Neuroeconomics study reveals how consumers can avoid overspending
“Well, not until now,” points out Taryn Schmidt, Head of Marketing at Wonga SA. Marketers have long capitalised on the link between emotions and ‘perceived value’, particularly during holiday periods when consumers may be prone to spending more than their budgets allow them to do. “By appealing to emotions, and not the rational mind, marketers manage to tap into what makes us most human. By understanding how this happens, consumers will be in a better position to make more rational spending decisions and avoid unnecessary debt.”
A team of researchers at the Duke University in North Carolina recorded the brain activity of a number of experimental subjects, including mapping out how the brain measures ‘economic value’ and makes emotional judgements such as likeability or preference. Using Magnetic Resonance Imaging (MRI), they discovered that people literally use the same part of the brain, the ventromedial prefrontal cortex (vmPFC) to determine how much they ‘liked’ something, as well as how much they’re prepared to spend on it.
The researchers learnt that how much a subject ‘emotionally liked something’ underlined how much they ‘economically valued it’. Scientists explain that, as a result, consumers are more likely to pay too much, overspend or take unnecessary credit to have whatever has sparked their desire.
“Each purchase decision is filtered through the same part of the brain,” explains Schmidt. “Because our brain is wired in this way, we literally ‘fall in love’ with the item that’s aroused this emotion. This creates incredible confusion, making consumers particularly vulnerable to impulsive buying.”
“Scientists believe that by controlling or evoking emotions, marketers can either heighten or inadvertently lower the economic value people place on that product or service,” says Schmidt.
However, consumers do have a defence. According to the same study, participants who deliberately dulled their ‘emotions’ by practising ‘mindfulness’, showed to have adjusted the ‘economic value’ they placed on any particular item.
She adds that the best way to practise ‘mindful shopping’ is to become aware of our thoughts, feelings and surrounding environment when we make transactions, particularly over the long weekends when retail stores up the ante. “When you feel that ‘urge’ or need to buy something, it’s important that you become aware of any external pressure. This could be due to an overzealous shop assistant, your children or your spouse.”
Spending money, whether on yourself or another person, is a very personal experience. Schmidt says it is important consumers pay attention to how marketers position the features of products or services to appeal to emotions or sentiments. “Marketers are very good at making consumers aware or appeal to ‘needs’ they didn’t realise they had.”
Schmidt suggests consumers make an effort to tune into their emotions when they shop. “Without judgement, it’s important consumers evaluate their feelings, opinions or outlook towards products and services. They should consider the source of these emotions and evaluate the significance of the product or service in meeting their emotional needs.”
“Shopping can often be an emotional and stressful experience. It’s important that consumers become aware, not only of the stress created by their external environment, but also the feelings that shopping elicits in them. This way consumers can develop useful ‘mind tools’ to help prevent unnecessary cash outlays and avoid over spending,” concludes Schmidt.