How Emotions Drive Our Shopping Behavior
Why do some people spend money easily even when they shouldn't, while others find it difficult to splurge even when they can afford it? It is essential to understand how a person feels during the whole process of shopping, browsing, choosing, and paying.
Shopping is part of everyone's life today, and it has been so for a long time. Most people believe that the choices they make result from a rational analysis of available alternatives. However, emotions greatly influence, and, in many cases, even determine our decisions.
So, why do some people spend money easily even when they shouldn't, while others find it difficult to splurge even when they can afford it? It is essential to understand how a person feels during the whole process of shopping, browsing, choosing, and paying.
The three types of consumers
To better understand the feelings that guide spending decisions, my colleagues and I ran a study in which we scanned the brains of people while they were shopping. The evidence was consistent with the notion of a "pain of paying": the more distress people experienced while considering a purchase, the less likely they were to buy seconds later. Based on this study and related findings, we identified three categories of consumers: tightwads, spendthrifts, and "unconflicted" consumers.
Tightwads find it painful to spend money, and usually spend less than they think they should. This is sometimes interpreted as "frugality," but frugal people are different- they spend conservatively, because they actually enjoy saving money. By contrast, spendthrifts do not feel enough pain when spending, and end up spending more than they think they should. Critically, tightwads and spendthrifts are both "conflicted": they don't like being tightwads and spendthrifts. Most people would be considered unconflicted consumers, a happy middle ground between the two extremes.
The biggest differences between tightwads and spendthrifts are observed when potential purchases are optional non-necessities. When contemplating those kinds of purchases, tightwads find it hard to escape thoughts of opportunity costs- what else they might need to buy with that money. For routine, everyday purchases, those anxiety-provoking thoughts do not loom as large. Spendthrifts are generally less burdened by thoughts about opportunity costs, whether the purchase is seemingly optional or not.
The emotions associated with paying
We have also done some research to see how people from different categories pair up. Consistent with past research, we can see that the more different people are in terms of financing mentalities, the bigger the chance for problems to arise. For example, a spendthrift's "love language" might be through gifts, which might not be the case for tightwads. This is an advantage for the tightwads in this scenario, because while buying a fancy gift might seem like something that a spendthrift does with ease, when a tightwad gives a fancy gift, it is usually perceived as a stronger signal of affection. If spendthrifts want to clearly signal affection (by breaking with their normal spending habits), they might try a homemade gift or arranging a novel, shared experience.
In general, people say that buying a gift for someone is less painful than buying something special for themselves. Still, despite the reduced pain of paying for gifts, other emotions might be in play such as anxiety, which might lead to questions like, "Will they like this gift?" So, all in all, when buying a gift for someone, it is more charged with emotions including joy and anxiety.
Another important thing to be addressed here is the pull that Black Friday sales and big sales have over some people. Indeed, they find these types of sales irresistible because of the idea that, say, "This is a lower price than what it usually is, so I'm getting a great deal!" As such, framing the price relatively lower than what it normally is or should be helps reduce one's pain of spending money. In reality, part of this is misinformation, and not understanding the kind of universe of deals that are available on a day-to-day basis. This stands true today, especially with the easiness of online shopping, and the available sales and offers that come along with it.
Online vs in-person shopping
Speaking of online shopping, we can't help but wonder whether people would behave differently while shopping on the internet. We have all been there- you see a product online, you decide to buy it, and within seconds, your transaction is complete. In general, many of the same psychological factors are at play in both online and in-person shopping, but the former just adds fuel to the fire by making shopping so effortless, easy, and fast to pay.
One of the main differences between online shopping and in-store shopping is the "waiting period." As we previously stated, an online transaction can be made in a matter of seconds, while with in-store shopping, there are several opportunities to second-guess a purchase throughout the process. When someone goes shopping in a store, they have matters like driving there, waiting in line, physically comparing and seeing the items of interest in front of them. This gives them opportunities to second-guess a purchase, while with online shopping, it's very seamless.
Nevertheless, retailers are catching up. They are very skilled in distracting the customer from the moment of payment. For instance, many stores have sales associates that are generally really nice and chatty, and by the time I'm usually done with my purchases, I would have these bags that I wouldn't remember paying for. Essentially, this takes your attention away from pulling out your wallet, and how much you actually spent. In addition to that, there are other tricks that focus on shopping momentum. This is why there are displays of somewhat small or cheap items closer to the entrance of a store that people may pick items from, thus building up shopping momentum, and helping facilitate people spending their money.
Taken together, the research suggests that purchase opportunities affect different types of shoppers differently. If the goal of shopping is to simply accumulate necessary items and minimize amount spent, tightwads' tendency to experience a strong pain of paying clearly puts them in the best position. But if we're trying to balance financial and psychological well-being, it becomes clear that there is no one "right" or "optimal" approach to shopping. Whether you are a tightwad, spendthrift, or unconflicted consumer, you can benefit from reflecting on how your feelings influence your shopping behavior, and how you might approach shopping differently.