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Consumer electronics prices are in broad decline

This holiday season is promising to be a very good one… to those of you who still have jobs that is. Yes, I know it sounds sad but still the facts are stubborn things. A wide range of consumer electronics products have hit record low prices according to this Wall Street Journal report. The article lists popular product categories such as HDTV’s , laptops, camcorders and DVD players - all showing significant price declines. The trend seems to be very widespread.

While prices on consumer electronics typically drop over time, the breadth of key price barriers that are being broken across so many segments is unusual. “The price declines we’re seeing this year are steeper than normal in many more different categories,” said Steve Koenig, an analyst at the Consumer Electronics Association, which calculated that consumer-electronics prices fell 7.7% overall in the first half of the year compared with a 1.9% price increase a year earlier.

Another interesting conclusion made by the author is that the “consumers shouldn’t expect gadget prices to fall much further over the holiday season” which I tend to agree with. As the economy slowly recovers the demand will pick back up and will drive the prices. Another factor to consider is the falling US dollar. Since most of these products are made overseas and imported into the country, weak dollar automatically means higher prices.

Earlier this month I made my investment picks for this year’s IRS contributions and I am heavily betting on inflation (here the distribution: 50% DBC, 30% FE, and 20% AAPL). As for this year’s shopping, all our budget went towards saving money for my daughter’s field trip to Cost Rica in the spring of 2010 so we will probably have to go away with a CRT TV in our living room for another year.

Verizon broadband contract DIY

Oregon Live has an interesting story about Dennis Streed, a 83-year-old man who wanted to pay $77.99 a month for broadband, TV and phone service - just what the Verizon ad promised to him. So he crafted a contract that included provisions for “No hidden fees, and no additions, unless we ask for them.” and made a company rep sign it.

But when the first bill arrived May 22, it asked for $158.49. The monthly charge grew to $186.33 in June and $183.03 in July. With the second bill, in June, Streed began paying only the $77.99 he’d promised. By August, Verizon cut off his Internet and TV service.

When contacted by the newspaper a company salesman has explained the incident as a mistake. The interesting part however is whether the man will be able to legally enforce the company abide by this non-routine customer created contract. We should find it out soon because Streed who once taught consumer law, is filing a complaint with the attorney general in Portland, his home state.

Next time I sign a contract with a phone company - it will be on my terms! ;-)

Anatomy of a shopping discount

Having a sale every day is a bad idea, but retailers are afraid to stop.
– Rama Ramakrishnan, former chief scientist of Oracle Retail

Why are there shopping discounts? Would not it be much simpler to find what you need, and just buy it at the lowest price in the market? Instead we are bombarded with marketing tricks called “shopping discounts” that turn our decision making into a nightmare. I have recently read a wonderful book called Cheap: The High Cost of Discount Culture where the author, Ellen Shell, offers her opinion on what exactly drives us to buy things and what role discounts play in our culture. In this blog post I would like to share some of her thoughts as well as add my own take on the subject.

The illusion of a price

The survival strategies of our ancient ancestors did not include learning the art of assigning monetary values to things. Barter, not money, was essential part of the ancient lifestyle for a very long time. Money as the concept is nothing but a small speck in the history of humankind and naturally people have not had the time to develop the proper skill. Monetary values are abstract, highly variable, and vulnerable to the power of suggestion and manipulation: People will pay more or less for the same thing depending on the context of the transaction.

Duke University professor Daniel Ariely — an economist and author of Predictably Irrational – once set an experiment in which he offered to recite his students a poem. Half the students were asked whether they would pay $2 for the pleasure of hearing him read, while the other half were asked if they would be willing to listen if they were paid $2. Then both sets of students were asked whether they would attend the recitation if it were free. Only 8% of the students who were offered money were willing to attend the performance without pay, compared with 35% of the students who were originally asked to pay to hear it. As you can see the “framing” of the event clearly influenced its perceived value.

The real-life example is outlet malls. Remote location of outlet malls is not merely a defensive, cost-saving maneuver directed to cut costs by taking advantage of low real estate prices and tax benefits. It is also a deliberate strategy. In the public mind, convenience is a trade-off for price, and price is traded off for convenience. Inconvenience connotes cheap, while convenience connotes pricy.

The pressure of a discount

Shopping is not a rational exercise but a process fraught with emotions raging from guilt to jubilation. Shopping forces us to extrapolate future needs from current evidence, a surprisingly difficult task. How do we really know what we will want or need tomorrow, let alone a month from now? The main problem is that shopping is for later, but for humans the “here” and “now” is always more important.

