Psychology of Buying: Why 'Mental Accounting' is Critical to the Decision to Buy

Have you ever noticed that spending cash is harder than using a credit card? You are not imagining things. Different payment methods carry varying degrees of discomfort when used. 

 

Cash tends to have the most painful impact, followed by checks. Credit cards offer a lesser discomfort than cash or checks. With advancements in payment technologies like contactless cards or smartphone transactions, the potential exists for these methods to generate even less discomfort than traditional credit cards. 

 

So, how can businesses leverage these insights into payment methods to assist customers in handling their emotional response to spending?

 

To put it simply, the answers lie in Mental Accounting and Reframing.

 

Mental Accounting plays a pivotal role in how customers navigate their emotions regarding spending. It serves to alleviate guilt and elevate happiness in spending scenarios. Thus, it's crucial to consider mental accounting within the broader context of managing customers' emotional experiences.

 

In this episode, we explore where your customers are emotionally relative to the purchases they make and how guiding them to an improved mental accounting from your business perspective is essential. It turns out that messages that acknowledge and address customers' emotional responses to spending can be a powerful strategy in enhancing their overall satisfaction and engagement during transactions.

Here are some other key moments in the discussion:

 

• 04:09  Ryan explains how money can be spent on anything, however the biases we create using mental accounting help us manage our emotions regarding our spending. 

• 07:20  Colin associates a podcast with Joe Pine regarding how customers value their time in experiences differently depending on the type of timed transaction it is.   

• 17:43  We discuss the importance of understanding what mental accounting your customers are using and working with that to help them feel more satisfaction with their purchase.

• 21:08  We explore how financing in the mix can change the spending experience for customers.  

• 28:09  We share the key takeaways from Mental Accounting and how you can leverage it to improve your experiences with customers.

About Colin Shaw

LinkedIn recognizes Colin Shaw as one of the 'World's Top 150 Business Influencers.' As a result, he has over 294,000 followers and 78,000 subscribers to his LinkedIn newsletter ‘Why Customers Buy’. The Financial Times selected Beyond Philosophy as one of the best management consultancies for four years. 

Colin is a renown keynote speaker and undertakes consultancy work and educational workshops to help organizations improve their Customer Experience. 

 

Click here to learn more about Professor Ryan Hamilton of Emory University. 

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