Cheap and nasty

Are consumers rational? Not, it seems, when working out the actual cost of their purchases over the whole lifetime. Consumers buy cheap and then pay later. I was doing some work recently with Ingersoll Rand, one of the world's leading air-conditioner companies. Air-conditioning is an energy-hungry beast. It accounts for nearly half of domestic electricity consumption in some US cities, and is a fast-growing drain on energy in the developing world. Some 85% of US homes have an aircon unit. Yet the majority of these do not meet current Federal minimum standards. Consumers mostly plump for the cheapest option at the point of sale. This is bound to be less energy efficient. And I'd wager that it's much more likely to break down. So, what seems like a bargain unit when they buy it, means that the consumer pays through the nose on energy and servicing costs for years to come. read more