies.”
Senior, Utah
“I like the mayhem commercials the best.”
Junior, Missouri
“My favorite is the ‘Is it better to be faster or slower’ commercial.”
Junior, Tennessee
“I like the commercials with the baby talking about online investing.”
Senior, North Carolina
“I like the one where they ask the little kids questions and they come up with funny answers.”
Sophomore, Alabama
CHAPTER
Consumer
Awareness
MAR K ETING IS POWER FUL! Think about
it—almost every single purchase you’ve made
started with advertising. But be careful. As
you learned in Chapter 4, debt is also marketed
to you. Some salespeople don’t want you to
think about the product’s total cost; they want
you to think in terms of how much down and
how much a month. Buyer beware!
- (^) Marketingvox, Rand Youth Poll, Seventeen, Packaged Facts of teens say they are currently saving.*
40
of teens have placed an order online in the past three months.*
26
UNIT 2: CHAPTER 6
Measure Your Progress
Before watching the video, read each statement and select what you believe to be the correct answer. Then, after watching the video, return to this activity and correct your answers if necessary.
JOURNAL QUESTION: INTRODUCTION
How does advertising affect your buying decisions?
- What percentage of “90-days-same-as-cash” purchases are not paid in 90 days and convert to payments?
25% 50% 75% more than 75%
- The average cost of a 30-second television advertisement during the 2013 Super Bowl was:
$1 million $2 million $3 million $4 million
- The average American was exposed to almost 560 advertisements daily in 1971. Today that number is closer to:
1,500 2,500 3,000 more than 5,
- A Harvard University study found that for every hour of television you watch each week, your yearly spending increases by an average of:
$50 $100 $200 $
- The fashion category accounts for about percent of teen spending.
10 25 40 75
BEFORE & AFTER
Chapter 6: Consumer Awareness 129
WHY ARE WE SO
MARKETED TO?
The U.S. is the most capitalistic country in the world. Capitalism is an economic system based on a free market, profit motive, open competition and private ownership of the means of production. This market is driven by the economic law of supply and demand. Companies promote consumer demand by marketing their products.
+
TEEN SPENDING HABITS
AT A GLANCE
- 55–60% of teens say their parents contribute more than half of their spending dollars.
- The fashion category accounts for roughly 40% of teen budgets.
- Approximately 79% of females and 76% of males shop online, and respondents indicated that roughly 18% of their spending is online. 2013 Taking Stock With Teens Survey, Piper Jaffray Companies
$
6
CHAPTER
Section 1: Buyer Beware
VIDEO 1.
The Most Marketed-to Culture in History
WE LIVE IN THE MOST marketed-to culture in the history of the world! If you are going to have financial peace, you are going to have to develop a resistance to that marketing. It’s not
that buying things is bad. But buying too many things, with money you don’t have, to impress people you don’t really like—that’s a bad idea.
» “Caveat emptor” means
1
.
» We’re not saying that you can’t have a good time with
your money. Remember, we want you to 2
like no
one else so later you can live like no one else.
» We want to sacrifice to win and then we want to
3
the winning. There’s nothing wrong with
buying a good product.
130 Foundations in Personal Finance High School Edition
SECTION 1
For every hour of television per week you watch, you spend an average of $ extra a year. Harvard University
$
THE ECONOMIC LAW OF
SUPPLY AND DEMAND
The theory that, in a free market economy, prices are determined by the interaction of supply and demand; an increase in supply will lower prices if not accompanied by increased demand, and an increase in demand will raise prices unless accompanied by increased supply.
+
VIDEO 1.
Four Common Marketing Tactics
When you turn on the TV, listen to the radio, surf the web, or walk into the mall, you are stepping into battle—a battle for your dollars. Today, companies use every angle
imaginable to aggressively compete for your money. The purpose of advertising is to inform, tease and persuade consumers to purchase products.
