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In the Journal of Consumer Research, a recent article “Seeking Lasting Enjoyment with Limited Money: Financial Constraints Increase Preference for Material Goods over Experiences” analyzes what people with limited funds pursue. Stephanie M. Tully, Hal E. Hershfield, and Tom Meyvis completed seven studies in order to analyze their proposed hypothesis. For most consumers in the world, their budget is highly limited on funds which makes each purchase more important and requires more thought than those with unlimited funds. A common saying, “money can’t buy happiness” is something that people have been contradicting all of their lives.
The hypothesis these marketing prodigies were analyzing was
“Building on [the research of Spiller 2011 and Fernbach, Kan, and Lynch 2015], we suggest that financially constrained consumers may be more attracted to purchases that last over time. Choosing such purchases enables consumers to build an inventory of resources, guaranteeing that—even if they cannot make a later purchase—they will still have something. In sum, we propose that consumers who consider their financial constraints will want to spend their limited resources on purchases that will provide benefits both now and in the future.
We further propose that this increased concern about longevity can produce a systematic shift in consumers’ budget allocation—namely, in their preference for material goods versus experiences.”
In a similar perception, people care more about materialistic products than experiences when they are low on financial means. A simpler version of the hypothesis is that “Feelings of financial constraint will increase consumers’ concern for the longevity of a purchase.
” In order to better understand the hypothesis, we must first be able to comprehend the way the study defines feelings of financial constraint. Financial constraint is not set by strict numerical dollar based amounts, but is a psychological state that is not necessarily affect by financial means, but rather a feeling of constraint based on the notion that the income is not adequate to achieve the desire standard of living and consumption.
Trade-offs are faced when someone has limited time, money, or something else that can be exhausted without being constantly replenished. People that were participants in the studies face frequent trade-offs due to their perceived notion of being financially unstable. In the first three studies, the researchers measure the feelings of financial constraint while the remaining four studies manipulate the feelings of financial constraint to better understand this psychological pattern and its effects.
The research technique used for these studies was descriptive research. Descriptive research helps sellers comprehend the characteristics of definite manifestations to solve or better understand a problem. Using descriptive research empowers researchers to see what options people choose and often they choose those options.
The first study concluded that hypothesis 2, “Feelings of financial constraint will increase consumers’ preference for material goods over experiences” showed a positive correlation in regards to the way people chose a self-generated material good or a self-generated experience. Overall, the participants who acknowledged their monetary restraints appeared to be more apprehensive about the longevity of their purchase which in turn showed that those contributors chose the materialistic possession. Unfortunately, the study could not be completely conclusive considering that some of the participants might have thought they could resell the materialist item at a later date.
Since the first study was inadequate to truly prove a hypothesis true or false, a second study was created using gift cards for companies that commonly sell materialistic goods and companies that generally sell experiences. The companies, both materialistic and experience based, were seen to be of equal value. The contributors were told to choose a gift card between two choices, one of which was a materialistic option while the other was an experience-related option. The choices were “Zappos or Fandango, Gap or iTunes, Kohls or Red Lobster, Barnes & Noble or AMC Theatres, and Bed Bath & Beyond or Red Box” (Tully). Overall, the only set in which an experience was chosen over a materialistic good was in the case of Barnes & Noble or AMC Theatres. The case proven was that people who were more concerned about financial constraints were more likely to choose materialistic companies than companies based solely on experiences.
The third study was created in order to make sure none of the previous studies were contaminated or were unfamiliar to see possible alternatives. In the third study, 184 people completed hypothetical shopping lists with five pairs of items. The materialistic option was chosen so that it would be seen as wasteful and frivolous compared to the experience offered. For example, one of the options was eating dinner at an Indian restaurant or purchasing a revolving tie rack. This study also fell in line with proving hypothesis 2 true. In regards to hypothesis 1, the reason people chose the materialistic option, out of the five reasons given was mostly related to option 3, “how long my chosen option would last for.”
In study four through seven, the cases were manipulated in order to better understand the psychological effect. The study asked participants to assess their current financial situation and given a short essay prompt. Participants were then asked to complete a portion of study three again in which they complete a hypothetical shopping scenario. In essence, study three was closely corrected by getting the members to focus more on their financial constraints when choosing between the two possible options given. Once again, the previous hypothesis had a positive correlation in regards to choosing a materialistic possession over experience when thinking about any restraints financially.
In study five, the differences were described as more social and some that were more risky, since experience related goods are seen in social groups and are more risky. Compared to study four, study five is more manipulative in that it makes you think more severely about financial constraints including loans, bills, lack or uncertainty of a future income. The participants had to read through five scenarios and choose which scenario they prefer. The specific purpose was in order to get in shape, however the material good was buying gym equipment and the experience was purchasing a gym membership. Some of the reasons people gave for choosing a specific option including longevity, social nature of the option, possible risk, and what they perceived to be the norm. The options were given between buying DVDs or movie tickets, getting sports equipment or getting access to a sports facility, buying an instrument or taking lessons, and buying supplies or taking classes. People who seemed to be more worried about financial constraints were also in a more negative state than those who were in the controlled condition. “While considering financial constraints did negatively affect participants’ mood, this mood difference did not drive their increased preference for material goods.”
The participants in study six were asked to choose between a long-lasting material option and an experience or between a short-lived material option and an experience. For example, if the purpose was to stay dry from the rain, one of the options was to buy a drink at Starbucks and wait for the rain to pass, purchase a reusable poncho (a long-lasting material option), or purchase a single-use disposable poncho. The case proved that participants were more likely to purchase a material good, but only if the material in question is longer lasting. However, the opposite was true when the materialistic option was short-term. This study further proved hypothesis three that longevity mediates the relationship between material purchases and financial restraints.
Oftentimes, people try to sell an experience based off of the memory it will leave and the potential to tell stories about it later. In study one the self-described experience was one that could leave intangible long-term effects including telling stories about vacations and concerts. In story five, the short-term experiences offered people long term benefits. Music lessons, although an experience, would allow people to have that ability throughout life. After making prior trips (experiences), the desire to travel would be increased, yet most people still preferred materialistic options over experiences. One of the reasons could be that even though the experience was fun, some products will still need to be bought. In study seven, the intangible long-term benefits of the experience were made explicitly clear, yet the findings still came out with products being purchased.
In chapter seven of Principles of Marketing, the 18th edition, the consumer buying decision process is analyzed and explained in further detail. The decision process “includes five stages: problem recognition, information search, evaluation of alternatives, purchase, and post purchase evaluation.” (Pride) The problem, for the consumer, would be that they face trade-offs and can often not have both options. The evaluation of alternatives would be the analysis of which option they rather have in the long run. The post-purchase evaluation could be seen as the longevity of the product after it was bought or the possible memory an experience would create.
All of the studies proved the three hypothesis correct. As a final appropriation, the “aggregate US expenditure data from the Bureau of Economic Analysis (BEA) shows a correlation between the proportion of money spent on goods, on the one hand, and proxies of feelings of financial constraint in society, on the other hand.” The data was even accurately portrayed when consumers spent much more on goods than service when there were greater periods of unemployment as well as lower levels of consumer confidence.
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