Want Happy Customers? Bet Your 'Bottom Dollar'
Regardless of the price, the more money your customers have in their pocket at the end of a transaction, the better they will feel about the purchase, new research suggests.
Consumers experience significant differences in satisfaction based solely on their budget status or financial condition at the time of purchase, rather than the quality of the product or how much it costs, according to a study set to be published in the Journal of Consumer Research
The research confirmed the existence of the so-called "bottom-dollar effect," when a consumer's satisfaction for a product decreases as that buyer's budget is exhausted.
One of the study's authors, University of Arkansas assistant professor of marketing Robin Soster, said the study has major implications for retail marketers and managers.
"Because the status of consumers' budgets may influence satisfaction with a product, marketing managers might consider the timing of promotions to coincide with resource availability," Soster said. "If a marketer’s goal is to attract new customers, initial promotions might be better timed at the beginning of a month or immediately after consumers receive tax refunds, to ensure that budgets are not approaching exhaustion at the time of purchase."
As part of the study, researchers focused on the distress consumers feel when spending their final dollars and how this distress alone influences satisfaction with products. Researchers measured how satisfied people were with movies purchased at different moments in the budgetary cycle.
"We predicted that as budget balances dwindled, the remaining dollars would be more painful to part with," Soster said. "This, in turn, would make products feel more costly, so people were less satisfied with what they bought."
The authors considered the pain of spending in various ways. For example, they found that if consumers think it is difficult to earn resources to replenish a budget, or if budget replenishment is a long way off, they get less satisfaction from the same item.
Results also showed that getting free money when budgets are near exhaustion eliminates decreases in satisfaction. However, such free funding has no influence on satisfaction with a purchased product if the windfall arrives when plenty of resources are available. The bottom-dollar effect on satisfaction also disappears if consumers are told their budgets will be replenished soon.
Soster said these findings are important not only for marketers and retailers, but for consumers, too.
"They reveal that satisfaction is influenced by more than the experience of a product and its cost," she said. "While some people may be able to mitigate the effects of this phenomenon by ignoring their budgets, a more fiscally responsible approach would be to make important purchases only when budgets are flush with resources."
The study was co-authored by Andrew Gershoff at the University of Texas at Austin and William Bearden from the University of South Carolina.
Originally published on Business News Daily.