When you’re aware of these techniques, you are more 7 as consumers. Here are four common marketing strategies:
- One of the techniques is 8
selling. People
who know how to sell spend thousands of dollars and
hours sitting in a classroom learning how to talk to
you—to serve you, to 9
you in your decision to
buy their stuff.
- The second technique is 10 . They use money
and easy payments as a marketing tool. They don’t want
you to think about how much something actually costs,
rather how much down and how much per month.
I Want to Buy Something, But Can I Afford it?
How do you know when you can afford something? When you have the cash to pay for it! Here are two common financing plans you should avoid:
90-Days-Same-As-Cash
If you pay within 90 days, there are no finance fees. But if you pay late, you will be charged interest for the entire 90 days. What if you have good intentions of paying it off before the 90 days is up? On average, about 80% of customers do not pay it off in 90 days. Life happens. The best intentions are often interrupted by life.
Zero Percent Interest
Look out for the 0% interest trap on car loans! The truth is that 0% financing is nothing more than a really good marketing tool. It has worked so well for the auto industry that other types of retailers, particularly in furniture and electronics, have adopted this method of marketing. In reality, less than one third of all consumers qualify for 0% financing. For the other two thirds, well, they’ve got you where they want you: in the store and wanting to buy. For those that do qualify for 0%, sellers often make up for the lost finance charges by increasing the price of the product.
132 Foundations in Personal Finance High School Edition
SECTION 1
Have you ever wanted to know what was really important to someone? Look at their checkbook entries. Are they spending a lot on “stuff” like entertainment, clothes, friends, etc.? People spend their money on things most meaningful to their heart. “For where your treasure is”—the money you spend or save—“there your heart will be also” (Matthew 6:21).
+
25% of Christmas shoppers will still be paying off the bills come next Christmas! The average consumer takes at least six months to pay off holiday bills. The Wall Street Journal
If a $1,200 purchase is charged on a credit card at 17% interest and only the minimum payments are made, it will take almost 20 years to pay it off and will cost an additional $2,076 in interest, bringing the total cost of that $1, purchase to $3, 276! The Wall Street Journal
$
VIDEO 1.
Four Common Marketing Tactics (Continued)
- Other media like TV, radio and internet use
11
to sell products. How does repetition
work? In advertising, repetition means repeated
exposure. Over time, repeated messages become familiar
and accepted as true. Companies behind the ads are
willing to pay for such repetition because it works!
- When it comes to marketing they also use product
12
.
Types of Product Positioning
» Brand Recognition: When marketing causes you to
position a product in your mind to be associated with
a certain 13
.
JOURNAL QUESTION: VIDEO 1.
What are some of your favorite brands (soft drink, clothing, etc.)? Why do you like them?
JOURNAL QUESTION: VIDEO 1.
Describe one way advertising has played a role in something you’ve purchased.
Chapter 6: Consumer Awareness 133
The average U.S. household has 52 unused items around the house worth a total of $3,100. eBay/Nielsen Survey
$
Describe a money goal that you currently have.
“Saving up enough to buy a nice used car.” Sophomore, Kansas
“Saving $20 per week.” Junior, Washington
“I’m trying to save up $ for a new set of tires.” Senior, Massachusetts
“My current money goal is to pay off my car and save more money for college.” Junior, Pennsylvania
Section 2: Buyer’s Remorse
VIDEO 2.
Significant Purchases
Your body goes through physiological changes when you make a significant purchase. You sweat. Your eyes dilate.
Your pulse rate changes. Proteins and endorphins are released.
» A “significant purchase” is normally anything over $
18
.
» Buyer’s
19
is when you wake up the next day
and regret your purchase.
» We all have that spoiled, grocery store kid living inside of
us. His name is 20
.
» When it comes to spending, adults devise a
21
and
22
it.
» When it comes to big purchases, the right way to do it is
to 23
and pay cash.
JOURNAL QUESTION: VIDEO 2.
Can you think of anything in your home that was bought but never or rarely used?
