Sunday, January 30, 2011

Why we spend on common goods

Interestingly, we spend our money for a variety of reasons. It can be a gift for our loved ones, a get-together meal with family members, a round of drinks with closed friends or an item to pamper ourselves/make our lives better.

Whatever the reasons, there is always a time to spend. If spending adds value to us, then the cost of returns back, as perceived by us, will be worth the investment. However, if spending has always been a hasty decision or if you are a total spending freak, then you may want to evaluate the reasons behind it. To do this, take into the shoes of the Retailers.

So before we take out a wad of dollar bills, ask yourself - what has Retailers done to us? There are a number of gimmicks, promotions and packages to win your consumer dollar. They could financially rob your wealth if you are not disciplined and do not take total control.

Here are 3 common tactics used:

1. The magic word - FREE

Do you like FREE? For me, of course! This goes without saying. Buy 2, get 1 FREE. Good Deal! Best Deal! Whatever you call it, as a human being with desires, I do like the word FREE. The problem is that too much FREE could lead you to buying things that are unnecessary and spending over your monthly budget. Sometimes you will ask "why did I buy in the first place?"
Because it's FREE! We love FREE-----DOM....hey! isn't that word so desired now? (haha..)

Back to the topic - there are Retailers whom go by bulk volumes. Henceforth, they will dangle the FREE carrot. To them, it's a win game should the total sales met. For you, if you are not conscious, chances is you will spend more instead to get the so-called FREE item. Think again before getting the carrot. FREE does not mean you have to spend FREELY right?

2. The number game - DISCOUNT

50% discount only for today. While Stocks Last! Grand opening, 50% discount only. Are you one of the guilty parties? Yes, I am! It's not wrong to buy, in fact it's a common norm in today's context. We love discounts, don't we? If there is a discount, we buy more.

The problem is the price may be marked up more than what is is called "discount", so that when discounts are given, the Retailer is able to earn a decent margin. So is that really discounted? You may consider checking out the "market price" which is pretty relative in value and find the best discount deals. We have, for example China, groups of people whom are shoppers that are addicted to discount shopping. The trend is there.

If you are not careful, you may tend to spend more than what you could afford without remembering whether your spending power allows it.



3. Words usage

Words are powerful - they drive emotions, they communicate a message across and they help to visualize a picture in your mind. Marketers called it "marketing messages". For instance "the men do not get it" - sounds familiar? Catchy phrase?

On the other hand, Retailers do used a mixture of words to drive home a particular emotion. Emotions to lead to purchase. Most times, you will hear the Retailers say "Last piece". When you re-visit his shop one month later, the "last piece" is still there. Again, the same Retailer will repeat his well-oiled sales pitch - "last piece - many people bought it already, so do you want a not?"

So why are there so many last pieces? Do they understand the meaning of "last piece" or is it used too often, not exclusively?

Before you take out the next dollar to buy, think about the integrity of the Retailer. Is it just his words (or maybe his charm) to make you buy or is it the true value of the product/service? Remember, the Retailer is there to earn, not you.

Buy when you need it, you want it and not the false perception around it. The underlying point of purchase should be your needs/wants, provided your budget remain within limits and that there is a firm justification of your expenditure.

Till then, control and maintain the discipline to spend.

I will talk more about branding and buyers' gravitation towards strong brands that lead to various types of purchases. If the love turns to addiction, could lead to financial disaster.

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