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97 Cards in this Set
- Front
- Back
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Decision Making Process
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1. Need Recognition
2. Info Search 3. Evaluation of Alternatives 4. Purchase Decision 5. Purchase Evaluation |
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underutilization
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a consumer uses a product, but only a small fraction of the extent to which they intended to use it
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attribute based choices
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"if it comes with a warranty, it must be good."
-the more attributes a product has, the less risky it seems |
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bounded rationality
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we have a limited capacity for processing information
-unless we are a lawyer, we probably can't understand the fine print; so we make constructive choices based on the information we do have |
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service contracts (extended warranties)
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-they are repair insurance
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service contracts
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-often, they are the most profitable part of the sale
-bad deal for consumer (only 12-20% of purchase used to repair or claims) -people often lose them -better taking money you have and put it in a repair fund than purchasing one of these |
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cross selling
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what complaining has led to; if you return an item, you don't get your money back, but you can exchange the item for something else
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viral effect
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complaining in volume on the internet
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Types of accidents
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1. Rollover
2. T-Bone 3. Head-on 4. Off-center |
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Federal Aviation Administration
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Part of the DOT; responsible for safety of air travel for the general flying public, including developing safety regulations
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Charities - when is it right?
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Check the BBB, if the organization does not spend 25% or more on the people it's supposed to help, then it's not a good charity
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dollar amount connected to insurance industry
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1 in 12 dollars
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purpose of insurance
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to provide protection against a financial loss due to factors associated with risk
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for something to be insurable, it must be:
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1. a probability of risk can be established (odds)
2. a financial loss can be determined (dollar amount) 3. the event will not affect everyone insured (explains why natural disasters are sometimes not covered by private insurance) |
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policies
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contracts with an insurance provider
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premiums
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payments consumers make
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exclusions
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items not covered
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deductibles
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amounts policy holders pay before insurance pays
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exposures
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sources of risk
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perils
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events that case a financial loss
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liability coverage
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-bodily injury protection
-property damage protection -personal injury protection |
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two types of auto insurance
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1. collision
2. comprehensive |
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liability coverage (100/300/50)
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100 - how much you can pay an individual
300 - how much you can pay per accident 50- how much you can cover damage to another's vehible |
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uninsured motorist
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coverage pays for bodily injury for you and your passengers if the driver causing the accident has no liability coverage
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medical payments
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covers medical expenses for accidental injury up to the policy limit
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towing insurance
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covers the cost of providing road service
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rental car insurance
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covers the cost of renting a car while your car is being repaired, within limits of the policy
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credit insurance
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protects a loan or mortgage in the event that a person cannot make payments - not helpful - expensive and they seldom protect you
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Homeowner's Insurance
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helps pay to repair or rebuild your home and personal possessions due to theft, fire, storm, etc.
-property insurance pays for losses to homes and personal property -liability insurance pays for losses from negligence resulting in bodily injury or property damage to others for which the policyholder is responsible |
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# of Americans without health insurance
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47 million
-nationalized Medicare and Medicaid |
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disability income insurance
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pays benefits to policyholders when they are unable to work
-worker's comp only applies if the person was injured while at work |
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life insurance
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the purpose of this is to replace any income lost by your death for those who were depending on you
-not necessarily needed for burial, can save money for that and generally save more than you could earn through a life insurance plan |
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Life insurance: Term vs. other types
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-this type of insurance is more economical because it provides protection only (more protection for the money than Whole Life insurance)
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State Department of Insurance (Insurance Commissioner)
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insurance is regulated by these people at the state level (NAIC)
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how many Americans own stocks through mutual funds and retirement plans?
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approximately 1/2 of Americans own this
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investing
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-the purpose is to build and maintain wealth
-many Americans have these through retirement plans; however, people should have additional accounts |
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investing
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putting your money into an asset that generates a return
-ex. stocks, bonds, mutual funds, or real estate |
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speculating
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putting your money into an asset that the future value, or return, relies on supply and demand
-ex. collectors items, baseball cards |
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risk
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probability of a loss
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return
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amount earned on an investment
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highest return associated with what?
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highest risk; lower risks usually have low returns
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systematic risk
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the risk associated with all securities and cannot be reduced through diversification (ex. interest rate risk)
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unsystematic risk
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risks associated with one particular investment and can be reduced through diversification (ex. financial risk)
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diversification
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reduces risks; refers to the number of securities owned; investors usually demand a return for taking on additional systematic risk
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from bonds you receive?
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interest received from what?
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from stocks you receive?
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dividends received from what?
