Consumer

How to Create Your Own Extended Warranty

by Flexo on October 15, 2009

In my article the other day about the deal I got on a new computer despite my immediate need, I neglected to mention something important: I refused the extended warranty that the salesperson offered numerous times. Any extended warranty is almost always a bad deal.

When I was a teenager, I had a short-lived job at a ubiquitous electronics store; let’s call it “Transistor Hut.” This was the only job in retail I ever had, and I can’t say I was a fan. Our bonuses were determined by our success in selling the “TSP,” an extended warranty. Let’s say that stands for the “Candy Service Plan (with a T),” and I don’t know whether this is still in existence.

The price of the TSP depended on the price of the item, and TSPs were available for almost every product. If you buy a $19.99 pair of headphones, you could spend another $9.99 for unlimited replacement, no questions asked (other than your phone number). If you buy a $299.99 DVD player, $79.99 (or so, keep in mind this was fifteen years ago) would allow you to bring the broken device into the store, have them ship it to a repair facility, and fix or replace it. That’s a process that would likely take several weeks.

The TSPs and any other store’s extended warranties are pushed hard by salespeople because they are often rewarded for them, and they are rewarded because they are very profitable for the store. Most people who buy the warranty will not use it, so the funds become significant income for the company.

Most credit card companies automatically double the manufacturer’s warranty on products purchased with the card for up to one additional year, so that automatic, free protection is often more than enough. Check your credit card’s terms to see if this is available to you. I knew it was available to me on my American Express Blue Cash for Business Card when I purchased the new desktop computer for Consumerism Commentary’s multimedia production.

Perhaps a smarter way to deal with the possibility of broken items — besides not buying anything — is to self-insure. Rather than spending an extra $50, $300, or $2,000 for an extended warranty depending on the product, put that amount into a new savings account designated for your own personal warranty extension. Do the same for all the products you buy for which a salesperson attempts to sell you the extended warranty. What you have created is a pooled funding source for repairs. It is unlikely that all of your products will break or stop functioning, so you can withdraw from this fund to pay for repairs for the one item that fails.

With this strategy, you keep all your money if nothing goes wrong, and if the money is sitting in a high-yield savings account, it’s working for you rather than lining the pockets of major retail chains.

Here is the step-by-step process.

Step 1. When you purchase an item, make note of the cost of the extended warranty. Don’t buy it.

Step 2. Transfer this amount to a special savings account that you will not touch until one of your “protected” items needs to be repaired. ING Direct lets you create sub-accounts, one of which you can name “My Extended Warranties” or “Warranty Fund.” Don’t create a sub-account for each item. One for all of your items will do. Thus, the “Warranty Fund” is pooled.

Step 3. Repeat steps 1 and 2 using the same Warranty Fund you already created for all products you buy that might break or are associated with an extended warranty. This will build up a sizable Warranty Fund in your own name at your own bank earning interest for you.

Step 4. When one of your self-insured products breaks or otherwise needs repairs, dip into your Warranty Fund. Try to avoid using your Emergency Fund unless the Warranty Fund doesn’t cover the full expense and the product must be fixed or replaced.

The strength here is that you are pooling your own funds. This is what the retailers do to ensure warranties bring significant profits to the company. Just like not every customer will take advantage of their purchased extended warranty, not every product you self-insure will break unless you are extremely unlucky or extremely careless. In addition, the best benefit of self-insuring is that you will never have to argue with a store representative about whether certain type of damage is “covered.”

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Always Try Bargaining: Here’s How it Worked for Me

by Flexo on October 12, 2009

Tom Dziubek, the producer of the Consumerism Commentary Podcast, and I have been having some difficulties with the Acer Aspire desktop I purchased earlier this year. I believe the problem can be fixed, but it will take some time. The problems have unfortunately affected our recording and interview schedule, so when an interview on Friday was cut short due to yet another glitch and more interviews were scheduled for today that were already postponed due to technical difficulties, I wanted to resolve the problem this weekend.

At this moment, it is somewhat difficult to get a powerful desktop computer on short notice. Retail stores are gearing up for the release of Windows 7 and manufacturers aren’t providing the stores with much. The belief here is that consumers would rather wait for Windows 7 to be installed at the factory rather than buy a computer whose operating system will be out of date within weeks, even if it includes a free upgrade.