Chapter 6: Consumer Awareness 135
“Many a man thinks
he is buying pleasure, when he is really selling himself to it.” BENJA MIN FR A NKLIN Author, inventor and political theorist
“
Budget
Builder
Thinking about making a significant purchase? You’ll need to save up for that! Go to foundationsU.com/ to add a sinking fund to your budget.
OPPORTUNITY COST
The true cost of something in terms of what you have to give up to get the item; the benefits you would have received by taking the other action.
+
Section 3: Opportunity Cost
VIDEO 3.
Develop Power Over Purchase
Because it’s always easy to spend more than you make, you
must develop 24
over 25
. It doesn’t
matter how much money you make. If you have a spending
plan and power over purchase, you can win with money.
Having power over purchase involves following these steps:
- Wait 26
before making a purchase. Take
the time to consider whether it is a need or a want. And
make sure you’ve budgeted for it!
- Consider your buying 27 . No amount of
stuff equals 28
or fulfillment. People
sometimes get 29
and 30
confused.
You buy fun, but you can’t buy happiness. Happiness is
where you are right now. Claim it for yourself!
- Never buy anything you do not 31
.
Particularly financial products like insurance
or investments.
- Consider the “ 32
cost” of your money—
which means that money spent here cannot be spent there.
Whenever you make a choice, you must pass up other
opportunities. Take your time and make the right decision.
- Seek wise 33 . Young adults who are not yet
married should find an accountability partner—someone
with whom you can discuss big purchases. Once you are
married, you should seek the counsel of your spouse.
136 Foundations in Personal Finance High School Edition
SECTION 3
Chapter Summary
Check for Understanding
Now it’s time to check your learning! Go back to the Before You Begin section for this chapter and place a checkmark next to the learning outcomes you’ve mastered. Review the Measure Your Progress section and correct your answers if necessary.
Build On What You’ve Learned
Describe three instances where peer pressure has influenced your decision about a purchase.
ITEM/EVENT:
PEER PRESSURE:
ITEM/EVENT:
PEER PRESSURE:
ITEM/EVENT:
PEER PRESSURE:
3 Times Peer Pressure Influenced Your Purchasing Decision
138 Foundations in Personal F inance H igh S chool E dition
RECAP & REVIEW
Take Action Challenge
Imagine that you inherited $5,000. Come up with three things that you could do with the money. Then describe the opportunity cost of each choice.
Big Ideas
The following Big Ideas are intended to provide clear focus and purpose to the lessons. Read each statement and think about how what you’ve learned will affect your current and future decisions. Then, in the space provided, write an “I believe” statement for each of the Big Ideas.
» Don’t buy things with money you don’t have.
» Develop power over purchase.
» Consider the opportunity cost of your purchases.
$5,000!
inherited
Now what are you going to do with the money?
You
USE $5,000 FOR:
OPPORTUNITY COST:
USE $5,000 FOR:
OPPORTUNITY COST:
USE $5,000 FOR:
OPPORTUNITY COST:
OPTION
OPTION
OPTION
Chapter 6: Consumer Awareness 139
Multiple Choice Circle the correct answer.
- As a consumer, you should consider inflation in your investment and retirement planning. a True b False
- If you don’t have cash on hand, financing a significant purchase is a good option. a True b False
- Which of the following is not a need?
a Food b Housing c Eating out d Utilities
- The purpose of advertising is to:
a Inform the consumer b Tease the consumer c Persuade the consumer d All of the above
- Which of the following is not a common marketing strategy? a Providing financing options b Making the customer do product research c Personal selling d Repetition
Short Answer Respond in the space provided.
- Explain why financing a purchase is a bad idea.
- Why should you always consider the opportunity cost when making a significant purchase?
- What are the five steps you should take before making a significant purchase?
- What effect does inflation have on purchasing power?
- Summarize factors that influence consumer decisions.
Chapter 6 : C onsumer A wareness 141
