Consumers Flashcards
Why do consumers buy goods/services?
To satisfy need and wants
From bottom to top, describe Mazlow’s Hierarchy of Needs.
Physiological, Safety, Love/belonging, Esteem, Self-actualisation
What is scarcity?
There are an unlimited amount of wants but limited resources so we must allocate those resources to satisfy as many wants as possible
What is opportunity cost?
The cost of the good/service you forego for another purchase
What are the factors of production?
Land, Labour, Capital, Enterprise
What are the factors affecting consumer choices?
Customer service, Price, Convenience, Gender, Age, Disposable income, Environment and Cultural factors
How is customer service a factor affecting consumer decisions?
The pre- and post-sale treatment of a customer can make customers feel more valued and increase the chance of them coming to shop again
How is price a factor affecting consumer decisions?
A higher price means a less likely purchase, customers want the best value
How is convenience a factor affecting consumer decisions?
Could mean less time commuting to shops, more shops in one complex or flexible opening hours, the easier the experience the more likely a consumer will shop there
How is gender a factor affecting consumer decisions?
A person’s gender can mean they have different wants, eg: women tend to spend more on make-up than men
How is age a factor affecting consumer decisions?
Our wants change over time so purchase are influenced by what stage of life we’re in
How is disposable income a factor affecting consumer decisions?
The amount of money left to spend/save influences the type and ‘status of purchases, eg: people with more disposable income will buy more luxurious goods/services
How is the environment a factor affecting consumer decisions?
Consumers are more aware of the environmental impact of production and consumption and will lean towards buying the more eco-friendly option
How do cultural factors affect consumer decisions?
The values and beliefs of a person belonging to a particular group can affect what they want to purchase
What does a budget include?
All sources of income, variable and fixed expenses, potential savings to spend or save
What are 2 methods of deciding what to buy?
Impulse buying and comparison shopping
What is impulse buying?
Buying something without much consideration as to whether you really need it
What is comparison shopping?
Contacting sellers and shopping around for the best-valued item available
What are some comparison shopping tips?
- Think carefully about what you want
- Shop around for the best price
- Investigate the product’s features
- Decide beforehand your payment method
- Check refunds/returns policies
- Never sign a blank contract or anything you don’t understand
- Check after-sales guarantees
- Keep receipts/invoices
What are the features of generic products?
No brand name, cheaper but of acceptable quality, supermarkets/pharmacies have their own home brands as an alternative to branded products
What are some supermarket persuasion strategies
- Comfortable temperature
- Cheerful music
- Large ‘sale’ signs
- Expensive products at eye level
- Commonly purchased items at the back
- Confusing layout/signage
- Smell of bread is enticing
- Lighting
- Free samples
- Emphasis on freshness
What is a distribution chain?
The chain of businesses a product goes through to get from the manufacturer to the consumer, where the product appreciates as each business must make a profit
What is a typical distribution chain?
Manufacturer - Wholesaler - Retailers - Consumers
Which stage of the distribution chain is the secondary industry?
Manufacturer
Which stage of the distribution chain is the tertiary industry?
Retailer
What are some examples of non-store retail?
Mail order and online shopping
What is mail order?
Ordering a product from a catalogue and receiving it via the mail
What are the advantages of mail order?
- Great for disabled/remote consumers
- Large range of products
What are the disadvantages of mail order?
- Products can be different from photos
- Money is lost if a business doesn’t send the product
- Hard to obtain a refund
What is online shopping?
Consumers select and pay for a product on a website and receive it via the post
What are the advantages of online shopping?
- Large range of sources to buy from
- Quick and convenient comparison shopping
- Product itself could be cheaper
- You can use mobile apps and devices
What are the disadvantages of online shopping?
- Tracing a business if something goes wrong can be difficult
- Added delivery charge sometimes
- Giving credit card details is risky
- Lots of scams and internet fraud
What are the types of retail outlets?
Convenience, Specialty, Department store, Discount variety, Factory outlet, Supermarkets
Example of a convenience store?
7/11
Example of a specialty store?
The Body Shop
Example of a department store?
David Jones
Example of a discount variety store?
Kmart
Example of a factory outlet?
Costco
Example of a supermarket?
Coles
What are the advantages of a convenience store?
- A variety of products needed on short notice
- Convenient location (corner of a street)
- Open late or 24/7
What are the disadvantages of a convenience store?
- Expensive
- Small products
- Less variety than supermarkets
What are the advantages of a specialty store?