I spotted one major regional chain electronics store that not only had something better than eMachines, it had the exact desktop model that I probably would have purchased online, with a few modifications, if I had more time. Most of the computer’s specifications were excellent, but the only drawbacks were a 5400 rpm hard drive — too slow for audio recording — and an integrated graphics chip. The graphics chip was probably fine for what we needed but I prefer discrete graphics.

The salesperson and I spoke for a long time, and I eventually got a discount on the purchase — a larger discount than I asked for. Here is how I won this battle of money.

1. I was very knowledgeable about what I wanted. I have been researching the best desktops currently on the model for the past few weeks, ever since the first sign of problems with the Acer Aspire, even though I believed and still believe the problem can be fixed. I knew exactly what I wanted and the price range I wanted to pay for the features I wanted.

The salesperson knew I was knowledgeable because I discussed the system in detail with him and explained my other options. I could tell he wasn’t as technically inclined as I am so I didn’t try to show off; I kept the conversation on his level but I was able to express that I had done my research.

2. I pointed out the flaws. It is true this machine had the two drawbacks I mentioned above. I made sure the salesperson was aware of my observation that these factors were detrimental to my choice and might hold me back from buying.

3. I asked for a discount. On the basis of the machine not matching my expectations exactly, and knowing that a 10% discount is common in retail electronics, I asked for 15% off. The salesperson explained that they cannot offer discounts on computer systems, but they could offer me a rebate if I purchased a printer or possibly some other accessories. I considered this; I didn’t need a printer, but if I could get a good discount on a replacement hard drive or graphics card, I might take that option.

The particular store I visited does not sell these types of computer components, so I wasn’t going to find something I needed. The salesperson did work very hard as we thought about different options that might satisfy me.

4. I was patient. When we couldn’t find a good route for a discount other than, in my mind, the computer itself, the salesperson went back to his manager. Still, the word was that they could not and would not offer a discount off the price of the desktop. We looked online, the salesperson on the store computer and me on my BlackBerry, to try to find other stores offering the system for less.

The store’s system of price matching is designed to wear the customer down. The salesperson has sixteen competitors’ websites bookmarked in Internet Explorer, and the process calls for searching for the product on each website in order to find a store with the product in stock and for sale at a lower price.

As I mentioned above, this is a very bad time for buying a computer with stores keeping not much in stock, so I knew this search would be fruitless.

On my BlackBerry, I did find a better price on NewEgg.com, but as expected, the store would not match an online-only price. The price at NewEgg was $30 better than the price in the store, which would have been a discount of less than 5%.

5. I made my final offer. After about thirty minutes in the store, we still weren’t going anywhere. The sales manager wasn’t ready to budge, and I wasn’t going to pay full price yet, even though I knew I needed a new computer by the end of the weekend. I didn’t let the salesperson know that I needed the computer immediately. In his mind, I could just buy the computer online. I told the salesperson that unless they can give me $30 off, that is exactly what I would do.

6. And then I walked out the door. But I didn’t get very far. As I was walking towards the door, I could see the salesperson and the manager in a frantic discussion, and as I stepped outside, I was called back into the store. There were going to make a deal on the desktop.

Patience still played a key role. I waited for what was probably another twenty minutes as the salesperson was in the back of the store, bringing the computer out. There were obviously some more problems because he came out twice without a computer and spoke to the sales manager.

Eventually the salesperson brought out the computer. The box had been opened, but the machine had never been used. It was not a display model or a customer return; the box had been opened because another customer’s keyboard was defective. They took the working keyboard from this computer and gave it to that customer, so mine was without a keyboard. They gave me the working keyboard from the display model and knocked $80 off the price.

That was more than my final offer, so I accepted. My discount in total was more than 10%. I spent more time in the store than I had originally planned but I got what I wanted for a price that was better than I thought I could have received. Even considering the replacement hard drive and the graphics card I purchased later, I talked my way into a great deal.

In the end, I got what I wanted, and so did the salesperson. Everyone wins.

I am not a very persuasive or aggressive person, so it’s a bit against my nature to work so hard just to save $85.59 including tax. I definitely think it was worthwhile. I always suggest at least trying to bargain, even when faced with resistance.

