When consumers feel financially constrained, they are more likely to choose tangible material purchases over experiential purchases in the belief that those material purchases will ‘last’ longer. This longevity factor can be deceiving, however; material purchases can often be more frivolous (and thus less valuable) than experiential purchases — and experiential purchases can last longer, through memories or well-being for example, than material ones.
More and more people are feeling financially constrained. In the U.S., half of American families recently surveyed considered themselves ‘financially fragile’. Financial constraint does not refer to income level, but to the feeling that the income is insufficient to pay for desired discretionary purchases.
Awareness of financial constraints pushes people to reflect on the longevity of their purchases because buying something today may mean not being able to buy something tomorrow. For them, today’s purchase has to ‘last’ — or, more specifically, has to have a ‘lasting effect’. In other words, the joy that a purchase brings has to last beyond today.
Previous research has shown that experiential purchases provide greater long-term happiness and well-being, which would indicate that financial constraint would favour experiential purchases. But this subtle prospective happiness is not something that most people intuitively understand. Consumers might know that they are unhappy today, when they have to go to work. They know they will be happy next week when they are on vacation at the beach. They rarely consider the weeks beyond next week, when the memories of the vacation are still with them and still bring them happiness. Because of their short-term perspective, they underestimate the full value of the experiential purchase.
As a result, consumers see an experiential purpose as ephemeral — ‘fleeting by nature.’ In contrast, they see material possessions as physically present for much longer. After all, by definition, a material purchase is tangible; you can continue to see it, to touch it. An event or some other experiential purchase is finite in time. And although the memories or the psychological and physical wellness resulting from the purchase continue to exist, these non-tangible long-term benefits are not as obvious as the physically present material purchase.
When feeling financially constrained, consumers tend to prefer material purchases over experiential purchases.
Understanding the fundamental role that longevity plays in pushing consumers to allocate their resources to material over experiential purchases can help companies define marketing strategies that build on the concept of longevity.
Thus, a cooking school or a gym should not only emphasize the benefits of their services, but the longevity of those benefits. Shifting a marketing approach from ‘learn how to cook!’ to ‘your dinners will never be the same again!’ brings longevity into the sales pitch. If the benefit of an experiential purchase is noticeably long-lasting to the prospective customer, the longevity advantage of a material purchase will be disarmed.
Another longevity-based selling point for experiential purchases concerns well-being. Research shows that the impact of experiential purchases significantly outlasts the experience. Using the example described earlier, while the vacation may be over, the hedonistic effects of the vacation — just the joy of finally visiting that country you’ve dreamed of seeing, or coming back to work recharged — are real… and long-lasting. Businesses that feature experiential purchases will not only want to sell the experience, but the long-lasting, beneficial effects of the experience.
Obviously there are limits to discretionary spending. Some people just cannot afford that vacation to overseas. And perhaps the intangible benefits such as memories and storytelling may still not be enough to persuade many people to make that experiential purchase. This is unfortunate, for the longevity consideration that comes from their feelings of financial constraint could be undermining their well-being; they erroneously think that they’ll continue to enjoy that revolving tie-rack for a much longer time than the vacation that only lasts 10 days.
Making Limited Discretionary Money Last: Financial Constraints Increase Preference for Material Purchases by Focusing Consumers on Longevity. Stephanie M. Tully, Hal E. Hershfield & Tom Meyvis. Social Science Research Network Working Paper Series (March 2014).
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