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Module 4 Consumption. What is it?. Society of mass production and consumption People who possess a lot of buying power are admired Consumer demand is stimulated through marketing techniques The act of using goods and services to satisfy needs and wants. Opposite of production

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slide5
Society of mass production and consumption
  • People who possess a lot of buying power are admired
  • Consumer demand is stimulated through marketing techniques
  • The act of using goods and services to satisfy needs and wants.
  • Opposite of production
  • Easy access to credit
slide13
Disposable income
    • The income left over after all expenses have been paid.
    • Money at our discretion to spend on goods & services.
    • Determines our consumption.
      • Deferred consumption.
slide14
Price effect
    • There is generally an inverse relationship between price and demand
      • Inferior goods
        • Goods that decrease in demand as income rises
          • Generics vs. name brand
      • Normal goods
        • Goods that show a constant demand despite changes in income.
slide17
The substitution effect
    • Depending on their disposable income people may decide to substitute one product for one that is similar such as:
      • Hamburgers for filet mignon
      • Civic for trans am
      • Hydro for solar
      • Disposable products for durable ones
slide18
Conspicuous consumption
    • The desire to display your wealth or to be identified with a particular social group
  • Law of diminishing marginal utility
  • Factors that determine patterns of consumption
    • Religion
    • Age
    • Gender
    • Price / Disposable Income
    • Education
    • Needs and Wants
slide21

The image above is a “coke” bottle.

This is one of the most recognizable symbols of popular culture.

The first coke was sold in 1886. For the year 1886-1887 the company sold nine bottles per day,

Since then the Coca Cola company sells 1.5 billion drinks daily

Coca Cola is one of the largest multinational corporations employing over 90 000 people and operating in over 200 countries.

slide25
Marketing is much more than an advertisement
  • Identifying customer’s needs in order to provide goods and services to exploit them.
    • “Necessity is the mother of invention”
  • Planning and executing a campaign from the conception of a product to the delivery to consumer.
  • Four P’s of Marketing
    • Price
    • Product
    • Place
    • Promotion
target market

Age

Target Market

Hobbies

Location

market
Market
  • The group of potential consumers who share common needs and wants.
  • The target market has the ability and willingness to buy the product.
  • Businesses strive to meet the needs and wants of their customers.
mass marketing
Mass Marketing
  • A single marketing plan used to reach all consumers.
target market1
Target Market
  • The group of consumers that a company desires to have as customers.
market segmentation
Market Segmentation
  • Dividing the entire market into smaller groups (of people) who share similar characteristics.
  • Allows businesses to customize products and marketing strategies.
demographics
Demographics
  • Segmenting the market based on personal characteristics such as age, gender, income, ethnic background, education and occupation.
  • Example: middle class, males, ages 20-40, who are construction workers.
age demographics
Age Demographics
  • Baby Boomer Generation
    • 9.6 Million born between 1946-1964
    • Posses 51% of the wealth in the country
    • Large discretionary/disposable income
    • Like Luxury/Recreational Items
  • Generation X
    • 2.8 Million born between 1965-1972
    • Product of dual income households/divorce
    • Savvy & Skeptical Consumers
    • Financially Cautious
    • Like sharp images, music, sense of humor
age demographics1
Age Demographics
  • Generation Y
    • 9.1 Million born between 1972-1992
    • Computer Generation
    • Accustomed to interactivity
    • Millions in spending power/influences billions in purchases
  • Generation Z
    • 7.3 million Born between 1993-2011
    • Grew up with 9/11
    • Cell phones/computers/MP3’s/Tech Savvy
    • Still growing and mysterious demographic
psychographics
Psychographics
  • Segmenting the market based on values, attitudes and lifestyles.
  • Example: People interested in professional football.
geographics
Geographics
  • Segmenting a market based on where a person lives. Geographic segmentation can refer to local, regional, national or global markets.
  • Example: A small local store will segment to the surrounding area like a town, while big companies like Nike market Internationally.
behavioral segmentation
Behavioral Segmentation
  • Dividing consumers into groups according to their response to a product. Behavioral segmentation divides markets into groups based on what they are looking for in a product and why they buy the product.
  • Example: Purchasing Nike shoes because Michael Jordan wears them.
slide37

Eat Fresh

There are somethings money can't buy.

