Friday, February 08, 2008

Example for your blog this weekend -

I'm sorry - with everything going on I haven't taken the time to get links to everyone's blog on here. If I have time this weekend, I'll do it then. You can get to other people's blogs by clicking on their name as they leave notes here - it will take you to their "dashboard", and then you can find their blog from there. Your weekly notes can be on anyone's blog, as long as you use the current posts

Here's an example on how to do your blog analysis for Monday:

http://www.cnn.com/2008/LIVING/wayoflife/02/08/savvy.car.shopping/index.html?iref=newssearch

This is the article I'm using, mostly because it's about buying new cars, which my husband and I just had to do. If you go about halfway down the page, number 3 says "compare incentives". Now if you remember one of the first things we looked at was a statement that said "incentives work." And they do - take a look at this from the article:

"If you're considering two similar (but different brand) vehicles, incentives on one of them could be all the incentive you need to make the choice between them. " Absolutely true. If all other things are equal, a person will choose the car with the incentive that fits their lifestyle best.

"You can also use incentives on one brand as a negotiating point for the purchase of another." Another great point - you can play sellers off each other.

Incentives are a basic point of economics, and can really affect what you do in any situation. After all, which would you choose...something plain, or something with a cool incentive, if there were no other difference between them? That's called "all things being equal" (ceteris paribus) - if there is no difference other than the one thing, you can analyze the situation.

15 comments:

josh said...

This is a good article. It is true that a person can really use incentives to their advantage by playing them back and forth between offers. What i think is amazing is how much profit companies must make on a regularly priced product, because if you play the dealer enough and know how to do it right, you can get the item for a lot less than its original cost. I think that if people would think about it more and were more aware of how much companies can bring down the price and still make profit, then consumers could get a lot of their purchases for cheaper.

josh said...

ON point number 2 of the article attached, it talked about upfront costs and looking into how much it will take to pay for the car in the long run. I think this is something that people often overlook. Sometimes people see things and it looks like such a great deal at the spur of the moment that they get it but later find that the plan wasn't thought through very well. in the car case, i don't know how many people i've heard say "that's a nice car" because the body looks nice without ever thinking that the engine may be junk. The interest cost is something that also can build up over a while. It may seem nice to get the car and have that material possession right away, but in the end you could be paying a multiple of the original cost.

Gan said...

i put my analysis on my blog... and mine isnt as exciting as yours... i didnt know whether i should put in on mine or as a comment on yours... so i just put it on mine cause my page was looking pretty sad and empty...

Tanvirkamal said...

Hey I just made a new post delving into the world of consumer electronics and how people get ripped off sometimes...read it and comment please, it will learn you something

Gan said...

to comment on your artical...
I also think that incentives go beyond individuals and that one can almost use demographics such as age, profession, or where one lives... and i think dealerships look at these demographics and decide which cars they will market to which areas or groups of people. For example... a dealership in wisconsin will put a lot of focus on cars with four wheel drive because of the winter season we experience, while a dealership in california would market convertables... it is almost like not only can we play sellers off each other, but they can also play us... the wisconsin dealership could price a suburban higher because of the incentive of having 4 wheel drive, where as in california, this incentive to purchase isnt there, thus a lower price will be put on a car. By locating and devising which accesories or specifics of vehicals have the largest incentive, dealerships can adjust the price to exploit that incentive. This is an example of price discimination joining forces with incentives to create an unbeatable super team!

JoelleBender said...

I agree with Morgan about the use of demographics when determining pricing and incentives. Like she said, not many people buy stick shift convertables in Wisconsin because you'd be crazy to drive them after October.
This article was very true, though. From personal experience, salesmen do jump on those who get excited over a car and hint that they don't know too much about what they're purchasing. This isn't limited to car sales, though. Any major appliance such as a dishwasher or refridgerator has the same rules: incentives drive people to purchase a certain brand, and more knowledge of the product leads to a more educated buy.

frenchie said...

I didn't use an article for my blog entry. I wrote about relating the information to my life. I hope that's okay..
Anyway, I really liked this article. They make a valid point that people do use incentives when making a choice between two things. As most of us have, I've definitely done this quite a few times. Making lists of pros and cons. When it comes down to getting the most for your money, incentives are the deciding factor.

belzmat said...

