Context
In the last couple of years, the morose economic context has led to record low consumer morale. The consumers’ financial constraints may impact how they consume and how they feel about consuming. The financially constrained consumers tend to engage in compensatory consumption, ie consumption that will allow them to offset the unpleasantness caused by the scarcity of their resources. That behavior stems from a desire to reduce the discrepancy between their perception of their state (ie being financially constrained) and their ideal situation (ie being able to afford whatever they like). Therefore, compensatory consumption should make them feel better. However, consuming under financial constraint can also trigger regret or guilt. Therefore, are financially constrained consumers happier thanks to consumption? Dias, Sharma and Fitzsimons investigated this issue in an article published in 2022 in the Journal of Consumer Research.
Research questions
The authors address this issue across the specter of opportunity costs. Though consumption – in its compensatory aspect – may bring the financially constrained consumers joy, it may also prompt them to consider other more legitimate, maybe cheaper, alternatives, thus tarnishing their purchase happiness. Dias, Sharma and Fitzsimons thus ask the following research questions:
– Do perceived financial constraint impact purchase happiness?
– What is the role of opportunity costs on this effect?
– Is this effect at stake for all types of purchases?
– Are there potential ramifications to this effect?
Method
To answer these research questions, the authors conducted 7 studies.
Study 1 examined the potential correlation between perceived financial constraints and purchase happiness. 738 participants were asked to describe their last significant purchase and answered questions concerning their financial constraints and happiness purchase.
Study 2 investigated the causal relation between perceived financial constraints and purchase happiness, and the mediating role of opportunity cost. In Study 2A, 1087 MTurk participants described a significant purchase for themselves, and were either asked to write the factors contributing to their financial constraints (high perceived financial constraints) or to list three facts they know to be true (control). They then answered questions about purchase happiness and opportunity costs. In Study 2B, 1089 participants followed a similar procedure, except that the research design allowed them to spontaneously consider opportunity costs.
Study 3 further examined this effect. 1488 MTurk participants were randomly asked either to consider their opportunity costs of their purchase or to write about the expected benefits of their purchase (control condition). Perceptions of financial constraint and purchase happiness were then measured.
Study 4 looked into the role of the type of purchase (planned VS unplanned) on this effect. 988 Mturk respondents randomly had to describe a planned or unplanned purchase. They then indicated their opportunity costs consideration; their perceived financial constraints and purchase happiness was measured.
Study 5 explored the potential ramifications of this effect with consumers reviews. Study 5A consisted of a correlational design in which available consumer reviews on Yelp were put in perspective with available consumer and demographic data. In Study 5B, an experiment allowed 998 participants to write a review about a purchase while manipulating perceptions of financial constraints.
Results
– Consumers are less happy about their purchases when they feel financially constrained. This is because financially constrained consumers often reflect on the opportunities they missed because of their purchase and the scarcity of their resources. In other words, more financially constrained consumers are more likely to consider opportunity costs when evaluating their purchases than less financially constrained consumers. This negative effect of (high VS low) perceived financial constraints on purchase happiness is further supported by the fact that it attenuates when all consumers are prompted to consider opportunity costs.
– This effect is attenuated in the case of planned (VS unplanned) purchases. First, because planned purchases are less likely to prompt opportunity cost consideration, thus leveling the playing ground between more and less financially constrained consumers. Second, because planned purchases are perceived as more legitimate which means that considering opportunity cost will be less likely to decrease purchase happiness.
– The negative impact of financial constraints on purchase happiness affects consumer reviews. Higher perceived financial constraints are correlated with reviews with fewer words and less favorable content. However, there was no significant impact on star rating.
Why is this article relevant for researchers?
This research sheds new light on the impact of subjective wealth (in the form of perceived financial constraints) on purchase happiness and consumer reviews, emphasizing the mediating role of opportunity costs consideration. It bridges three subjects from the marketing literature from a new perspective. The article provides very robust results, thanks to the thoroughness and variety of the studies and the use of correlational and causal designs.
As bourgeoning relations have been identified, other bridges could be made between these topics thanks to other concepts. The authors notably propose to consider other constructs to mediate the relation between perceived financial constraints and purchase happiness, such as regret, guilt, rumination that are partially connected with opportunity costs. Moreover, they considered perceived financial constraints as an independent variable representative of subjective wealth, but social class or perceived purchasing power (especially in today’s inflationist context) could be investigated.
Future research could also look into ways of alleviating perceived financial constraints. Existing business models such as “Freemium” or “pay what you want” may be studied in this capacity.
As for consumer reviews, the authors were thorough in considering the rating as well as the review content, but reckoned that the relation between financial constraints and ratings should be further investigated.
Because of the mediation with opportunity costs, there is spin-off potential for these findings in comparative advertising. Indeed, the present studies show that considering opportunity costs decreases purchase happiness. This could question the relevance of comparative advertising, that focuses on competitors, thus making consumers consider opportunity costs.
Finally, differentiating the effect according to purchase type led the authors to consider planned and unplanned purchases, arguing that the former were bound to be perceived as more legitimate thus reducing opportunity cost consideration and opportunity cost mediation. Other types of purchase could be considered such as utilitarian VS hedonic, or in terms of frequency.
Why is this article relevant for professionals?
This article provides marketing professionals with valuable insights.
First, managers should be aware that the perceived financial constraints of their customers might impact their purchase happiness. This negative impact of perceived financial constraints on purchase happiness may trigger less favorable reviews, which constitutes further incentive for managers to consider perceptions of financial constraint with caution. Though it may be hard to assess how financially constrained consumers may feel, professionals engaging in low-cost may expect this type of clientele. More generally, at any time when financial constraints are perceived as high, for instance, in a morose or uncertain economic context, any business could expect customers to be less happy with their purchases. This information may lead managers to upgrade aspects of their offer to maintain levels of happiness, or try to lower the consumers’ perceived financial constraints. For instance, SAME Café works on a “pay what you want” model, because they believe that “everyone, regardless of economic status, deserves the chance to eat healthy food while being treated with dignity”. In the same vein, “payday deals” help reduce the pressure on households before their pay kicks in – a moment when perceived financial constraints are high.
Second, the article also shows that considering opportunity costs may decrease purchase happiness. This should prompt professionals to highlight the benefits of their products rather than engage in comparative advertising. Granted this Samsung commercial is snappy and rememberable by making fun of Apple, but it may also be risky to have consumers weigh the benefits of buying a Samsung against the cost of not getting an iPhone.
Third, the present findings show that unplanned purchases are usually perceived as more legitimate than planned purchases. In this respect, more widely, providing consumers with robust arguments to legitimate their purchases may decrease their opportunity cost consideration.