Are You a Smart Consumer?

© Banco de España

© CNMV

Student’s booklet

UN

IT 5

5

Are You a Smart Consumer?

� Be aware of the factors that influence your purchasing decisions, and develop your own judgement.

� Avoid impulse buying.

� Compare prices.

� Consider all the implications of your consumer spending, not just the economic ones.

� Know your rights as a consumer.

You will learn how to

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UNIT 5: Are You a Smart Consumer?

Consumption is the acquisition and use of goods and services to satisfy our needs and wants.

Have you ever been sorry about a purchase you made? Do you have stuff at home that you bought but don’t ever use? Have your ever asked yourself “Why did I ever buy that”? Whether we realise it or not,

our spending decisions are influenced by a variety of factors. The price, quality and recommendations of others are important aspects to consider, but we’re also influenced by things that don’t always act in our favour, particularly our emotions, advertising and our desire to impress others, like friends and classmates.

It’s understandable to want to follow the advice of your friends, but you need to know if you’re spending just to win the approval or admiration of others. Advertising can distort our reality and make us believe that we’ll be more attractive, taller, stronger or happier by using a particular product. What’s important is to be aware of these influencers so that you don’t allow them to cloud your judgement.

Following your own judgement means making your decisions, with-out letting others sway you. It’s knowing how to weigh the pros and cons of your choices, according to YOUR values, personality, beliefs, needs and BUDGET.

Remember that every euro you spend unwisely is money YOU lose, not your classmates or the advertising agencies.

5.1 Do you think before you buy?

Knowing how peer pressure and advertising influence our buying decisions, social media deserves special mention for combining and magnifying both. Watching what “friends” or friends of friends are doing and buying, following brands on Twitter, Facebook and Instagram, reading blogs that promote products (some are unbiased while others are not), and the thousands of adverts on the Internet can lead us to make poor decisions which we later regret.

The Internet can help you be a smart consumer if you use it to research a product before buying, read reviews by others that have used it and compare prices. Just make sure that you are aware of the influences that exist and use good judgement.

The influence of social media

Smart consumption YES

Excessive consumption NO

Consumerism, or excessive consumption, refers to the unrestrained buying and consuming of goods and services we don’t need, in ever-increasing amounts.

Smart consumption is good for the economy and brings us a better quality of life. Consumerism, or excessive consumption, is the opposite of smart consumption and carries negative consequences for our personal health and finances, the environment and Society.

UNIT 5: Are You a Smart Consumer?

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» Use their own judgement.

» Analyse costs and benefits.

» Compare prices.

» Do their research.

» Know how to prioritise.

» Value quality, durability…

» Distinguish between wants and needs.

» Take their time for spending decisions.

» Buy for the sake of buying.

» Buy impulsively.

» Buy the wrong products.

» Spend more than they can afford.

» Let themselves be swayed by advertising and by others.

» Don't think about the consequences.

» Confuse buying stuff with satisfaction and happiness.

Smart consumers: The others:

Impulse buying, which can destroy any budget, refers to those un-planned purchases of things that we wouldn’t buy if we thought rationally about them. We give in due to some transitory emotional weakness. Our way of thinking and a series of psychological mechanisms can cause us to make misguided buying decisions.

The left hemisphere of your brain controls logic and the processing of numerical information, while the right hemisphere governs emotions and creativity. Emotional states, with little or no critical thinking, are usually the cause of impulse buying. It’s beneficial to take into account your emotions, but not to let them control you. The smart consumer uses both sides of the brain. Instead of spending impulsively, smart consumers analyse and compare alterna-tives. They calculate the savings and sacrifice needed to acquire the product and know how to prioritise. If, after a reasonable cooling-off period, they still want the item, smart consumers set a goal and save until they can buy it.

The best weapon to fight impulse buying is waiting. Before spending your money, give yourself time to think about it. For major purchases, you might want to wait a week or two. For those little whims, sometimes a couple of hours is enough. Stop, breathe deeply, ask yourself the following questions and answer them honestly:

5.1.1 How can you spot a smart consumer?

5.1.2 Impulse buying and emotions

sadness

happiness

envy

fear

analysis

logic

price

reason

» Do I need it? If I don't need it, but I want it, why do I want it?

» Am I sure that I'm going to use/wear/eat it?

» Will I be able to find it on sale later or find it cheaper anywhere else?

» If I buy it now, what other things will I have to give

up? Will I run out of money for my other expenses in the coming weeks or months?

» Will I be taking money away from another goal that's more important to me?

» Are there any less expensive options that would work the same?

Why do you think some salespeople use pressure tactics to force custom-ers to make quick decisions?