I have an interesting blog on the effects of oil on todays world if anyone is interested

belzmat said...

I agree with josh on his outlook to incentives in todays world, because companies use every little thing they can use to their advantage now days. Whether it is saving a penny on the production of rubberbands, and selling it for the same price or saving $50 dollars in producing a milk automatic pasteurizer(first thing I thought of), the amount of money a company can generate by making things more efficient and consumer friendly at the same time.

taylork said...

I agree with Morgan on how car dealerships use incentives to their advantage. When my mom and I went to get my car I noticed how point 6 can be used to the dealers advantage. I test drove 3 or 4 cars and the dealer definetly put a lot of effort into trying to sell me a more expensive car because it had cool things a new teenage driver would want such as a sun roof or a new stereo system. It's definetly important not to show too much emotion when looking for a car, because dealers will definetly play off of that.

Vicky said...

For the record, I have an interesting blog on video games and taxes that might be interesting for a comment.

Anyway, on the car article, it pays to know what you're buying and to research it beforehand. I just bought a new cell phone and signed a new contract with a new phone company. In order to choose a phone company, I found a website that told me where cell towers were around my college campus and picked the company that has a tower right on my campus. I chose the phone I wanted and knew all it's features. (It's the razr2, and it's the best cell phone I've ever owned out of the four that I've owned!) The only thing I really had to do was go to the phone store and play with the phone to make sure it was the one I really wanted. Other that that, I knew what I wanted and I was not going to be ripped off. It's all about the information you have. When buying anything, you need to be an informed consumer. Don't expect the salespeople to educate you. It's your responsibility to educate yourself.

BethanyStoppel said...

I have yet to buy a car for myself but I do know people who are trying to purchase ones. Everytime they tell me about the "great deal" they found I always tell them to make sure that the car is in shape before they pay or sign anything. Private sellers have no interest in giving you a great deal because that means they get less profit. A car dealership is a little different just because they usually try and convince you to stay a customer with them (my parents have only bought from one guy for the past 11 years). They're still looking out for the best interests of their company though. Everything is about getting as much money as they can.

KM said...

Funny comment on the market (Morgan's comment) - when I bought the Cavalier (the one that died last month), I was living in Texas. Didn't even consider anything like rear window defrosters - who needs that in TX? I mean, the LOW in "winter" there was about 50 degrees. And then, my students had out big-aXX winter coats. Funny.

No, the Cav didn't have a rear window defroster. Made it through 8 WI winters. It's so nice not to have to scrape that back window now...

johndav said...

I think the article offers some valuable insight. I was unaware that a buyer could have so much influence on the price of the desired product if he or she really wanted to. I would assume that a lot of people do not realize the amount of pull they can have if they just try to play with the price a little. You could almost go as far to say that companies simply assume that people are ignorant to the extent of not looking into what they are buying, simply because they are the ones setting the price, and people typically will pay a certain amount depending on how bad they want it and what the price is set at. This goes back to the “Hershey bar” example, in that if someone tried selling a candy bar (potentially worth only $1) to a hungry class before lunchtime, many would be willing to exceed that actual value and pay a seemingly high amount of cash only because it fit their desires at the time. This is probably why the article suggests to not “wear your heart on your sleeve,” displaying your emotion explicitly, because the sellers will definitely play into your emotions, aiming to inflate the price proportional to your level of desire and commitment. Acting on a whim, or executing some action solely on emotion, though it may be fulfilling at first, often times may leave regretting your quick decision. Like (almost) anything in life where emotion isn’t enough, a little bit of research, enough to acquaint oneself with the matters, will help. At least it works for cars.

johndav said...

I’m thinking that last one was probably worth two. Here’s another one…

The article says that dealers often offer various incentives such as “cash-back” or longer warranties, etc. Furthermore, it implies that these can easily be manipulated if the buyer knows what he or she is doing, provided they researched a little. From this, it’s obvious that the price displayed may not be the lowest price the dealers could sell, or even the actual worth of the car. I started to question the legitimacy of the “sales” and “incentives” offered by various retailers/dealers. I explain this further in my personal blog titled “INCENTIVES.” After I wrote the whole thing I found an article that supported what I was saying. It compares starting prices, the sale price, and an online price (a more accurate value) of the same item.