How using credit or cash effects what you buy

Payment Methods and Product Perceptions

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I recently ran across an interesting article in the Journal of Consumer Research. In it, the researchers looked at the effect of your payment methods (credit card vs. cash) on how you evaluate a product (benefits vs. costs).

The authors argue that the so-called credit card premium (using a credit card) increases the average consumer's propensity to spend and is due in part to the effect that using credit has on your perception/evaluation of products.

They found, for example, that study participants "primed" with a credit card (i.e., given word puzzles that involved terms related to credit cards) were less able to recall details related to product costs than those that were primed with cash. And yet, the credit card priming had no effect on the ability to recall product benefits.

Likewise, individuals primed with a credit card tended to identify more words related to the benefits of a product as opposed to costs when they did a computerized word recognition study. Those primed with cash did the opposite.

In a third study, individuals primed with credit cards were found to respond more quickly to benefits than to costs when given a product description and asked to press one button if they heard a benefit and another button if they heard a cost. Cash-primed individuals were the opposite.

And finally… They found that consumers will preferentially select a product with superior benefits when primed with credit concepts, but a product that is superior cost-wise when primed with cash concepts.

In other words, it seems that dealing with cash (or at least cash concepts) makes you more price sensitive, whereas dealing with credit (or at least credit concepts) make you more sensitive to perceived quality.

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In terms of big picture implications, they argued that:

Marketers, by constantly reinforcing the salience of credit-related concepts, may be affecting not just the amount of money consumers are willing to spend but also the nature of the goods and services that find their way into consumers' market baskets.

Paying with credit cards may increase the likelihood of indulgent choices that are less healthy compared to cash. This effect is likely to be magnified by the rapid movement away from cash to credit/debit card purchasing.

Food for thought…

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