Thanks to what psychologists call Hyperbolic Discounting, humans are able to think rationally when a reward is significantly delayed. But as the reward gets closer, our passions lead us to fits of impulsiveness. This is not a terrible deep insight: Everyone knows that it’s easy to make resolutions for the future but far harder to put those resolutions into immediate practice.

Retailers can take advantage of this by offering “exploding discounts,” price reductions rigged like an arbitrary time bomb. Exploding discounts work by really heightening the emotions, whether you need it or not, the time limit itself gives you a reason to act now. The emotional response is “Buy it now, or it will be gone”. You are focusing on the present, not the future, and that’s where they want you to focus, because we are all much more emotional about the present and more rational about the future.

Different discount flavors

In addition to a direct reduction of price, discounts come in a couple more flavors, each designed to elicit a different consumer response: coupons and mail-in rebates. Coupons are less dangerous for retailers than direct discounts. Someone has to physically cut it out and bring the coupon to the store, and not everyone is willing to do that. Coupons are a way of having two prices: a price-sensitive person will use the coupon and get a lower price, while a less price sensitive person might be willing to pay the full price.

Rebates do something similar using a very different strategy. The catch is that no matter how much we enjoy the idea of rebates and account for them in our buying calculus, few of us enjoy filling for rebates. Rebate redemption rates are very low, hovering in the 5 to 10 percent range for many items.

Discounts can hurt businesses’ bottom line but retailers employ numerous marketing tricks to maximize profits and negate the discount effects. For example at McDonard’s and many other fast-food restaurants, the lighting tends to be unflattering fluorescent, and the seats are bolted to the floor at an awkward distance from the tables. The purpose of this is not to prevent theft of the chairs, as you may think, but to discourage elders, teenagers, and other undesirables from getting comfortable and congregating for hours over a small coffee, or an order of fries.

Time is money (freebies)

Free is a category unto itself, It can rob us of our reason. Razor blade maker King Camp Gillette took full advantage of this temporary insanity. Gillette grew rich handing out free safety razors to generate demand for his pricey disposable blades. The business model was later called Freebie Marketing and expanded into many more areas of our life ranging from entertainment to household items to office equipment.

How do freebies work? Very low prices tend to make us overvalue the deal. This is a boon for merchants who know that as their price approaches zero, consumers tend to lower their expectations and become more willing to endure significant costs, generally the highest cost being their time. We all know that time is money but research shows that most of us fail to calculate the opportunity cost of time, and when reminded of it, we tend to underestimate its value.

Conclusion

Discounts may be calibrated mathematically, but their impact is felt viscerally and deeply. As do sex, alcohol, and drugs, discounts tap into our brain’s pleasure center and sap our reason. Distracted, we make mistakes. We overvalue what we say matters very little, such as saving a few pennies and undervalue what we say matters very much, variety, quality and - most important - our time. Understanding the “magic” discounts work on our brains is important for coming up with an effective strategy to help us counteract the problem – something that will probably be a topic of one of my future blog posts.

Moving my phone service to CallCentric

innomediaI wasn’t simply speculating about my phone bill last month. Yesterday I got myself together and went on with the change. I didn’t however take the easy route of buying a packaged deal from a normal “layman’s VoIP company” like Vonage. The true bargain hunter is always looking for a challenge ;-) and so I signed up for an account with one of so called Bring Your Own Device (BYOD) VoIP providers and used my old SunRocket gizmo for the equipment. Below is my experience with the transition.

1. Unlock your SunRocket gizmo

First I had to unlock my old VoIP router so I could provision it to use with the new VoIP provider. You can skip this step if you buy off the shelf VoIP router. The gizmo I had was InnoMedia MTA6328-2re and these are the exact steps that I had to follow to unlock it:

1. Unplug cable from gizmo WAN port (so you are disconnected from Internet).
2. With PC connected to gizmo LAN port, go to http://192.168.251.1 , log in with user and welcome.
3. Open this URL: http://192.168.251.1/restore2.ssi ; after about 15 seconds you should see a message about reset to defaults. Wait another 30 seconds.
4. Close browser window. At this point your gizmo should be in the same state as when SunRocket first shipped it to you.
5. Open a new browser window, go to http://192.168.251.1/Voice_adminPage.htm (do not open gizmo home page first).
6. When prompted for password, use user: admin and password: slapshot
7. Go to IP Network->Provisioning Setting. Uncheck Enable Provisioning. Click Save & Reboot. Click OK to warning.

