How to Give Away Your Power By Being a Biased Consumer

Today's post is about how we can seriously hurt our power as consumers by holding biases and preconceptions about products, companies and industries.
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I want big companies to compete intensely for my readers' spending dollars. I don't want them to get those dollars by default because of our preconceived notions.

But when we make purchasing decisions based on our biases and preconceptions, we give away all our power as consumers.

Read the following three statements:

1) I only drive American cars.
2) I only buy organic.
3) I never shop at Wal-Mart.

Do any of these sound familiar to you? I'd bet most of my readers have made at least one, if not all, of these statements at some point in their lives.

My goal in today's post is to show that statements like these hurt us more than they help us. In fact, many widely held shopping- and purchase-related biases, despite sounding reasonable or ideologically agreeable, actually do considerable damage to the average consumer's choice and power.

All people have biases--it's fundamental to the human condition. But when our biases become unthinking or out of date, we hand over our consumer power before we even walk into a retailer's place of business. Let's go over each example:

"I only drive American cars."

I heard this statement regularly in Syracuse, NY when I was growing up. And if I had a nickel for every gas-guzzling, rusted out American car on the roads up there during the 1970s--well, let's just say I'd have a lot of nickels.

People back then who held this ideologically comfortable bias thought they were being loyal to American automakers (uh, oh--there's that dangerous word "loyal" again). The awful irony, however is this: because they refused to consider other products on the market, not only did they limit their own choices, they also wasted money, energy and environmental resources. But worst of all, they rewarded Chrysler, Ford and GM for making substandard cars.

[Those of you too young to remember, watch a classic 1970s-era movie like The French Connection or Taxi Driver to get a sense of the monstrously large cars everybody drove back then. And if you want to imagine what we all drove in Upstate New York, imagine those same monstrous cars covered in rust and falling apart.]

The new competition from international automakers actually helped everybody. The US automakers had no choice but to respond to the superior Japanese imports, and they grudgingly improved their product lines, finally making cars that had fewer defects, ran better and got far better gas mileage. Foreign automakers built plants and dealer networks here, providing hundreds of thousands of new jobs. Best of all, American consumers had more choice, and they ultimately ended up getting better, safer and more fuel-efficient cars for their money.

"I only buy organic."

Let's set aside for the moment all the recent questioning of the nutritional and health benefits of organic food. Do you realize that paying to meet all the government requirements to qualify for organic labeling can be onerous, especially for small farmers? It's quite likely that you have local farmers in your community who grow all of their food responsibly, yet they can't label their foods as such because it's too expensive or time-consuming to follow national organic standards to the letter of the law.

Don't assume that food lacking an organic label is by definition grown unethically. By holding that assumption as an article of faith, I guarantee you will miss out on the opportunity to buy local and support many ethical food growers in your community. Isn't that just as "brand stupid" as thinking a Givenchy bag is superior--just because it has a label?

[Forgive a quick tangent: when the government sets onerous rules and regulations on any industry, it generally has the perverse effect of limiting competition. Here's a particularly painful recent example: Altria Corp. (the former Phillip Morris tobacco company) was happy with the recent FDA decision to expand its authority and regulate tobacco. Why? Because heavy FDA regulations mean significantly increased costs for potential competitors.

The largest players in a market can always bear new regulatory requirements with ease. However, those extra requirements typically create barriers to entry for potential new entrants, and they increase the cost of doing business for smaller, marginal players to a point where they exit the market. This means fewer choices for consumers and maximum market share for the big guys. Don't get me wrong: I support intelligent regulations, but not when those regulations create counterintuitive outcomes that hurt the consumer.]

"I never shop at Wal-Mart."

This one is going to get me in trouble, I know it.

There are lots of things I don't like about Wal-Mart, but their pro-consumer pricing strategy isn't one of them. This company simply decided to build a business based on lower operating margins than other retailers. If you'll excuse the finance-speak for a moment, Wal-Mart's operating margins tend to be in the 2-4% range, while most other department store retailers charge higher prices so that they can achieve 5-7% operating margins. Those higher profits come directly out of consumers' pocketbooks.

