How do consumers purchase; price or value?

young-girl-shopping

In American society we are all consumers of one thing or another. We make decisions daily about what products and services we will purchase and consume. Our consumption extends even beyond the hours we are awake and continues even as we sleep. Most of us have a nightly routine of arming an alarm clock so we can be sure to wake up at the appropriate time to make it to work on schedule. Even if you do not set an alarm I would be willing to bet one of the first things, if not THE first thing, you do is look at the time. These actions even in their simplest form is consumerism. You are consuming electricity provided to you either via your electric company or batteries you have purchased.

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In terms of consumerism it can be easily understood that there are a number of things we consume but have no real control over cost or the mechanism of delivery. Public utilities such as electricity and water and sewer services are a few of these. They are offered to you through only one vendor and the price is nonnegotiable. Other products and services offer some opportunities for choice but are still limited. Things like household landlines, internet, and cellular phones are good examples. Although there are more options for you to choose from the number of suppliers are still limited thus greatly restricting your control. However, there are a great number of things we consume daily which offer us a massive amount of control in purchase decisions. For these items there are an incredibly large number of suppliers and a somewhat wide variety of price options. A couple things which fit into this category are televisions and restaurants.

It is important to first understand that we have no real control over category #1. I will do you all the favor of skipping the economics lesson as to why category #1 exists the way it does but rest assured it is the most efficient way of providing us with those services. Thankfully we do have some control over the other two and that is what is more important to understand.

The Belief

There is a belief among many businesses that their consumers are only worried about the price of the products they buy. I would argue that this assumption is wrong. I will not dispute the simple fact that consumers are worried about price because that would be futile. I would, however, like to accent the point that I believe consumers are also worried about value. Most everyone wants to get the “biggest bang for their buck” or the most value they can for their dollar. Unfortunately there has been a break in the logic and reasoning of many companies. Many times corporations sacrifice value in exchange for price. This is a dangerous behavior which has become more and more prominent in the last few decades.

The Phrase

To illustrate my idea of how consumers are concerned with value I will use a very simple example most everyone can identify with. There is a phrase I would suggest most, if not all, of us have used before which is “but it’s ONLY (X) number of dollars more.” This phrase is usually adjacent to other phrases such as “and this one does…” or “and with this one I also get…” To put it a little simpler I can use a television as an example. Many times when we plan to make purchases we have a maximum amount we will consider paying for the item. For simplicity’s sake let us assume our maximum consideration for the purchase of a television is $500. Obviously we want to get the best television we can for our $500. This will almost guarantee we will spend the entirety of our $500 to make the purchase. And now the stage is set.

5548_samsung-led8000-led-tv-2Step #1. We have determined our budget ($500) and developed the intent to purchase the best television we can.

Step #2. We go to the store and peruse the multitude of television sets they have for sale and all the various options they offer.

Step #3. We decide, after a great deal of effort, which television gives us the “biggest bang for our buck” at the top of our budget allowance.

Step #4. We decide to purchase the chosen television.

However, before we grab the box:

Step #5. We see the television directly beside it and the options it offers.

This television is probably in access of our budget by at least $25 or more. The difference is that it has more features and benefits for the consumer. It may be larger, thinner, have a better warranty, or any number of other benefits. The point is it has more to offer, more things we value. It is at this moment the words “but it’s only (X) number of dollars more” get spoken. What usually happens next is we justify the extra money for the purchase and

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proceed to:

Step #6. We purchase the television which exceeded our budgeted allowance.

What Happened?

We made a purchase based on value and not price.

The Important Part

To tie all this together I will urge you to take action on this example. Exercise this behavior on all of your products. Base your purchases on value AND price. As consumers we have the power to control the products on the shelves of our stores. Our purchases inform companies what we want them to manufacture. I will not go on the tangent of “Only Buy American” although more employment in the US is never a bad thing.graph

We need to focus our purchases on quality products. As we continue to purchase sub-par products we are telling the manufacturers we are okay with them. This is promoting the manufacture of more sub-par products. This will never be a good thing for us as a consumer or our economy. If we stop purchasing low quality products manufacturers will be forced to stop producing them. Spend your money wisely.

 

 

 

 

 

 

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