Purchasing Behaviour. Law of Diminishing Return.

[PsYkHoTiK]

A little pre discussion read up HERE.

Originally Posted by wikipedia

In economics, diminishing returns is also called diminishing marginal returns or the law of diminishing returns. According to this relationship, in a production system with fixed and variable inputs (say factory size and labor), beyond some point, each additional unit of variable input yields less and less additional output. This concept is also known as the law of diminishing returns or law of increasing opportunity cost. Although ostensibly a purely economic concept, diminishing marginal returns also implies a technological relationship. It is possibly among the best-known economic "laws."

Its basically relatable to any resource. But in the context of the discussion, I shall limit it to purchasing/spending.

I take into account the point of diminishing returns whenever I make a purchasing decision. Cost isn't a main factor but instead, what I get per dollar spent is. But I like high end stuff. So I find some common ground in between those. Most of my big purchases are made this way (and also my purchasing recommendations). This of course requires a lot of reading up before hand. This is also entwined with my business background.

Examples: PC Hardware, Home Theater Equipment, cars. These are to name a few such examples that I've used the above criteria.

Some people want the best bar none. No matter what the cost. Some people (like my mom) look at the dollar value and base purchases on that (which is why most of her stuff falls apart after a while ).

But what about you? What is your purchasing habit? Or do you know weigh anything and just jump in and buy stuff at whim?

[Chai]

My purchasing habit? Buy the best that I know of, or buy the best I can afford. If I can't afford it, I will probably not consider buying.

[PsYkHoTiK]

Well yea, affordability is a key limiting factor.

So even if its really expensive, you'd get it? Or would you like settle for second best if the difference in terms of what your getting is not that much (while the price differential is thru the roof)?

[Chai]

That really depends on the item. My best example would be the camera lenses. You have to pay a lot more, almost exponentially in terms of costs, but for minimal gains.

[Adrian Wong]

Hmm.. I weigh my purchases on a variety of factors. Not just cost, although it is a major factor. After all, if I can't afford it, I just can't buy it.

Even value is quite subjective. What is value? Is it just a price-performance ratio? I think there's really more to it.

Sometimes, you just have to pay for something simply because you absolutely NEED it to do something. Even if it forces you to take a second mortgage or a loan from a friend, you must buy it because it is a necessity.

As for stuff that you do not need but still want to buy, choices need not necessarily be based on price-performance ratios. It could be based on other factors like depreciation, resale value, warranty, reliability, etc.

[peaz]

For me it's various factors.

At the very base is my requirements of the product. i draw the baseline for products that will cater for all the basic needs and take the price point there as the baseline price. The minimum that I'll spend. Then from them I see what better offering is available and what's the price for those products. I'd also see if I've any near-future purchase plan to replace what I'm buying and how long that will be from the day of my purchase to determine whether if I'll go for the more expensive product or just get an ok interim one.

For example of my recent mouse purchase. My mouse just died and will be in need for a warranty replacement. But I need a mouse ASAP. I already know that I want the new Microsoft Natural Wireless Mouse 6000 which is not yet available here in the AP region. So, what do I do.

1. Requirement -Wireless, Microsoft (no logitech cos I'm too afraid of their software already), 4 buttons and above
Baseline products - Wireless Notebook Mouse Optical 4000, Wireless Optical Mouse 5000

2. What else is available?
All those laser version, Bluetooth version, mid-high price point

3. Future plans?
Get the Natural wireless mouse 6000 - high price point

End result, wireless Optical mouse 5000 since I've decided to get the Natural wireless mouse 6000 in the near future. Possibly available within the next few months. So spend less now.

[marc]

I'd like to look at this from a different perspective.

The more your earn the more you can buy.

If you find you are limited by your purchasing power (controlled by your disposable income), then it is time to look for other ways to earn more money.