LESSON 5: How E-Commerce Influences Consumer Choice
An update and extension of Lesson 6 from Children in the Marketplace. The lesson's theme is that in an economy based on markets people are free to substitute one item for another.
Teachers' Version

Grades 4-6

Introduction

This lesson is designed to focus on the decision making skills of the consumer. With many goods and services, consumers have a variety of alternatives from which to choose. Yet, it is often difficult for consumers to imagine finding a substitute for a product or service they regard as a necessity. However, if prices for various products rise relative to those of substitutes, consumers begin looking for alternatives. As decisions are made, the price of a good or service relative to available substitutes is a very important factor.

The concept of substitutes, or alternatives, gives helpful information in understanding consumer behavior. In discussing the concept of substitution, it is important to remember that consumers are always seeking to maximize benefits relative to costs.

Awareness of the wide range of alternative goods and services available to consumers and businesses should help them to make intelligent choices. There are many sources for obtaining information about prices of alternative goods and services such as stores, newspapers and television advertisements, catalogs, and e-commerce.

The buying and selling of goods and services using the internet is called e-commerce. In 1999, 17% of the 39 million households in the United States shopped on line and nearly half of them spent $500 or more. E-commerce is thought to be the wave of the future in retail sales, but the extent of its impact is subject to speculation.

Some speculate within a few years the internet could have 5% of America's retail market and have an impact similar to that of the Sears Roebuck catalog when it was first introduced in 1888. Today, catalogs account for about 10% of all retail sales in America.

Content Standards: 2, 8

Concepts:

• Substitutes
• Price
• Choice

Objectives:

• Explain the role of price in making a consumer decision.
• Explain how consumer choice reflects decisions based on personal values, financial constraints and wants.
• Give examples of goods and services and their available substitutes.
• Describe the role of e-commerce in today's marketplace .

Lesson Description

In this lesson students learn decision making skills that will help them become better consumers. As consumers they have a variety of alternatives from which to choose. They learn about the importance of price information in making their decisions.

First, students gather information on different brands of athletic shoes and determine which one is the best buy for them and explain why. They also listen to an interview with Adam Silver about consumer decision making. Then, students identify a toy or game they would like to buy. To help determine where to purchase their toy or game, students gather information from a store, a catalog, and three websites.

Finally, students conduct interviews to determine the extent to which adults in their community use e-commerce. They draw generalizations from their data and send a report of their findings to the adults who were interviewed.

Materials:

• Visuals 1, 2, and 3
• Copies of Visuals 2 and 3 and Activity 1 for students not using on line student version
• 5 to 10 copies of Activity 2 for each student
• Internet access
• Toy catalogs
• Access to a toy store that sells toys
• Newspaper advertisements and inserts.

Procedures

Part 1

1. Tell students they are considering the purchase of a new pair of athletic shoes. Direct students to complete Part 1 of the on line student version lesson. For students not using the student version, display Visual 1. Instruct them to select the type of shoe they want.
2. Display Visual 2. Point out that six shoe brands are listed on the chart. Tell them to rank the brand names by placing a 1 next to their favorite brand, a two for their second choice, and so on until all 6 brands have been ranked. If students are not using the on line version of the lesson, distribute a copy of Visual 2 to each student.
3. Ask students what influenced their rankings. [Many will mention brand name recognition or that they currently own a particular brand of shoes. Some will be influenced by print or television advertising.]
4. Tell students that one factor that influences consumer spending decisions is price. Instruct students to use the websites listed to locate the price for each brand name shoe they wish to purchase and write the price in the chart. Suggested websites are:
   • http://www.adidas.com
   • http://www.asicstiger.com
   • http://www.nbcloseouts.com
   • http://www.nike.com
   • http://www.ryka.com
   • http://www.kellysrunningwarehouse.com
   • http://www.onlineshoes.com
5. Tell the students to use the price information to rank the brand names again.
6. Discuss:
   1. š Did your rankings differ? Explain. [If there is a variation in price, some students' rankings will differ. If consumers are not convinced that an item more expensive than others is worth the difference in price, they will substitute a lower-priced item for the more expensive one. This will occur even though the less expensive item initially may not be as desirable to the consumer. If there is little difference in price, student rankings may not vary much.]
   2. š If there is little difference in price, on what do consumers base their decisions? [Consumers buy the brand they have always bought, based on a recommendation from a family member or friend or based on information from an advertisement, buy what friends buy, buy based on the location of the store and ease of purchasing the good or service.]
   3. š Why is knowing the price of the shoes you would like to buy important? [Consumers try to maximize their satisfaction relative to the amount of money they have to spend. Prices help consumers determine how much they gain and how much they give up when they make a choice. If they buy the cheaper brand, they can use the money they saved to purchase something else or save it. By checking out all the various prices, consumers can decide which pair of shoes is more satisfying for them to buy.]
   4. Why do consumers substitute less expensive goods for more expensive goods? [When prices begin to go up, consumers look for other products that are cheaper and that satisfy their want. By substituting the less expensive product, consumers can make their income go further.]
7. Tell students they have saved enough money to buy a bicycle. They find two different brands of bicycles. They are basically the same in quality. One costs less than the other. Discuss:
   1. Why might you purchase the less expensive bicycle? [Because the bicycles are of the same quality, by buying the less expensive one, you save money and make your income go further]
   2. What might you do with the money you save? [Answers will vary but some students may mention saving the money. Other students will mention a variety of purchases they could make such as a bicycle helmet.]
   3. When have you substituted a less expensive item for a more expensive one? Why did you do this? [Answers will vary but students should be able to explain that by substituting the less expensive item for the more expensive one, they satisfied their want and saved money.]

