Dave Ramsey Buyer Beware (Class 6 of 13)

In this class Dave explores the psychology of buying and not buying. Corporations spend enormous sums of money to get your business. They employee marketing experts, physiologists, and advertising agencies who study and understand how to separate you from your money. They do this for one reason. It works. Dave explores the 4 basic techniques used in marketing and provides the student with a 5 step process designed to take the emotion out of purchases, minimizing the manipulative effects of sales and marketing techniques.

The classic technique is relationship selling. The salesman is at least as old as human history. In direct sales, particularly the sales of high ticket items such as cars, corporations spend thousands of dollars and expend hundreds of man hours training their sales force how to relate to their customers, build trust into the sales relationship, and excitement into the buying experience. Always keep in mind that these men and women are highly skilled professionals and you are on their turf.

Needless to say Dave Ramsey is particularly offended by the use of finance as a marketing tool. As a culture, we have been conditioned not to ask how much something costs but rather to ask how much money down and what are the monthly payments. This is the losers’ game. The borrower is slave to the lender. Dave exposes the about the most egregious examples of this ploy, including 90 days same as cash and 0% financing. Studies have determined that 88% of 90 days same as cash sales roll over into monthly payments with an average 24% interest rate. This is not at all the same thing as cash. Zero percent promotions are a tease. Less than 1/3 of all customers qualify for a zero percent loan, but by the time the victim reaches the finance desk, the hook is deeply set. He buys anyway.

Yes, advertising in all media really works. That is why corporations spend all that money. Dave goes through an exercise in which he starts an advertising slogan or jingle then asks the audience to finish.

Example: You deserve a…Break today…at…McDonalds.

The audience knew every single one of these ads. They were extremely successful campaigns developed by the most skilled marketing corporations in the world. In the future expect technology to become more sophisticated in targeting your dollars. I recently heard about new electronic billboards that utilize a small camera and facial recognition software to determine your age, race, and gender. The computer then selects an appropriate ad for display. And you though cookies were intrusive—ha.

Finally Dave explores the use of product positioning in retail merchandising. Color selection, brand and trademark recognition, packaging, color, and shelf position all increase the probability of a sale. Nothing, including the Muzak in background, is there by accident. It is the result of careful scientific studies. Companies pay stores for prime positions for their products just as they pay psychologists to select the color of the packaging.

Starting with the premise there is a two year old spoiled brat inside of each of us who wants what he or she wants right when they want it, Dave proposes a five step process to gain control over the buying process. Psychologists have determined that “major” purchases, those over $300, actually cause measurable changes in our bodies and in brain activity. A quick poll of the class seemed to indicate that threshold has increased in the past few years as the value of the dollar has declined, but that number does exist for each of us.

When buying a major purchase:

1)Go home and wait overnight before making the purchase. This will give your body a chance to recover from the chemical effects of buying fever.
2)Carefully consider your motives. You can never buy happiness. That commodity is found inside not outside your being.
3)Never, ever buy anything you don’t understand. That includes but is certainly not limited to cell phone contracts, financing contracts, investment schemes, and insurance policies. If you don’t know what you are buying or how much it is going to cost, cool it, until you understand.
4)Consider the opportunity cost of the proposed purchase or investment. Money used for one purpose will not be available for another purpose. This is not always a new bass boat Vs an emergency fund. Money invested in the stock market is not available to purchase a rental property.
5)Seek the counsel of your spouse. Dave emphasizes the spiritual aspect of the marriage relationship in making decisions. He believes that as a result of divine purpose each partner brings particular gifts and insights to the decision making process. I also believe that buying a bass boat without your wife’s consent will result in extremely unpleasant unintended second order effects.

Now let’s be careful out there.