Consumers who feel strapped for cash are less likely to talk about things they buy, according to a recent study
Your friend may never tell you what she snagged at a killer sale.
Consumers who feel like they’re pinching their pennies are less inclined to talk about the things they’ve bought, according to a recent study published in the Journal of Consumer Research, because they think it’ll make them feel even worse about their financial state. The research has implications for marketers, who rely on word-of-mouth promotion to influence consumers, lead study author Anna Paley told Moneyish.
“What we find is that people who feel financially constrained are less willing to engage in word-of-mouth about purchases that they’ve made, because they believe that if they were to talk about their monetary expenditures, they would feel worse about their limited finances,” said Paley, a visiting scholar in marketing and logistics at Ohio State University.
“Financial constraint,” as defined in the study, comes from the belief that someone’s financial situation restricts their desired consumption — not necessarily how much money they have. “People at all socioeconomic levels can experience this feeling of financial constraint,” Paley said. Around 70% of millionaires surveyed by UBS in 2013, for example, said they didn’t feel wealthy.
Participants’ reluctance to engage in word-of-mouth wasn’t about whether they’d made a “good” or “bad” purchase, she added: The effect held true regardless of how much the item cost, whether it was on sale and whether it was “a justified expense or one that felt more frivolous.” It also held true across audiences and settings — whether they were anonymous, with friends and family, or on social media.
The association between this psychological state and the outcome could’ve gone the other way, Paley noted. “On one hand, it’s possible that people who feel financially constrained would talk more about their purchases to show off their spending ability or … provide a sense of validation,” she said. “But we actually found the exact opposite.”
These findings, established across seven different studies, could spell difficulty for marketers who count on word-of-mouth: Consumers find recommendations from friends and family to be the most credible form of advertising, according to a 2015 Nielsen survey of respondents across 60 countries.
To reduce the likelihood of the effect demonstrated in this research, Paley said, marketing managers may benefit from “separating out the amount that someone has paid for (an) item from any kind of requests to engage in word-of-mouth about it” — intentionally shifting them away from thinking about items as monetary expenditures. That might mean avoiding placing a “Share on Facebook” button in an email right below a purchase receipt, she suggested by way of example.
Marketers can also be mindful of broader financial trends, she added. “Based on this research, we can suggest that when the economy is going through a bust rather than a boom cycle, it’s likelier that one’s investments in word-of-mouth will be less effective,” she said. “You can intuit that many people are feeling more financially constrained than they would otherwise when the economy is doing well.”
On the consumer end, Paley said, this research sheds light on the trade-off many people experience between the potentially unpleasant prospect of talking about their purchases and the benefit that word-of-mouth may have for someone else. “People need to maybe consider that tradeoff and recognize that yes, maybe they’ll feel bad about their limited financial state,” she said, “but maybe someone else will appreciate the purchase tip or the recommendation.”
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