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!
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
Physicists of the University of Würzburg have made an astonishing discovery in a specific type of topological insulators. The effect is due to the structure of the materials used. The researchers have now published their work in the journal Science.
Topological insulators are currently the hot topic in physics according to the newspaper Neue Zürcher Zeitung. Only a few weeks ago, their importance was...
In recent years, lasers with ultrashort pulses (USP) down to the femtosecond range have become established on an industrial scale. They could advance some applications with the much-lauded “cold ablation” – if that meant they would then achieve more throughput. A new generation of process engineering that will address this issue in particular will be discussed at the “4th UKP Workshop – Ultrafast Laser Technology” in April 2017.
Even back in the 1990s, scientists were comparing materials processing with nanosecond, picosecond and femtosesecond pulses. The result was surprising:...
Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...
A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.
Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...
In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.
“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...
16.11.2016 | Event News
01.11.2016 | Event News
14.10.2016 | Event News
09.12.2016 | Life Sciences
09.12.2016 | Ecology, The Environment and Conservation
09.12.2016 | Health and Medicine