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TV Ad Volume May Finally Be Moderated

by Smithee on October 9, 2009

This is something I’ve wanted to see happen for my entire life. I never thought it would, and I’m only mildly political so I never pushed for it, but we may see a new law that says a TV commercial can’t be “louder than the program it accompanies”, nor can it be “excessively noisy or strident”.

At our house, we don’t get to see a lot of commercials, but our TV-service-provided DVR isn’t as elegant as a TiVo, and the 30-second skip button leaves a gap between skips, and some of those gaps are obnoxiously loud. Usually it’s people wanting to melt down my “extra” gold or sell me some unpainted furniture from a warehouse, but it could be anything. It makes me instantly angry, every time.

But just yesterday,

The House Subcommittee on Communications, Technology and the Internet on Thursday approved a bill that would prohibit television commercials from being excessively loud. The FCC would be required to come up with recommended volume levels for commercials.

Broadcasters, TV stations and cable and satellite providers would then have one year to purchase the necessary equipment to temper noisy ads.

I wasn’t expecting new equipment to be necessary, since when we watch things on Hulu, the ads are never louder than the show I’m watching. When we watch videos on the Xbox, a TV show’s volume isn’t any louder than it would be if I were playing a game, and the same goes with a DVD. Even when watching any of the dozen channels on Boxee, I never have to scramble to adjust the volume. But I guess that “old school” TV providers (I have the extremely recent Verizon FiOS) are a mish-mash of suppliers and delivery devices, and there’s still a hole that needs to be plugged.

House panel seeks to hush noisy ads, Kim Hart, The Hill, Oct. 8, 2009

Hit the mute! Why TV commercials are so loud, and how that may change, Jeff Bercovici, Daily Finance, Oct. 8, 2009

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Overkill At the United States Mint With New Coin Designs

by Flexo on October 8, 2009

In 1909, the U.S. Mint decided to honor assassinated President Abraham Lincoln by putting his likeness on the obverse of the lowest denominated coin in regular circulation, the cent. This new design, introduced for the centennial anniversary of Lincoln’s birth, replaced the “Indian head” cent. The model for this design was most likely not a native American; most sources point to Sarah Longacre, the daughter of the cent’s engraver, wearing an Indian-style head dress.

This was the first time a coin in this country would depict a political leader. Those who created the first coinage in the country several centuries prior desired to distance this country from the monarchies of the Old World, where it was common for state leaders to decree their countries’ coinage should depict their images. American coins, for the most part, would depict a representation of “liberty” until the introduction of the Lincoln cent.

Public reaction

The design change in that year drew mixed emotions among the public. Some welcomed the change. As A.A. Leve wrote on August 15, 1909, in his letter to the editor of the New York Times in 1909, “… [T]he long line of illustrious Americans on our coins will have more education and patriotic influence on the citizens of our country than all the biographies and histories ever combined.” At least in the coin collecting community, you often hear of long-time collectors using their coins to teach their children and grandchildren about American history, so Leve may have been correct.

But there was also dissent. C.F.H. also wrote to the New York Times in August of 1909:

… [T]he chief aim governing a plan to honor such a being as Abraham Lincoln should be to comply with what his wished might be were he given full opportunity to express them. For, in failing to take account of so important a factor, such an honor as that involved in the new product of the mints of this freedom is left incomplete.

To think that Lincoln would find progress expressed in the recent insult to our National symbol of liberty, the “Indian head” on the cent, which, though it might be improved upon, should always remain, is inconceivable.

Throughout the twentieth century, the U.S. Mint was judicious in changing designs on coins. But over the past decade, they, and Congress who has been authorizing these changes, have been on a tear. Although the government’s stated purpose was to incite interest in coins again, it is clear that the U.S. Mint would much rather function like the Franklin Mint, releasing new products as often as possible so they can collect money from coin collectors.

The beginning of redesign overkill

First we had the State Quarters program, which began in 1999. Five new designs would adorn the reverse of the quarter dollar each year for ten years. The artistic and metaphorical engravings of prior centuries were replaced with run-of-the-mill images of whatever each state could come up with to commemorate itself. In 2000, the dollar coin came back in full force with the Sacagawea dollar.