- Great customer service and product knowledge
- Range of the same product
What are the disadvantages of a specialty store?
- More expensive
- Limited variety
- Less convenient
What are the advantages of a department store?
- Large variety in one store
- Some product knowledge
- Good quality
- Cheaper than specialty stores (buy in bulk)
What are the disadvantages of a department store?
- More expensive than discount variety stores
- Large, complicated store layout
What are the advantages of discount variety stores?
- Large range
- Cheap
What are the disadvantages of discount variety stores?
- Lower quality
- Poor customer service
What are the advantages of supermarkets?
- Large range
- Affordable
- Have evolved to be more like discount variety stores
What are the 2 main payment options?
Credit and debit
What is credit?
The supply of money now in return for the promise of paying it back later (usually with interest)
What is debit?
Paying with money you have
What are some types of debit payment?
Cash, Debit card (EFTPOS), Direct debit
What are the advantages of cash?
- Accepted almost everywhere
- Discounts offered for cash payments
- No hidden costs
- Lower risk of going into debt
What are the disadvantages of cash?
- Easily lost or stolen
- Unsafe to carry around large amounts
- Not obtainable without a nearby ATM
What is a debit card?
- Using your own money in your account
- No interest, only an account-keeping fee
- Only able to spend up to your balance
- EFTPOS is a common way of transferring money from your account to a business’
What does EFTPOS stand for?
Electronic Fund Transfer at Point Of Sale
What is direct debit?
- Paying scheduled bills from a nominated bank account
- Bank automatically withdraws (debits funds and electronically transfers them
- If your account doesn’t have enough money, the bill won’t be paid
What are the advantages of credit?
- No need to carry money
- The opportunity to get a good credit score
- Convenient for online purchases
- Offers cheap use of funds if you fully pay back what you owe
What are the disadvantages of credit?
- Easy to overspend and go into debt
- More expensive than other forms of credit, like a loan
- Can damage credit score with lots of late payments
What is Paypal?
- An intermediary where you pay for things using a credit card, bank account or Paypal account money
- Accepted most places
- Secure way of paying, easier to obtain refunds and resolve disputes
What is Afterpay?
Like a credit card but no application/credit card fees: buy now, pay later with installments, late fees if not paid
What are some advantages of Afterpay?
- Instant online approval, no application fees
- No annual fees/extra repayments for timely pay
- Purchaser receives product immediately
- Credit score doesn’t matter
What is Layby?
- First, pay a deposit then the store puts the product aside for you
- Make regular payments over a fixed period of time
- You don’t own the good until you pay everything off
What are some advantages of Layby?
- Purchase good now, pay later
- No interest unless you need an extension
- Spead purchases over a week/fortnight
What are some disadvantages of Layby?
- Some form of security may be required
- You may overspend
- Charge accounts can only be used in that store
What is an unconscionable act?
Any practice by a seller that is deemed unreasonable and often illegal
What are some common scams/rip-offs?
- False/misleading advertising (including bait and switch)
- Referral selling
- Pyramid schemes
- Get-rich-quick scheme
- Unordered/unsolicited goods
- Special prizes/offers
What is false/misleading advertising?
- Advertising a product differently to what is is, or legally imply something false about a product
What is ‘bait and switch’?
When a deal is advertised to customers but upon arrival they’re told the deal is over and are directed towards more expensive options
What is referral selling?
A fake deal offered for buying a product and then giving details about other potential customers
What is a pyramid scheme?
People pay a joining fee with the promise of quick and easy money and earn money from the joining fees of other people they recruit and who they then recruit, however, only people at the top make money and the rest don’t make any profit
What is a get-rich-quick scheme?
You’re offered the chance to participate in an overseas money transfer but by giving bank details to receive a cut of the money scammers can take money from your account
What are unordered/unsolicited goods?
Unordered goods are sent to you via post and then you’re demanded to pay at your door
What are special prizes/offers?
A free mystery prize is offered but you only find out after you go to collect it that you must buy something or send money beforehand
What are the laws to protect consumer rights?
- Competition and consumer act 2010 (commonwealth)
- Fair Trading act 1987 (NSW)
- Australian consumer law (ACL)
What is a contract?
A legally binding agreement between 2 or more parties
What are the features of a contract?
Offer, acceptance, consideration
What is an offer?
A proposal
What is acceptance?
The offeree agrees to the offer
What is consideration?
Each party gives up something of value
Name the case that defined when an offer is made.