Granted, there are plenty of other issues Wal-Mart faces, a discussion of which is far beyond the scope of this post. But few people give Wal-Mart credit for this highly pro-consumer strategy, a strategy many other retailers could also follow--if they chose to be equally pro-consumer.

Readers, what are other biases that hurt our consumer power and limit our choices? What else did I miss?

Related Posts:
Why Spices Are a Complete Rip-Off and What You Can Do About It
Stacked Costs and Second-Order Foods: A New Way to Think About Rising Food Costs
Just Say No to Overpriced Boxed Cereal
The Problem with Government Food Safety Regulation
How to Write an Effective Complaint Letter

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16 comments:

Joanne said...

I really like this post Daniel. It is a good reminder of why we cannot think in absolutes. There are exceptions to just about every rule out there (this is especially true in biology where you cannot make a definitive statement about anything - the caviats are far too many) and so anyone who is too close-minded ends up harming more than helping themselves. I think the best thing we can do, in the end, is to keep an open mind and be as educated as possible about the items we buy so that we can make the best choices.

citrus said...

Shouldn't our shopping choices be informed by multiple factors, not just what is most empowering to us as individual consumers?

Predictable, I know, but: I refuse to support a business that may empower me as a consumer, while doing harm to its own employees and to my larger community.

That said, your point about organic labeling is an excellent one.

Mumses said...

great post, Dan! Especially interesting since you talk about two companies I own shares in. I think you should launch that financial/economics blog you've been talking about...:)

Daniel said...

Some interesting insights so far.

Joanne and Mumses, thank you for the feedback, and as always thanks for reading.

Citrus, you make a solid point, but I think it depends heavily on how you define "empowering"--and for that matter on how you define "harm." That said, if you've thought carefully and without bias about the retailers at which you choose to spend your consumer dollars, then by all means spend as you see fit. That's what I want my readers to do, and that to me is the definition of an empowered consumer. Many readers will think through the Wal-Mart issue and decide similarly.

The entire question of Wal-Mart is far beyond the scope of this post, and of this blog for that matter. But I will say this in its defense: for the past few years it's garnered so much market share that it could have (and as the business school textbooks would say, should have) raised prices significantly by now. And yet the company hasn't. Prices are still low, as are operating margins. Say what you want about other aspects of Wal-Mart, but that is truly, and almost mystifyingly, pro-consumer.

DK

Amy said...

Hi Daniel,

Thank you for pointing out the limitations of "I only buy organic".

I shop at a local farm stand and from my farmer neighbors' honor-system front yard stands, though they are not certified organic. I still get (to my taste) the best-quality corn, sweet peaches, and winter squashes that overwinter well, but for a lot less money than if I had purchased organic at the grocery store.

By shopping at these places, I'm supporting local businesses, and saving money. However, I did have a conversation with someone active in the food movement about the farm stand, and she expressed dismay that they aren't organic, as though this rendered their farm stand inferior. It's disappointing that this view is held, particularly by someone who presumably understands the intricacies of the food industry.

Generally speaking, people need to be free to purchase the very best quality that they can afford without being made to feel badly about those decisions. This post sums that sentiment up nicely.

Holly said...

I especially enjoyed the point about organics. Because of how full of hoop-jumping (not to mention loopholes) the organic label is, many farmers actually do more to be sustainable than what is required for an organic label - and yet they don't choose to have the label. It's a better idea to find a local small farmer or retailer that buys locally - or join a CSA - than just buy everything at WholeFoods just because it has the magic sticker. I wish more people were interested in the inner-workings of the food industry. If they were, we'd all have more and better choices.

Charity said...

I find you very credible, Daniel. I am impressed by how fair and balanced your arguments are in all of your posts, and this is no exception. I appreciate getting a different perspective on things, especially when it's logical and well-reasoned. Thanks for your work.

Daniel said...

Amy, thanks for your comment. And you epitomize what I want for my readers--to seek out and find opportunities to save money AND buy healthier and better quality food, and not get caught up in labels or brands without a good reason.

Holly, I like your expression "magic sticker"--that's a good one. Of course it's better that WFMI or other grocers use some sort of signal that helps consumers differentiate the qualities of the foods they find important, but totally agreed that it's foolish to get caught up in the sticker.