Part 2

1. Tell students to listen to the interview with Adam Silver to learn more about consumer decision making.
2. Tell students that they have been saving their allowance to buy a new toy or game. Instruct them to go to one of the following websites to find a specific toy that they would like to purchase.
   • http://www.123-toys.com
   • http://www.toysrus.com
   • http://www.etoys.com
   • http://www.mattel.com/store/main.asp
   • http://www.toonvilletoys.com
3. Tell students to write the type of toy or game they wish to buy in the space provided. Instruct them to fill in the Toy Survey with information they gathered from the website. If students are not using the on line version of this lesson, make copies of Activity 1 for each student.
4. Explain to students that to make an informed decision, they need to gather information from two other websites, a local store and a catalog and complete the Toy Survey.
5. Tell students to use the information from their chart to select the location where they want to buy their toy or game.
6. Discuss:
   1. Where would you buy your toy or game?
   2. How did price influence your decision? [If prices vary, some students will buy at the location with the lowest price.]
   3. How might the amount of the time needed to purchase an item influence your choice [Many students will purchase at the location that requires the least amount of time.]
   4. What other factors influenced your choice? [tax or shipping costs, the ease with which the toy or game could be returned, ability to try out the product]

Part 3

1. Explain to students that e-commerce is a term used to describe the buying and selling of goods and services on the internet. E-commerce is growing. More and more people are buying and selling goods using the internet. In 1999, 39 million households shopped on line and nearly half of them spent $500 or more.
2. Discuss:
   1. How do you think e-commerce might influence the way people purchase items? [The number of people purchasing items on line will increase.]
   2. How do you think this might influence local stores or small businesses? [They could lose customers because they now shop on line.]
   3. What advice would you give these store owners who have lost customers to the internet? [Establish their own website, provide more and better service for their existing customers, advertise the advantages of shopping at a local store.]
3. Inform students that they are going to conduct a survey of at least 5 to 10 adults to determine how many adults in their community shop on line.
4. If students are not using the on line student version, distribute copies of Activity 2 to students. Students should complete a separate survey form for each adult interviewed.
5. Have students share the results of their surveys and write a summary of their findings.
6. Ask students what generalization they can make about the use of e-commerce by the adults in their community? [Answers will vary.]
7. Have students write thank you letters to the individuals who participated in the surveys and include the summary of their findings.

Closure

Use the following questions to review the key points of the lesson.

• How does price influence consumer decisions?
  [Consumers will substitute a lower priced items for a more expensive item if they feel the higher priced item is not worth the difference in price.]
• Why do consumers substitute less expensive goods for more expensive goods?
  [When prices go up, consumers look for other products that can be substituted that are cheaper and still fulfill their wants. Through substitution their income will go further.]
• What factors other than price influence consumer decisions?
  [If there is little variation in price, consumers base their decisions on habit, brand name recognition, advice from friends and family, advertisements.]
• What is e-commerce?
  [the buying and selling of goods and services on the internet]
• What impact is e-commerce having on consumers?
  [The number of consumers purchasing items on line is increasing. It provides consumers with another source of information when determining the best place to purchase a good or service.]

Evaluation

Display Visual 3. Instruct students to read the problem and decide what advice they would give their friend.

[Answer: I would tell him to look on the internet, in catalogs and local stores and gather information on price, amount of tax, shipping costs (if applicable), return policy and other discounts. I would explain to him that with this information, he can determine the CD player that gives him the greatest satisfaction at the best price.]