Why the way we pay influences how much we value our purchase
When it feels easy to pay for something, it might just make us feel less connected to what we're buying, a new U of T Scarborough study says.
New research shows the way we pay influences how much we value our purchase.
Credit: U of T Scarborough
"Debit and credit cards rule the marketplace, and while going cashless is convenient, that convenience may come at a price," says Avni Shah, an assistant professor of marketing at U of T Scarborough and the Rotman School of Management.
Across two experiments Shah and her colleagues at Duke University and the University of North Carolina-Chapel Hill looked at the potential consequences of paying with cards over cash by focusing on how connected consumers felt towards what they bought.
The first experiment asked participants to buy a coffee mug normally priced at $6.95 for the discounted price of $2 with either cash or credit. Two hours after the purchase they were then asked to sell back their mugs at a price of their choosing. Despite the fact it was the same mug owned for the same amount of time, those who paid cash wanted nearly $3 more than those who paid with a card.
"Those who paid with cash also reported feeling more emotionally attached to their mug," says Shah.
In the other experiment the researchers wanted to eliminate possible reasons for the cash-payers charging more for their mugs because of the effort tied to finding an ATM and paying bank fees, or the added bonus for card-payers earning rewards points for their purchase. Here participants were given $5 in either cash or voucher to give to one of three charities and a ribbon lapel pin corresponding to the charity they chose.
"We found that people who donated by cash felt more connected to their chosen charity than those who donated by voucher. Cash donors also reported feeling less connected to the charities they didn't chose," says Shah.
"In other words, paying by cash made people feel more attached to what they bought and less connected to what they didn't buy."
So why is it that paying with cash makes you value something more than paying with a card? Shah says it comes down to something called pain of payment.
"You feel something when you physically part with your money, and there are different levels of pain depending on the type of payment," says Shah, whose research focuses on the costs associated with payment and how it affects consumer preference and choice.
"Something tangible like cash will feel more painful to part with than paying by cheque, which will feel more painful than paying by card and so on."
The effect extends beyond just cash and credit to include other mobile forms of payment including cell phones, smart watches and new products like Apple Pay, notes Shah. As North America continues to transition towards an ever increasing paperless economy, she says it's important to understand what the implications of these new payment systems will be for consumers.
"There are shorter product life cycles and if consumers are feeling less connected to the products they're already buying, just add easier access to credit and higher consumer debt levels and it's a toxic combination," says Shah.
There's been some positive systems in the marketplace that Shah points to as helpful to consumers including the recent Interac commercials extolling the virtue of cash over credit, and even mobile apps that remind consumers of when a purchase has been made on their account.
"These should be encouraged because they can help consumers more careful, deliberate and meaningful purchases," she says.
The study is available online and published in the current edition of the Journal of Consumer Research.
Don Campbell | EurekAlert!
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Physicists have developed a new technique that uses electrical voltages to control the electron spin on a chip. The newly-developed method provides protection from spin decay, meaning that the contained information can be maintained and transmitted over comparatively large distances, as has been demonstrated by a team from the University of Basel’s Department of Physics and the Swiss Nanoscience Institute. The results have been published in Physical Review X.
For several years, researchers have been trying to use the spin of an electron to store and transmit information. The spin of each electron is always coupled...
What is the mass of a proton? Scientists from Germany and Japan successfully did an important step towards the most exact knowledge of this fundamental constant. By means of precision measurements on a single proton, they could improve the precision by a factor of three and also correct the existing value.
To determine the mass of a single proton still more accurate – a group of physicists led by Klaus Blaum and Sven Sturm of the Max Planck Institute for Nuclear...
The research team of Prof. Dr. Oliver Einsle at the University of Freiburg's Institute of Biochemistry has long been exploring the functioning of nitrogenase....
A one trillion tonne iceberg - one of the biggest ever recorded -- has calved away from the Larsen C Ice Shelf in Antarctica, after a rift in the ice,...
Physics supports biology: Researchers from PTB have developed a model system to investigate friction phenomena with atomic precision
Friction: what you want from car brakes, otherwise rather a nuisance. In any case, it is useful to know as precisely as possible how friction phenomena arise –...
19.07.2017 | Event News
12.07.2017 | Event News
12.07.2017 | Event News
19.07.2017 | Materials Sciences
19.07.2017 | Life Sciences
19.07.2017 | Physics and Astronomy