The next coin to be awarded a new design was the nickel in 2004. This year saw two different designs for the reverse. In 2005, two more new reverse designs were used, as well as a new portrait of Thomas Jefferson on the obverse. The following year, the Mint found yet another portrait of Jefferson for the obverse and returned to the pre-2004 reverse.

In 2007, the Mint began a new dollar coin design in addition to the Sacagawea coin. To satisfy Presidents other than those already depicted on coinage, every American President would get a chance to appear on the dollar coin. Four new designs have been released every year since 2007, each with a portrait of a President, released in the order they took office.

The Mint couldn’t go another year without announcing something new, so in 2008 they decided to follow the State Quarters series with additional designs, including representations of D.C., Puerto Rico, American Samoa, Guam, the U.S. Virgin Islands, and Northern Mariana Islands.

Are we done yet? No. This year is the centennial anniversary of Lincoln’s first appearance on the cent. If you’ve looked carefully at your change this year, you may have noticed new penny designs.

A better idea

It’s time to stop commemorating people on our coins. Let’s go back to artistic designs depicting the idea of liberty, like this beautiful engraving of “walking liberty” by Adolph A. Weinman or another liberty engraving by Augustus Saint-Gaudens. Choose one design for each coin and stick with it for a long time, at least one generation and perhaps more than two. Give the public some time to get used to each design.

Continuous design changes don’t make coin collecting interesting for the long term. And for those interested in investing, I doubt that collecting any new coins will ever be financially worthwhile due to the vast quantities that are minted each year. All that is left for collectors besides the coin’s face value is the art. It might as well be good art rather than homages to elected leaders.

The Lincoln Cent (Letter to the Editor), A.A. Leve, The New York Times, August 15, 1909.
The Lincoln Cent (Letter to the Editor), C.F.H., The New York Times, August 6, 1909.

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Facial Recognition and Billboards

by Smithee on October 2, 2009

in Consumer, Privacy and Security

I have a fascinated/disgusted relationship with targeted advertisements. On one hand, I’ve seen enough Playtex commercials in my lifetime that I could probably draw you their logo from memory, and I’ve never been in the position to decide, “should I buy the Playtex version, or a different brand?” All those ads in my face have been a complete waste of my time, and the advertiser’s dollars. So, I think it would be really neat if I only saw advertisements that would interest me.

On the other hand, even though I’m blessed with A.D.D. and therefore daydream my way through most ads, I’ve read enough studies about how ads work, and I know that in some cases I’m more likely to buy a brand I’ve heard of. In other cases, a simple Google search will suffice, and the recommendation from people I trust is worth more than a hundred well-produced ads.

Since the seminal work on the subject—Minority Report—came out in theaters, I’ve been waiting to see just how close we’ll get to individually-targeted ads. And this morning I see that Germany is beginning to place video cameras inside of street-level billboards, designed to recognize people’s emotional reaction to specific ads. If the advertisers sees that more people are smiling, or at least interested, than sneering, they’ll feel encouraged to keep the ad going.

Granted, this is quite far from a commercial that speaks to you or knows your habits, as in “Hey, Bill Braskey, it’s been 8 days since your last vanilla latté. Don’t you think you deserve one?” And I’m thankful for that. At present, I don’t feel like an advertisement that judges my emotional state is an invasion of privacy, but if they start to recognize my identity, I certainly will.

We do, however, already see ads based on our habits. Google and its advertising partners have the ability to show you ads that other visitors won’t see, because your Internet browsing habits are not exactly private. They call it “interest-based advertising”, and because Google is Google, they were very open and up-front about it, and have provided permanent methods for anybody to opt-out of the program.

Billboards shouting out your name aren’t a reality yet for a couple important reasons: 1) recognizing an individual face isn’t foolproof yet, and 2) advertisers don’t have access to a database of, say, driver’s license photos. Although, there may be a way around that last requirement, if Facebook starts selling access to names tagged in photos. In any event, you can rest assured that we’ll keep on top of this for you and help you protect your brain.