Reflection ?

UNIT 5: Are You a Smart Consumer? UNIT 5: Are You a Smart Consumer?

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After buyingWhen buying

5.2 Price comparison

Compare prices for the same product in different stores. It's surprising how much of a price difference there can be from one shop to another, but keep in mind the following when comparing:

» Some stores state their prices including VAT while others do not, which can represent a difference of up to 21%.

» If you have to go out of your way to get to another store with a better price, think about whether the saving is worth the bother, time spent and cost of getting there.

» When comparing in-store with online shopping prices, don't forget about shipping costs. For small purchases, the shipping costs can wipe out any saving in the price.

» Make sure the different merchants offer the same conditions and guarantees, in case you need to return something.

Compare prices for different sizes or amounts. You need to calculate the unit price of a product to know which size is cheaper. But also think about how much you need. It doesn't make sense to buy more than you're going to use just be-cause the unit price is lower.

Compare the item with other alternatives. Are there other cheaper brands or models that would do as well? Are there generic or white brands with the same composition? And if you're not going to need the additional features of a top model, why spend the extra money? Wouldn't it be better to save it for other things?

5.3 Your rights as a consumer

If a package of 3 pairs of socks costs €10.74, the unit price is €3.58 per pair. Compare that to a package of 5 pairs that costs €15.

If a 30 ml bottle of cologne costs €45, the unit price is €1.50 per ml. Compare that to a 50 ml bottle that costs €58.

Before buying

» The right to receive accurate and sufficient information about the products at your disposal.

» The right to receive a price quote.

» The right to safety (protection against the sale of products that pose risks).

» The right to receive an invoice for the purchase.

» The right to clearly listed prices and rates.

» The right to accurately measured and checked quantities.

» The right to receive warranty documents and an instruction manual.

» The right to technical assistance in case of malfunction or breakdown.

» The right to redress (ask for a remedy or compensation for faulty products).

As a consumer, you have the right to protection and rep-resentation through consumer advocacy groups. These associations can provide you with detailed information on different topics (e.g. nutrition, housing and energy,

transportation, telecommunications, leisure and culture, saving and investment, etc.), that can aid your buying de-cisions. In summary, consumers always enjoy the follow-ing rights:

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1.Conscientious

6.Sustainable

This is knowing what you want, what you need and how much you can afford. It's being aware or your situation and accepting the conse-quences of your spending decisions.

This means knowing what alternatives exist, always comparing quality and price to choose the best products and services to meet your true needs.

This includes knowing and defending your rights and adding your strength to others through consumer pro-tection and advocacy groups.

This means reducing the neg-ative effects of your consump-tion on the environment. It includes choosing eco-friendly options, saving energy and water, and following the "3 Rs": reduce, reuse and recycle.

This means using critical think-ing and your own judgement, without letting yourself be swayed by peer pressure, emo-tions or advertising. It means valuing yourself and others for who you are, not for what you possess.

2.Discerning

This means following a balanced diet, exercising and avoiding the con-sumption of things that are harmful to your health, like alcohol and tobacco.

4.Health-

conscious

3.Informed

5.Active

Smart ConsumerBehaviour

5.4 The six facets of smart consumer behaviour

Smart consumers consider many aspects of their spending, not just the financial ones. Being a smart consumer might include the following types of consumer behaviour:

Europeans generate 2500 million tons of garbage each year. Thats more than four times the volume of Egypt's Great Pyramid. Don't buy just for the sake of buying! That's harmful to both your pocket and the environment.

Did you know?

What type of consumer are you?

Reflection ?

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5.5 The consumer of financial products

To choose financial products, you can and should use the same buying strategies used for other goods and services: information research, comparison of prices, costs and conditions, and critical thinking. You have the right and the duty to compare financial institutions, to choose the one that charges less in fees, to put your savings where you can get the best return, and to negotiate the best financing terms.

You have the same right to receive complete and accurate information before and after signing, the right to protection against products with a higher level of risk than you want, and the right to redress if you feel adversely affected by the actions of the firm.

1. Plan, before you go shopping. See what you need and how much you need and make a budget so you'll know how much you can spend.

2. Give services rather than products as gifts and value quality over quantity.

3. Look at expiration dates.

4. Some apps let you scan a product’s barcode and then send you an alert if they find a store nearby

that sells the same thing at a better price.

5. When possible, share or borrow instead of buying.

6. When possible, share or borrow instead of buying.

7. Reduce, reuse and recycle. Reduce your energy consumption and other utilities at home, avoid un-necessary containers and packaging, separate your garbage and look for ways to reuse items instead of throwing them away.

ACTION Tips to make it work