Pharmaceutical Society of GB vs. Boots Cash Chemist (1953)
- The customer makes an offer when they bring products to a checkout
Name the case that defined who an offer can be made to.
Carlill vs. Carbolic Smoke Ball co. (1893)
- An offer can be made to the general public
Name the case that defined what a consideration can be.
Chappell and co. v. Nestle
- Consideration doesn’t have to be money
What are the rights of consumers?
- Product is as advertised
- Safe and acceptable quality
- Full disclosure of terms of sale
- Consumer guarantees/warranties honoured
What are the responsibilities of consumers?
- Pay the correct amount
- Purchase goods/services from legal websites
- Accept most of the risk when buying the product
What does Caveat Emptor mean?
Let the buyer beware: a seller isn’t obligate to tell you everything about a product
What does the Competition and consumer act 2010 guarantee for goods?
- Acceptable quality
- Fit for purpose
- Match descriptions
- Comply with warranties
What does the Competition and consumer act 2010 guarantee for services?
- Fit for purpose
- Done with reasonable skill and care
- Provided within a reasonable time
How do you reply to a seller saying “Your warranty has expired”?
ACL states that a product must be of reasonable durability for a reasonable amount of time, and this overrides any warranties from the manufacturer
When can a seller refuse a return/exchange?
- Change of mind
- Business purchase over 40k (not a consumer)
- One-off item sale
- Auction sale
- Insurance/financial service
How do you reply to a seller saying “You have to go to the manufacturer”?
ACL means that I can go to the manufacturer but I don’t have to
How do you reply to a seller saying “You should buy an extended warranty”?
Under ACL, it’s illegal for a business to sell me something that I am already guaranteed for free
What are the organisations you can go to as a consumer?
State: NSW Fair Trading
Federal: ACCC and ASIC
Ombudsman
Independent: CHOICE
What does ACCC stand for?
Australian Competition and Consumer Commission
What does ASIC stand for?
Australian Securities and Investments Commission
What does NSW Fair Trading do?
- Assist consumers in resolving complaints
- Checks that all scanners, scales and petrol pumps are accurate
- Check products meet Australian safety standards
- Warn consumers about illegal businesses
What does the ACCC do?
Watchdog on the pricing of goods/services
What does ASIC do?
Protects consumers in the area of finance: consumer credit, insurance, investments, super and banking
What do ombudsmen do?
- An ombudsman for each industry eg: insurance, telecommunications
- Investigates/reports on complaints
- Resolves disputes between businesses and consumers
What does CHOICE do?
- Runs comparative tests on a range of goods and services
- Non-profit
- Independent consumer watchdog
- Lobbies for the introduction and improvement of consumer legislation
What are the personal consequences of poor financial management?
- unable to maintain lifestyle
- can’t fulfill basic needs
- debt/bankruptcy
- repossession of home
- stress
What are the social consequences of poor financial management?
- relationship tensions
- social isolation (can’t afford activities)
- can’t travel with others
What are the legal consequences of poor financial management?
- Garnishee
- Writ of execution
- Bankruptcy
What is a garnishee?
A court order allowing an employer or bank official to take money off your wage/account and pa y it to your creditors
What is a writ of execution?
A cout order allowing a court official (sheriff) to to seize and sell assets/property to pay back creditors
What is bankruptcy?
Forced or voluntarily giving up control of your assets in exchange for protection from your creditors; you’re only declared bankrupt when the court issues a sequestration order
Who can be bankrupt?
Only individuals can be bankrupt, companies are instead liquidated, where all their assets are sold to pay back their creditors
When can people access their pension/super?
67
Why do people need superannuation?
To be able to maintain the same standard of living when retired
What is superannuation?
Money put aside for you for retirement whilst you’re working
- Compulsory
- Your employer allocates a percentage of your wage
- contributing extra money to your super has tax advantages
Why is financial management important?
To keep track of income and expenses to ensure savings and to keep yourself out of debt
Why would you need a budget?
If income is too low or spending is too high
What does a budget do?
Monitors and helps cut back fixed and variable expenses
How do you put together a budget?
- Calculate total income (books or electronic spreadsheet)
- Record all expenses (fixed and variable)
- Total all expenses
- Compare income with expenditure
- Assess your financial position and make changes
What are the 2 types of superfunds?
Retail and Industry
What is a retail fund?
- Typically run by a bank or investment companies
- Offers a wide range of investment options but the company that owns them will keep a percentage of your returns as profit
What is an industry fund?
- Originally trade union based (fought for better pay and working conditions
- Offers less choice but you keep all the returns
