Buying Big Purchases
In the series “Buying Big Purchases”, Money Bear Club will examine how consumers buy the largest purchases of their lives, and analyse how these purchases can be handled better. Buyers dealing with big purchases will find a wealth of information. Others will get acquainted with buying and decision-making methods that can help in many areas of life.
The first part of the series will analyse how consumers buy household appliances. Readers will find a lot of tips and tricks related to buying appliances.
Buying home appliances
Every person eventually has to deal with big purchases, such as those of home appliances. Be it either a redecoration of a house, moving into a new home or dealing with a dishwasher breaking down, every one of us will have to make these decisions. Learn how other consumers handle buying home appliances, and how can you do it in a way that saves both money and time.
How consumers buy home appliances…
In total, over $180 billion worth of major (large) home appliances were bought in 2017. Out of that number, $22.8 billion of household appliances were bought in China alone. $13.1 billion worth of household appliances were bought in USA. The remaining billions are split between Europe, Asia, the Americas, Africa and Oceania.
The revenue gained from home appliances has been rising since 2016. The trend seems really strong in China, where from 2017 to 2018, revenues from home appliance sales are expected to increase by 13.6%.
Knowing that China is the fastest growing home appliance market in the world, we can make an educated guess. Because of such fast growth, appliance companies are going to focus their efforts on China for the near future. It could lead to both good and bad outcomes.
On one hand, new ideas in household appliances could end up being implemented in products intended for the Chinese market. On the other hand, the continuing decline in revenues could lead to more efforts being directed at the declining markets instead of China.
Studies show that before buying a new good, 65% of consumers spent more than 16 minutes time gathering information. It consists of learning about the advantages and benefits of their chosen products and other options (comparison shopping). However, only 51% of consumers make a relatively well-informed decision when buying new products. That’s because 49% of consumers don’t visit more than 4 sites before making a decision to purchase. Good news is that over 80% of shoppers conduct online research when buying electronics products.
Another side of how consumers buy home appliances, is where they make these purchases. Internet-based shopping has been on a steady rise. Still, the majority of consumers buy their dryers and similar items in brick and mortar stores. Hence, it can be deduced that knowing how to save money in physical stores is still important.
…and what can you learn from that
A few conclusions can be deduced from these observations. The average appliance buyer is looking to buy at a physical store, yet is not entirely uncomfortable with shopping online. The buyer will also consult more than 2 websites, but will spend under an hour for price and quality comparison.
To find the best price and a quality product, a buyer will need to spend more time online and visit more websites.
Saving money on home appliances
The main strategies on saving money on home appliances are:
- Buying items for the long-term;
- Taking advantage of hidden opportunities;
- Letting go of your biases.
Buying items for the long-term is the one true way of saving money on home appliance purchases. Most people have heard of the saying “quality over quantity”, yet few remember to use this saying when they are shopping. Energy efficient appliances can save around $500 in the time they are used. Let’s look at an example of how this works*
This refrigerator is rated at A+ energy class. It means that the refrigerator is in the highest energy-saving and efficiency category. Moreover, the refrigerator also has tools and built-in appliances that help the owners to save money. They are an adjustable thermostat and automatic defrost. The refrigerator helps to save electricity and money both because of how it operates, and because of the appliances it has built-in. The buyers would get an energy-efficient refrigerator with useful add-ons.
Appliances that have low energy efficiency, cost more in the long term than energy-efficient appliances. Buyers of home appliances should remind themselves that a more expensive purchase will “pay for itself”. This will be done through its own energy-saving capabilities and add-ons. Paying for a higher quality appliance, in this case, means saving money. All of that because a quality appliance is capable of operating efficiently.
Slow decision-making is a great behavioural strategy for buying major purchases. The first product we decide we want to buy is often the one we feel the most brand loyalty to. Maybe a customer has seen the same brand of a refrigerator in the houses of their family and friends. Maybe their parents bought a new dishwasher of a certain brand that worked better than the previous dishwasher. Let’s leave studying brand loyalty to scientists. However, brand loyalty has many ways to form, and it is a major factor in decision-making of consumers.
If a consumer actively seeks to lengthen their decision-making process, it could improve their chances of recognizing brand loyalty they already have. A slow decision-making process is also great for taking advantage of sales and unexpected discounts. New promotion which offers significant savings could be released a week after the customer buys their home appliances.
“Buy one get one” and “Buy one win one” promotions are very common in home appliance stores. A consumer taking their time when purchasing new home appliances, could get a vacuum cleaner or a hair dryer for free. Of course, if only they are patient enough to wait for a sale.
