According to a recent study set to be published in the Journal of Consumer Research, “beauty truly lies in the eyes of the cardholder.”
Promothesh Chatterjee, an assistant professor of marketing at the University of Kansas School of Business, and Randall L. Rose, chair and professor of marketing at the University of South Carolina`s Darla Moore School of Business, undertook the study. Their research entailed a series of four related experiments that induced test subjects to think about paying for purchases with either credit cards or cash. They then examined the way that these consumers evaluated different products.
The results of the study revealed that when consumers are planning on paying for items with cash, they pay more attention to product costs, both monetary and non-monetary. Factors such as price, delivery time and costs, warranty costs, installation costs, and likewise all become major factors in their decision to purchase. On the flipside, however, when consumers are planning on paying for items with credit cards, they tend to pay more attention to product benefits relative to the product`s cost, rather than the costs themselves.
The authors of the study highlighted the fact that consumers` attitudes towards credit cards are developed at a young age. Factors like credit card advertising, for example, can lead consumers to develop a mental association between credit cards and a luxury lifestyle. Moreover, credit cards are closely associated with immediate gratification. Cash, on the other hand, is viewed conversely. Consumers associate cash with costs and the pain of payment.
Multiple previous studies have indicated “the use of a credit card as a payment mechanism increases the propensity to spend as compared to cash in otherwise identical purchase situations.” With Chatterjee and Rose`s study into shopper behavior, they extend this line of thinking, concluding that “the effects of credit cards go far beyond increasing consumer spending power and shifting consumption from the future to the present; fundamental product perceptions are affected as well.”
Marketers have long used credit card promotions to influence consumers to spend more and purchase more frequently. Chatterjee and Rose`s research extends this line of thinking, birthing the implication that by influencing payment method, marketers can affect not just how often consumers are willing to part with their money to make a purchase, but also the very nature of the products that they purchase.
If this research holds up, marketers will be salivating at the thought of how they can take advantage of this consumer behavior tendency. Marketers around the world will soon be figuring out ways to apply the findings of this study to control consumer behavior and influence shoppers to spend more money.