sort of risk. Some decisions are less risky than others. If a college student puts $5 in a savings account, there is little risk, but also very little reward. Her money is safe, but it will not grow fast. If, on the other hand, she uses the $5 to buy a lottery ticket, she is taking a big risk, with the possibility of a great reward. Most likely, she has lost the $5 forever. But there is a slight chance she will win millions.
Many people play the lottery. Many others do not. This is because everyone has a unique level. Some people will always choose the less risky option, even if the possible reward is small. Other people will go with something far riskier in the hope that they will get a big reward.
It is common for people to have a high level of risk aversion. Security is an important value to many people. But many people have low levels of risk aversion. These risk takers make very different decisions than people who prefer to play it safe.
Here is one example of risk aversion. Suppose you loaned a friend $300 last month. Today, he offers to pay it all back, or to invest it in his Internet company. You have a high level of risk aversion if you prefer that he pay you the $300 now. You are not sure how profitable his business will be, so to you it is not worth taking the risk. You have a low level of risk aversion if you decide to let the $300 ride and see if you end up with more in the long run.
There is no such thing as a safe bet.
Let us Talk About You
Cultures, values, beliefs, and risk aversion all play a part in the economic decisions that people make. People do not even have to be consciously aware of these factors. They just do what seems right. This does not mean these factors are not influential. It just means that many consumers are not conscious of their influence.
You can see the influence these factors have more clearly if you think about your own views. Do you know what your value and belief system is? Do you ever think twice about making an economic decision based on what you believe in?
The media has all sorts of messages for us. At times it can feel like a constant bombardment from the television, the phone, and the Internet, not to mention the radio, magazines, mail, billboards, and all the other ways that words and pictures are hurled at us. It is almost impossible to escape the media.
Think of the many advertisements for products and services you see in just one day. Could you even count them all? In addition, you get warnings, instructions, questions, information, and all kinds of other messages.
Communication is an important feature of human behavior, and the media’s primary focus is communicating one message or another to consumers.
Types of Media
Companies use the mass media to communicate information about their products and services to a large number of people. Producers are aware that consumers are the ultimate decision makers in the game of economics. Producers, however, also know that the mass media can be a powerful method of persuading consumers to buy their goods and services. Take a closer look at how this works.
Traditionally, news media is a subset of mass media with its own content and purpose. In recent years, however, the lines between general mass media and news have blurred.
Influencing Consumer Behavior
Television, magazines, and other media can be highly influential. Popular sitcoms create images of consumption that inform our own consumer behavior.
Consciously or not, some people adopt the styles, fashions, and even attitudes of their favorite TV characters. Some consumers make decisions based on their desire to look or live in a way that resembles the lifestyles they see on TV.
Magazines can have a big effect on consumer behavior, as well. Fashion magazines influence some women’s perception of beauty and influence the products they buy. Men’s magazines also influence how men see themselves. They have articles that include news, sports, men’s fashion, and even lists of the top outfits men should have in their closets.
Some people adopt the styles they see on their favorite shows.
Mass Media
Mass media has a big effect on how consumers view themselves.
Companies advertise their products and services in all forms of media. This is done indirectly through product placement and directly through advertising.
Advertising is the biggest method used by producers to influence consumer behavior.
There are many methods and techniques of advertising. You are probably familiar with most of them already. TV commercials, magazine ads, billboards, and even signs on the sides of buses all infiltrate our lives on a daily basis.
On the Internet, most Web pages contain advertising, often including pop-up screens and animations. You can get advertising delivered directly to your cell phone, too.
It pays to advertise.
Over the years, the sophistication of advertising techniques has advanced, as have breakthroughs in communication technology. Many people use the Internet every day and depend on it to get information. This makes the Internet an enticing vehicle for advertisers. Unlike radio, television, and print sources, the Internet is a nonlinear form of media, making it possible to advertise in various ways. Banner ads, pop-up windows, corporate Web pages, and bulk e-mails are some of the methods used.
Advertising Strategies
The main purpose of advertising is to get consumers to demand more goods and services. There are many ways to do this. One is to create a need for a product by emphasizing the connection between a product and a certain aspect of life.
For example, most people want to be clean. Soap and shampoo are needed to be clean, but is that all? If advertising can convince consumers that they also need deodorant and conditioner to feel clean, then more people will buy deodorant and conditioner.
Advertisers can also succeed at increasing demand by getting people to see luxuries as necessities. This is usually just a perception – you think you cannot live without something when, in fact, you probably can.
The Brand-Name Game
In our fast-paced world, producers know that consumers like to find what they need quickly and conveniently. Today, you can order a product online from anywhere in the world and have it delivered to your house in a matter of days.
This leads to a lot of competition among producers who want consumers to buy their stuff. This is another purpose of advertising – to get people to choose a specific product or service instead of the same thing provided by a competitor.
One method used by companies to get people to buy their products instead of someone else’s is branding. Branding gets people to recognize a particular company’s product and associate it with quality and popularity.
