Whether they're getting a new shirt, a new computer or a trip, people get less "buying happiness" from buying things when they feel financial stress, according to research from Duke University's Fuqua School of Business.
“That sense of financial constraint leads people to rethink their purchase and think about what else they could have done with that money, known as the opportunity cost,” said Fuqua marketing professor Gavan Fitzsimons, who co-authored the findings. “Because of that question in a consumer's mind about what else they could have used the money for, every time they think about that purchase, they're going to be a little less happy with what they ended up buying.”
That dissatisfaction also prompted consumers to leave poorer ratings for those purchases — an insight that could help businesses solicit customer feedback to encourage more sales.
The researchers conducted more than 40 studies to measure people's perceptions of their financial situation and recent purchases. Whether they bought a material object or an experience, and whether they paid $100 or $1,000, the results were consistent:people who felt financial pressure experienced less "buying happiness."
Feeling financially limited refers to a person's perception of their financial situation and affects people of all socioeconomic circumstances, the authors said.
“People at all income levels are feeling financial pressure, especially now,” Fitzsimons says. “Rentals are escalating dramatically, the housing market has been out of reach for many people. Even people earning well above the median income still notice when gas and milk suddenly cost more than it did two years ago.”
Rising costs due to inflation and other factors indicate that consumers could face further financial stress in the coming months. This added financial pressure could lead to more "compensatory consumption," or buying things, not just for their function or purpose, but because the buyer believes the item will make up for a deficit in another area of their lives, Dias said. .
“People who are financially limited are more likely to buy things to improve their happiness, but our research shows that what is happening is quite the opposite,” he said.
The authors discovered at least one way that financially limited consumers could get more happiness out of their purchases:by planning. “When people who feel financially limited make a more conscious decision about their purchase and plan in advance rather than buy an item on the spot without thinking ahead, they are already thinking about the possible alternatives to how they could have spent that money. Fitzsimons said. “That helps them get more happiness out of their purchase than they would otherwise have. Are they as happy as they would be if they weren't financially limited? Not quite. But having plans and thinking ahead about how to spend that money can help them get more happiness out of their purchases.”
Measuring consumers' "purchasing happiness" is just another way scientists are trying to solve an eternal question about the relationship between wealth and well-being:Can money buy happiness? These studies offer some new clues, Dias said.
“Social scientists have long known that less money is associated with lower well-being, at least to some degree,” he said. “Our results suggest that limited financial resources hinder well-being not only by limiting what people can buy, but also by reducing the happiness they get from their purchases.”