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equities
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-ownership in company
-share in company profits |
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bonds
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-promise to repay debt
-various terms to maturity -government and corporate |
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money market
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-federal gov't debt
-short term, less than 1 year |
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rate of return equation=
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(ending value-beginning value)+income / beginning value
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nominal rate
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the rate of return without adjusting for inflation
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real rate
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the inflation adjusted rate of return
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dividends
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distributions of money from companies or government to investors (from stocks)
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diversity
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spreading money among several different kinds of investments
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portfolio
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one's set of investment holdings
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capital gain (loss)
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appreciation (depreciation) in value of investment in stock
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stocks
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consumer has part ownership in a corporation
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bonds
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consumer is lending money to the company or government selling it
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mutual funds
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groups of investments where consumers buy into the fund which in turn invests in many different types of stocks and/or bonds; these are liquid assets
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bonds are kind of like what?
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I.O.U.'s - you lend money to a company and they use it and pay you interest because you loaned them the money
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Real Estate Investment Trusts (REITs)
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investments in real estate - not liquid, may be difficult to obtain money quickly
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gold bullion
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gold in its physical form
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National Consumers League
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a website that targets and informs of investment schemes
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kvetcher
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paid complainer
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a pull medium
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there is interactivity between the consumer and the Internet
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consumers 8 to 18 years old spend over $30 billion a yr mainly in these three categories:
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-food and beverages
-toys -clothing, entertainment, and personal care |
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biometrics
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using people's individual physical traits to identify them
ex. fingerprints, Iris recognition -->used as a form of identity access management and access control |
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skimming scam
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where a waiter takes your card when you pay and scans your card to steal your identity using a "skimmer"
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security freeze
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a way of stopping your card from being able to be stolen- costs $10 if you aren't a victim of ID theft, but free if you are
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Identity Theft Penalty Enhancement Act
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July 2004 and the Fair and Accurate Credit Transactions Act of 2003
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credit reporting agencies
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Experian, Equifax, and TransUnion
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Law of Demand
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-as price goes up, demand goes down
-as price goes down, demand increases |
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Law of Supply
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-as price of good goes up, more supplied
-as price of good goes down, less supplied |
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equilibrium price
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the point where supply and demand are equal
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free market economy
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an economic system in which individuals rather than government make the majority of decisions regarding economic activities and transactions
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market failure
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scenario postulated by some economists in which markets do not efficiently organize production or allocate goods and services to consumers
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Types of Market Failure
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1. Imperfect Competition
2. Price Discrimination 3. Imperfect Information 4. Inequality |
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Imperfect Competition
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monopolies: exists when a specific enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods
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Price Discrimination
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exists when sales of identical goods or services are transacted at different prices for different groups/individuals from the same provider
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market failure leads to?
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government intervention sometimes in the form of government protection
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Consumer Protection Laws
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Federal and state statuses and regulations that promote product safety and prohibit abusive, unfair, and deceptive practices
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Federal Food and Drug Act of 1906
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an act for preventing the manufacture sale, or transportation of adulterated or misbranded or poisonous or deleterious foods, drugs, medicines, and liquors, and for regulating traffic therein, and for other purposes
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Food, Drug, and Cosmetic Act
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-FDR signed the bill on June 25, 1938
-because of Elixir Sulfanilimide (the product was thought to be a wonder drug but was actually highly toxic to the patient) -administered by the FDA (Food and Drug Administration) |
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Federal Regulatory Agencies
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-independent of each other and allegedly the government to some degree
-directors do not change with a change in administration -operating funds come from congress or administration |
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FDA
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food, drugs, and cosmetics are safe for consumers
-established in 1906 -oldest consumer protection agency in the country -1938 drugs must be approved before |
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Consumer Product Safety Commission (CPSC)
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ensure safety of products not covered elsewhere
-established 1972 -protect you from unsafe products besides drugs |
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Federal Communications Commission (FCC)
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is an independent United States gov't agency directly responsible to Congress
-established 1934 -regulates interstate and international communications by radio, television, wire, satellite, and cable |
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FTC - Federal Trade Commission
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-established 1914, purpose was to prevent unfair methods of competition in commerce
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Amendments to the FTC
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1. 1938: included unfair or deceptive practices, advertising
2. 1975: Magnuson-Moss Warrant Act - requires manufacturers and sellers of consumer products to provide consumers with detailed information about warranty coverage |
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SEC - Securities & Exchange Commission
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Established 1934
-protect investors and maintain integrity of securities market -watches for fraud and deception -require companies to disclose information --Martha Stewart |
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EPA - Environmental Protection Agency
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Established 1970
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mergers
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when two or more companies combine into a single company
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injurious consumption
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occurs when individuals or groups make consumption decisions that have negative consequences that cause injury to themselves or others
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special interest groups
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those determined to encourage or prevent changes in public policy without trying to be elected
-lobbyists work for these groups |
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SOCAP (Society of Consumer Affairs Professionals International)
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an organization of people who work in business in the area of consumer affairs and customer services
-began in 1974 |
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low labeling
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manufacturers label products in order to avoid paying for consumer dissatisfaction
-ex. dry clean only items so that no consumer can complain if they wash their item and it shrinks, etc. |
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sunk cost fallacy
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desire to use something we've already paid for
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