Big Brother is watching you shop, Michael Fitzpatrick, BBC News, Oct. 2, 2009

Photo credit: rpongsaj

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The Album’s Last Gasp

by Smithee on September 4, 2009

For a good thirty years or so, starting in the 1950s, musicians released singles on vinyl discs called “records”. You could also buy a full album of music by one artist, and some were worth it, but you also had the option of buying just that one song that you liked, that you kept hearing on the radio.

(You’d also get a second song on the “B-side” of the record. Mostly people just considered that a bonus.)

Vinyl made way for cassettes, and the cassingle was born. Then cassettes made way for CDs, and while I remember seeing some CD singles, they were never as prevalent as those on vinyl or cassette. I believe that’s because the vinyl and cassette singles were cheaper to make than the full album version, since they used less raw material, but a CD single cost as much to make as a full CD.

Consumers, en masse, didn’t complain about the death of the single. I did, because I won’t pay $18 for two or three songs. And let’s face it: the majority of your average pop/rock album is filler material. But for some reason, I was mostly alone in my anger.

Then everything went digital, and all Heck broke loose, people were making lossless copies, yadda yadda, you know this part. Now we’re finally at a place where you can once again pay for just the music you like, for a completely reasonable 99 cents, and there’s nothing stopping you from sending a copy to, say, your wife. (See also this controversial article: “Is it Ever Okay to Steal Entertainment?“.) In the music scene, DRM is dead, and yet somehow, the recording industry still lives. Who’d've thunk it? (Me. You. Everyone without a vested interest in obscene profits from album sales.)

record-needle

Photo by stevecadman

But record companies, bless their pathetic little hearts, are still trying to find a way to sell full albums. There are at least two options in the works, something called “CMX” and Apple’s version codenamed “Cocktail”, which we’ll almost certainly learn more about at their upcoming press event on September 7th. These new digital album covers are meant to be interactive, and include videos and lyrics, and other mysterious “stuff” that has yet to be identified.

It won’t work. If I had an extra $1,000 (or even $1,000 that wasn’t extra), I would bet it all that this won’t work. These efforts will all die. Technical compatibility issues aside, people are simply done buying things that they don’t like. I’m not in the habit of feeling schadenfreude, but in this case, I am happy to sit back, point and laugh.

That all being said, when a music group proves itself to make consistently good albums of mostly-non-filler (in my opinion, people like Ben Folds, They Might Be Giants and “Weird Al” fit this description), I’ll buy a whole album. They deserve it. Also, good movie soundtracks. Music tastes are incredibly subjective, of course, but until music goes non-digital again, you’ll have very few reasons to buy a whole album.

New digital album format doesn’t have a prayer, Matt Rosof, CNET News, August 11, 2009

Cocktail part of Apple’s September event, Greg Sandoval, CNET News, August 14, 2009

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Consumer Confidence Above Expectations: Are We Out of the Woods?

by Flexo on August 26, 2009

Depending on which newspapers and news websites you read, the Consumer Confidence Index either soared, jumped or surged this month. The headlines as you would expect don’t tell the whole story.

The Conference Board calculates this index by performing a random survey by phone of 5,000 households in the United States, selected because they represent the country as a whole. The questions in the survey ask the respondents how they feel about the economy as they look towards the next six months. Will there be more jobs available? Will they receive a raise?

The results of this questionnaire moved the Consumer Confidence Index from 47.4 in July to 54.1 in August, significantly beating the economists’ expectation of 48. Economists are calling this a major win for the economy, but to me it just looks like those in charge of the predictions got it wrong. If the expected August index was 55, we would see disappointed headlines rather than the exuberance expressed today and yesterday.

Consumer confidence becomes a “self-fulfilling prophecy” in some ways and a feedback loop in others. Those who respond to the surveys with a favorable outlook cause the Index to move upwards, and the news of the index moving upward encourages businesses to start operating as if the economy is heading soon towards recovery.

But let’s keep this in perspective. While the economists are joyous about the Consumer Confidence Index’s jump, the index is significantly below the level one would consider “good.” According to CNN, we would need to see an index of 90 before the economy can be considered solid. We’re only at 54.1. We have a long way to go before jobs start appearing in the market and before people start spending more.

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Decaf Double Short Skim Double-Pump Vanilla Latté

by Smithee on August 21, 2009