Nevertheless, slow decision-making should not be used when the customers are already in stores. The more time supermarket shoppers spent in a store, the more likely they were to make an impulse purchase. It’s not clear if the same is true for customers of appliance stores, but there is a high probability. Money Bear Club has examined how impulse purchases can lead to financial setbacks.
Taking advantage of hidden opportunities is very important. The advent of internet and online shopping created many competitors for traditional stores. If a store isn’t on the internet, it is as though it doesn’t exist at all. In 2018, companies are still competing for their share of the internet audience. And that brings many benefits for the consumers.
Viewing social media accounts of household appliance stores is a must for any shopper looking for a discount. They have giveaways of pricey appliances, and feature discounts that aren’t shown in the stores or websites of those companies. That’s their way of rewarding loyal customers. Yet, these accounts are accessible even without subscribing to them. Shoppers can enjoy discounts without getting bombarded with constant advertising.
Letting go of your biases is a top psychological strategy in an advertising-heavy world. Even if most people say that advertising doesn’t affect them, their opinions don’t match their actions. Studies have proven that advertising works. And that is bad news for those looking to become savvy shoppers.
To achieve the largest savings when buying household appliances, a customer should re-examine their pre-existing biases about one company or another. A rarely advertised product does not necessarily mean a product not worth buying. And vice versa. If a shopper realises that their preferences are created by advertising, they will be more open to products from less-advertised companies.
The chart showing most popular machine brands in USA, uses a small sample size (624). Nonetheless, it still reflects a clear divide between the most advertised brands and those who are left behind.
We do have companies that we like more or less. These preferences impact our shopping choices. If a consumer is able to let go of their biases for or against a company, they can make a more rational choice. Although advertisements are inescapable, people still have the power to at least acknowledge their biases for one or another product.
Common purchase traps
Common traps that make consumers spend more than they would like on household appliances can be hard to spot. Nevertheless, once a person knows about them, they become clearly visible.
One of the most cunning traps is the friendly sales associate. This tactic is very common in major appliance chain stores. If a consumer is unsure about a product, the sales associate will offer “secret” advice about another product. The product is almost always more expensive than the one the customer was considering at first.
This tactic works very well, because humans tend to favour familiarity over strangeness. And a friendly sales associate instantly becomes closer when they reveal knowledge intended “just for you”. Customers of home appliance stores, boutiques and luxury stores should not forget that sales associates in those stores have sales goals. And the easiest way to achieve them is to give advice that pushes customers to buy more expensive goods.
When customers think about buying household appliances, they probably imagine stores with rows and rows of refrigerators, dishwashing machines, and ovens. Products are placed around the store based on the appliance category they belong to.
And how is the order of where a certain appliance is put in their category is determined? By price. Not by their qualities, and certainly not by their energy-saving effectiveness. Although ordering products by their price has benefits, it distracts the customers from the qualities of the goods.
The price then creates a decoy effect. When a customer sees a decoy refrigerator or a microwave, they tend to “accept” that price. Most customers won’t buy the most expensive appliance in a store (because more expensive does not equal to better). Nevertheless, they will still make an unconscious comparison using the decoy product and their chosen product. And that comparison will not benefit their wallets. When a very expensive product becomes “normal”, we are more likely to buy an appliance that is out of our price range.
Those who are redecorating their whole homes, will often find home appliances being sold in furniture stores. A consultant or a designer from the store may suggest buying a dishwasher from them to go with the kitchen.
Who wouldn’t want to take care of two birds with one stone and stop worrying about the right appliances? Especially, when a sales associate already has recommended a suitable model. Nonetheless, home appliances in furniture and decoration stores are big traps for people who want to finish re-decorating quickly. Even if it is an IKEA store, the appliance prices still won’t be the lowest a customer is able to find.
Best deals on home appliances?
Buying large purchases is a time-consuming process that requires smart strategies. The difficulties of buying home appliances are exacerbated by unending product choices and powerful marketing. However, the good news is, that there’s so much information about the best deals on home appliances. Buyers of home appliances largely don’t experience an asymmetry of information related to their purchases.
The most important tip to remember when buying a big purchase is to buy the one the buyer likes the most. Big purchases tend to be used for at least a few decades. And if the buyer is unsatisfied with a purchase, he or she could have to re-sell it (a time-consuming process). Or worse, feel dissatisfaction for years, when using a thing they have bought. Using savings strategies is important. Yet, they will all be for nought if the buyer buys a product they don’t like.
*Disclaimer: if a reader of this article buys a good using this link, Money Bear Club may receive a referral fee.
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