For everything else there's ............

A Diamond is Forever

Wii would like to play

slide38

Pleasure you want. Protection you trust.

Strong enough for a man,

made for a woman

The best a man can get

Cha~Cha~Cha

Have a Happy Period

slide39
Advertising
    • To increase the demand for the good or service
    • Instructs, Promotes and Reinforces Products or Organizations
slide40
Questions companies consider before launching a campaign.
    • What are the product’s unique selling points?
    • What are hidden qualities important to the buyers?
    • Is there adequate demand for the product?
    • How much to invest in venture?
    • Who are you targeting?
    • What is the objective of the campaign?
slide41
Types of Advertising
    • Objective
      • Generally informs and appeals to the intellect
slide42
Subjective
    • Appeals to emotions and our subconscious desires
    • Characteristics
      • Use of celebrities
      • Models who are young, attractive, sexy
      • Escape ads
      • Association with money, power and success
slide43
Misleading
    • Illegal in Quebec
    • Examples
      • Bait and Switch
      • % off without indicating original price
      • Lowest price in town!
slide44
Advantages and Disadvantages
    • Pros
      • They inform consumers
      • Mass consumption due to advertising leads to mass production and therefore lowers cost
      • Allows for competition which drives prices lower
      • Creates jobs
slide45
Cons
    • Encourages impulsive consumption
    • Manipulates consumers
    • Sells images and perceptions
    • Increases price of a product
    • Seeks conformity
      • Promotes questionable social conduct
slide47
Not all ads are made equal
  • Evaluating different types of ads
    • Television
    • Radio
    • Print
    • Internet
    • Product Placement
    • Point of purchase
slide48
Commonly used advertising techniques
    • Information
    • Unfinished comparison
    • Status
    • Peer approval
    • Hero endorsement
    • Sexual attraction
    • Entertainment
    • Intelligence
    • Independence
slide50
Do not be fooled by advertisements
    • Does the ad appeal to your emotions?
    • Look beyond the appeal to find out what the ad really says
    • What is unique to the product?
    • Be alert to ads that are misleading
    • Read the fine print
slide53
Credit is the lending of money to enable the purchase of goods and services now but pay for them at a later time.
    • Enjoy the use now
    • Use other’s money
    • Pay interest on capital
    • Pay the whole capital amount
slide54
Terms
    • Debtor – Borrower
    • Creditor – Lender
    • Interest – The cost of borrowing someone’s money
obtaining credit
Obtaining Credit