Charity, thank you! You have paid me the highest compliment. And you put your finger on exactly what I'm trying to do here at Casual Kitchen: give readers a different and well thought out perpective on the foods we eat and prepare.

DK

Christie's Corner said...

Interesting post, Daniel. You're right that there are no black and whites. I think the consumer biases you mention come about because it's easier to think in absolutes. The nuanced, "if then" approach requires a lot of time and thought.

I agree with you about organics and the messy results of protectionism. WalMart? Let's just say they'd have to broker world peace before I bought a stick of gum from them. (And yes, I'm being totally unreasonable on this point.)

Marcia said...

Very interesting post. I find it interesting that my parents still only buy Fords (though they replace them almost constantly).

Living in So. Cal, there are a lot of people who "only buy organic". I prefer to buy from the local farms, some are organic, and some are not. All of it is high quality.

And Walmart. I don't like them, but there isn't one in my town. However, when I visit my mother, I do shop there. Because of turnover, their produce is the best in town. And that one plane trip I took with my toddler when the airline lost my luggage? Well, I had to buy clothes, diapers, etc... somewhere.

oilandgarlic said...

Thought-provoking post. I saw the documentary about Walmart and vowed never to return. Well, reality hit. Although I watch out for sales at other stores, Walmart's prices are generally lower.

Plus, despite Walmart's many problems, I do have to applaud their low-priced drug prescription program. It made a difference for me because some medications I need are not covered by my HMO. Plus their efforts led to similar low-priced drug programs at other chains. Making more medications affordable has definitely helped many people.

Daniel said...

I didn't even think about their low priced drug program. That was a miss on my part. In some ways they are revolutionizing the drug industry. Of course in the same breath you can argue that they are hurting pharmacists in small towns all over the country! I guess WMT really does have to broker world peace (to borrow Charmian's exceptional phrase) to win over some consumers. And that's okay too.

But as a few commenters have said: it might be easier to think only in absolutes, but there really are no absolutes.

DK

Stuart Carter said...

I am one of the "never shop at WalMart" people. I have very pragmatic reasons as well as an ethical reason.
Pragmatic: I find that produce, raw meat, and milk goes off really fast. I find that I can shop cheaper at Publix and Winn-Dixie by shopping smart with coupons (yes, W*M may be a couple of cents cheaper, but when I can get the same stuff BOGOF from W-D or Publix...). The food I buy at Publix and W-D stays good longer.

Ethical: I find W*M's corporate policies abhorrent, along with their casual disregard for human life (read Consumerist for stories of people being assaulted, arrested, and killed by W*M stores).

So yeah, I don't shop at W*M. But I agree with you - a "loyal customer" is an idiot. Brand loyalty is for schmucks :)

Daniel said...

Stuart, nothing wrong with having a well-thought out and reasoned opinion. I think you get my point, which was not about Wal-Mart per se, but about not following your habits or biases without challenging them from time to time. Thanks for your comment.

DK

Lo said...

I must agree -- this concept is thought provoking, and has some great bones to it. I think if we're going to make truly great buying decisions, we have to be aware of our own biases.

As Holly points out, "magic stickers" don't tell the whole tale when it comes to purchasing sustainable, pesticide & chemical free foods. And sometimes, frankly, those organic labels are even lying to us (much larger conversation).

As far as the Walmart discussion goes, I totally get your point. And it was a great way to get all of our attention (and lure us into commenting ;))

Yes -- Walmart's business model does appear to be customer-centric... though even that argument falls down when we consider the sometimes inferior product that they're putting out on the market. They're also enabled to put out a lower price point on their goods because they take advantage of their vendors in ways that other "big box" stores to do not (ask anyone who has worked for a vendor that provides goods to Walmart... the stories abound).

All of that said -- it's important to be critical of our own buying decisions... and know exactly why we're choosing to buy what we buy.

autumn609 said...

Love the magic sticker concept. When I am at the local megamart it is nice to know what is organic easily for the things I want to buy that way. My CSA that I love, and I never thought one could have too much baby garlic until now (peas are late this year) is not certified organic, but they do everything but get the certification, which would double our membership costs. They put so much love into growing the food that you know it's fresh and as natural as can be. Have learned to check the lettuces very carefully, as I almost served a omnivore salad with a "slug" to my veggie only friends.