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Test Review - Chapter 6 - Consumer Awareness

Dave Ramsey, 2nd edition, Foundations to Personal Finance.

Define BrandingThe promotion of a product or service by identifying it with distinct characteristics (usually associated with public perception, quality or effectiveness).
Define Brand recognition/awarenessRefers to the public’s ability to recall and recognize a brand by its logo, jingles, packaging.
Define Buyer’s RemorseFeeling of regret or concern after making a large purchase
Define Caveat EmptorLatin Term for “buyer beware”
Define FinancingTo buy an item with credit; paying it off over time.
Define: MarketingThe process of communicating the value of a product or service to customers.
Define: Opportunity CostRefers to the financial opportunity that is given up because you choose to do something else with your money
Define what a Significant Purchase isAn amount of money you spend, usually $300 or more, [money] that causes you pain to part with
Define: CapitalismAn economic system based on a free market, profit motive, open competition and private ownership of the means of production
Define: InflationThe persistent increase in the cost of goods and services or the persistent decline in the buying power of money
What are some of our basic needs?Food, Shelter or housing, health, utilities
True/False:A good salesperson will answer a question with a question.True
True/False:You should never buy something you do not fully understand.True
True/False:Young single adults should find an accountability partner with whom to discuss big purchases.True
True/False:The amount of stuff a person has is directly related to contentment and happiness?False
True/False:A budget has little effect on a person’s financial success unless he or she also develops power over purchase.True
True/False:Inflation has no effect on your buying power.False
True/False:Teens have cited ʺfriendsʺ as the strongest influence over their purchase decisions.True
True/False:You should never wait overnight before making a big purchase if there is only one item left.False
True/False:Companies use all angles to aggressively compete for your money?True
What is the purpose of advertising?1. Tease the consumer, 2. Inform the consumer , 3. Persuade the consumer
Name some common marketing strategies:Any of the following would work: Providing financial options, repetition, personal selling, bandwagon, transfer of fantasy, Emotion, Nostalgia, statistics, Humor, Sense of Appeal, Positioning, Color, packaging.
How can a company place an ad and offers no interest on your purchase for three years?They build in the cost of financing into the price of the item/product.
True/False: Companies use all angles to aggressively compete for your money?True
True/False: Companies know the competition is fierce for consumer dollarsTrue
True/False: Companies spend millions of dollars and do extensive research on advertising.False
True/False: Repetition has proven to be an ineffective marketing technique.False
Identify ways companies compete for your moneyCompanies use a variety of marketing strategies to compete for consumer dollars: personal selling, creative financing, repetition and product positioning (which includes color, packaging, branding and shelf position)
What concept is best explained by the statement, ʺMoney spent here cannot be spent thereʺ?Opportunity cost
Identify which method companies are using to compete for your money in the quotation: ʺ90-days-same-as-cashʺFinancing
Identify which method companies are using to compete for your money: Reputation for holdingProduct Positioning
Identify which method companies are using to compete for your money: Car salesman:Personal Selling
Identify which method companies are using to compete for your money: TV commercialsMedia
What are four common marketing tactics?Personal selling, financing, repetition, product positioning
Dave tells the story of a man who bought his dream car, drove it home, but then returned it the next day after some money calculations. This story is an example of:Opportunity cost.
What are some of the things you should consider when making a significant purchase?If you can buy with cash. (if you can’t pay with cash, don’t buy it); Your buying motives, and the opportunity cost
What are three forms of product positioning?1. Shelf positioning 2.Financing 3.Brand recognition
Give three examples of a “power over purchase” tactic.1. Consider the opportunity cost 2. Seek Counsel 3. Wait overnight.
Zero Percent financing is nothing more than a really good marketing tool.False
Choose One: A spur-of-the-moment, unplanned decision to buy a product or service (impulse buy or buyerʹs remorse)Impulse buy
Explain why financing a purchase is a bad ideaGoing into debt for any reason is a bad idea because it puts you at financial risk, causes you to pay more than the cost of the item, and prevents you from building wealth. Easy financing is a marketing tool used to get you to make a purchase even if you don’t have the cash to pay for it.
Why should you always consider the opportunity cost when making a significant purchase?Because money spent in one place cannot be spent in another. Considering opportunity cost is just one of the steps needed to have power over purchase
What are the five steps you should take before making a significant purchase?1. Wait overnight, 2. Consider your buying motives, 3. Make sure you understand what you are buying, 4. Consider the opportunity cost, and 5. seek wise counsel
What effect does inflation have on purchasing power?Inflation means that your dollars buy less than they did in the past. You must consider inflation when planning for future expenses, especially for retirement
Summarize factors that influence consumer decisionsAny or all of the following may at some time influence consumer decisions: marketing, peer influence, brand recognition, opportunity cost, advice from others, immaturity, contentment, time, whether the item/service is a want or need, etc.
Explain why consumer awareness is such an important part of a healthy financial planWe live in the most marketed-to culture in the world. In order to have financial peace, you need to develop power over purchase and resistance to marketing. Buying things is not bad. But buying too many things -with money you don’t have, to impress people you don’t really like -will make winning with money impossible.

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