2. Sign up for CallCentric account

I suggest signing to the Pay Per Call plan first so you can try out the call quality first without spending too much money. The only fee to pay during the sign up is 911 Cost Recovery Fee ($1.50). Other than that the costs are just $0.0198 per minute when you call within the US and you can deposit as little as $5 into your account.

3. Configure your gizmo for CallCentric

When you sign up to CallCentric they will prompt you to go through the setup guide which has instructions for a number of popular routers. I didn’t look at all of them but the instructions they had for InnoMedia were very detailed and had several screenshots. It was really a piece of cake to follow them and get my gizmo up and running.

4. Make a few test calls

Once your gizmo is configured and provisioned with CallCentric, use it for a while to see if you like the service quality. You will not at this point be able to receive incoming calls (you will have to buy a phone number or port your existing number) but you still can test incoming calls with their ClickToDial tool. Another way to test incoming calls is if you know somebody who is already a CallCentric customer (they are giving you an internal 777 number that can only be used within the network).

5. Port your phone number

The last thing I did was buy a real phone number. The “Pay Per Minute” version is just $1.95 per month and $0.015 per minute. As you order the service you have a choice of buying a new number or porting your existing one. If you choose the latter CallCentric will ask you to provide some information about your current provider (name, address, a copy of recent statement) and will submit a LNP request which in my case is estimated to take 2 weeks to process. If you port – the porting fee is $25, if you buy – the new number fee is $3.95.

6. Enjoy your new phone service!

I have not had much time to use the phone yet but I love the service (my LNP request was processed withn hours) and the web interface is one of the best I have seen. In fact I am going to borrow some of the dashboard ideas for my own project. As my phone number gets ported, I will post in the comments my experience with the service quality.

MP3’s on a stock car stereo. What are the options?

I have been pretty much in sync with the time as far as personal technology goes, so I think. I use CFL powered lights throughout the house, I abandoned paper news a while ago, I use smart-phone to keep me online on the go, and my music is all in MP3’s for a few years at least.

There is one big thing though that is terribly out of date. It is my car. There are a couple reasons really. It doesn’t break and I can’t convince myself to replace a perfectly working car. Any after market work usually requires special instruments and expertise and costs a lot, and as many of you know I am “cheap”. ;-)

So my Honda Accord ‘98 still has a cassette player instead of a CD, a rare thing these days. In my quest to turn it into a more comfortable place I have retrofitted it with a Blutooth enabled speaker (purchased at Sharper Image for all the Discover cash back I received) and a portable MP3 player which I connected to the car speakers via a cassette tape adapter.

Last week the cassette player died and I had to look for alternatives. The first thought that came in my mind was to buy one of those cheap FM modulators but I recalled that I already tried them twice and the sound quality in both cases was just terrible.

My second option was to install a more expensive FM modulator unit that connects directly to the car stereo antenna and has a manual switch to bypass the signal when not in use. I didn’t like the idea of having to switch off the thing every time I don’t want to use it. Besides, I would have to take off the stereo to install it which by itself is not a simple thing to do.

I then figured that since I have gone as far as consider removing my old stereo from the dashboard, maybe I should look into possibility of replacing it with something more up to date? I went to look at car stereo vendors. The thing I was looking for the first was support. Eventually I settled on Crutchfield and am I happy I did.

With all car stereos priced $129.99 an up Crutchfield will ship a vehicle specific receiver chassis, wiring, and instructions, everything free of charge. The thing that helped me the most was the helpline that is open every day till midnight (eastern time). I got to use it twice!

As it turned out installing a new car stereo is not a nightmare I feared it would be. My friend convinced me to pay $30 extra and buy a receiver with built in Blutooth and I am happy I did. I no longer need my old Blutooth speaker which I had a problem with since I was always forgetting to turn it off after leaving my car in the garage (my cell phone would then stop ringing when I am in the house). Another nice surprise is that the Blutooth will now stop the music or radio when I receive a call!

As I previously stated the folks at the support hotline were very helpful which really put me at ease with all the questions I had - and I had a lot. This was my first ever work on a car stereo. If you plan to do it yourself, buy from a vendor with a name in car electronics, unless of course you have somebody who has done it before and can offer you help.

A couple handy tips. Be careful with the screws to make sure you don’t drop them inside the dashboard. Use a magnet to keep them at the tip of the screwdriver. Another thing, you will need to connect wires. I had a soldering iron at home but you could also use a crimp tool and caps.

What was the most challenging work you have done on your car? Please share your story in the comments!

Photo credit to garrettmurray at Flickr




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