The three C’s of credit

  • Character
    • References may be demanded
  • Capacity
    • Are you able to pay
    • Look at some information such as:
      • Income, Debts & Job stability
  • Collateral
    • Assets that could be seized if loan is defaulted
slide56
Credit Bureau (Such as Equifax)
  • Collect credit information about consumers and sells this information to lenders.
  • They investigate references and employers.
  • Bureau has credit history on anyone who has used credit.
  • Assigns a credit rating which assesses the probability of repaying the loan and interest when they are due.
  • Record will show if you have any outstanding debts, failure to pay etc…
personal loans
Personal Loans
  • Available from financial institutions
  • Advertise lowest rate, but not everyone qualifies
  • Collateral needs, perhaps an endorser
  • Payment plans
  • Once signed, pay that interest rate until final payment which includes interest and capital.
credit cards
Credit Cards
  • Variable Credit
  • Issued by financial corporation or retail store
  • No interest if total is paid before its due
  • If amount not paid in full, monthly payment is required
  • Interest can range from 9-28.8%
  • Some cards require membership fee
  • Both consumer and retailer pay fees
lines of credit
Lines of Credit
  • Predetermined credit limit
  • Open ended
  • Usually preferential rates
installment plans
Installment plans
  • Credit which is paid off in parts.
  • Common when purchasing a car, furniture, major appliances and other big ticket items.
  • Interest rates are high
  • The items can be seized until the last payment has been made.
mortgages1
Mortgages
  • Amortization
    • The repayment period
    • 15 – 40 years
  • Foreclosure
    • Seizure of property
deciding to buy a house
Deciding to buy a house
  • Preferences
  • Achieve standard of living
  • Responsibility of paying house off
  • Golden Rule
    • House should not be more than three times your annual income
  • Taxes
    • “Welcome Tax” , School Tax & Municipal Tax
  • Dependant on:
    • Size of property, Geographic Location, Services, Age of the house & Zoning
slide67
No more than 40% of monthly income should be spent on housing cost
  • No under the table contract
    • Illegal, Risk losing investment
  • Must be legal transfer of house through notary, with two witnesses present
  • House should be inspected before transfer
  • Risks of hidden defects
slide68
Types of Mortgages
  • Open
    • The principal balance may be paid back at anytime without penalty
      • Higher cost due to higher rate of interest
      • Benefit is paying off the mortgage in less time
  • Closed
    • Limits amount that can be repaid
      • 10% of principal may be paid on the anniversary date of the mortgage
slide69
Interest Rates
  • Fixed
  • Variable
    • Rate is determined by market rate.
  • New products
slide70
Points of interest
  • The longer you choose to pay off the house, the greater the total cost due to interest.
    • Tips
      • Pay down loan as quickly as possible. Take advantages of opportunities to do so.
        • A single payment against principal can lead to savings of many times the initial amount.
slide72

Debt: money owed

Ex: mortgage, bank loan, credit card

Debtor: person who has to repay the money that was given to them.

Creditor: institution that gave the money

Ex: banks, credit card companies

Short term debts: money owed in which the debtor can pay off easily/regularly

Ex: phone bill, gas, groceries, etc.

dealing with debt
Dealing with Debt

1. Design a Personal Plan

See a financial advisor

Create a budget and reduce expenses

Consolidate (unite all debt) and use a personal loan

Destroy credit cards

Sell some assets

Renegotiate with creditor

Increase income

This option will allow the debtor to keep their property

slide74

2) Repossession

Creditor takes back goods that were purchased

All payments that have been made on the debt are now lost to the debtor

Debt no longer exists

slide75

3) Voluntary deposit

Exists only in Quebec

Debtor arranges to have a percentage of his/her salary with the Provincial Court

The percentage is determined by the court

Money will be used to pay off debts

Prevents repossession

slide76

4) Personal Bankruptcy

Debtor admits that debts cannot be repaid

Debts total more that debtors assets

Debtor turns over all assets to a trustee, who will divide it among the creditors.

Debtors can keep necessities and tools needed to have an income

All debts a cleared except: fines, student loans, alimony/child support)

Lasts 9-18 month, most have a fresh start afterwards

slide78

Budget: a way of managing your income (weekly or monthly) and expenses

Puts you in control

Determines discretionary income (left over after all expenses)

Helps manage debt and monitor your costs

Promotes savings

the budgeting process
The budgeting process

1) List your estimated income

Net income (money left after taxes and deductions on payment)

Gifts, allowances, and other sources of income

BE HONEST, don’t include any income that is not certain

slide80

2) List your probable expenses

Fixed expenses (regular bills). Ex: phone bill, hydro, insurance, rent/mortgage

Variable expenses. Ex: clothing, luxuries, entertainment

Savings

NOTE: there will be unexpected expenses (ex: repairs, medical, etc.). Therefore, having a savings will help with these.

slide81

3) Balance income against expenses

Total your expenses and your income

Subtract your expenses from your income.

If there is a surplus this means you have successfully created discretionary income for yourself.

If you cannot make ends meet you will have to readjust your expenses