During the recent World Series one of the constant interruptions was an ad featuring a group of youngsters marveling about a mysterious stranger who obviously was “greatly respected,” and a man of “considerable power and influence. “ He came into town, received the best in goods and services from merchants, but never seemed to pay for anything.
It turns out that the stranger used a variety of mobile payment methods, including his smartphone and his Apple watch. All he had to do was turn the appropriate device to the appropriate interface, and presto – payment made. How wonderful. How efficient. How cool.
I wonder if the boys knew that the mysterious stranger likely left town disappointed. Sure, he had a cup of coffee, a meal in a nice restaurant, a new hat and a book, all swiftly paid for with a wave the wrist, but something was missing – all of those items didn’t satisfy him as much as they once did. Why not? Because it was too easy.
An assistant professor at the University of Toronto, Avni Shah, determined that people who pay cash feel better about their purchases, and seem to value them more. Shah noticed that forking over a few dollar bills or coins for a latte made for a more enjoyable coffee than if purchased by debit or other direct transfer. Her observations were confirmed in a series of experiments (Shah et al – Journal of Consumer Research) involving products and even experiences.
Shah puts this cash-driven satisfaction down to a pain differential, suggesting that using cash is uncomfortable or painful, and “the more pain we go through, the more we value what we buy.” I think it’s quite a basic notion. When paying with cash, we have an immediate reminder of the cost of the item, since we’re depleting a visible stock of coins or banknotes. We give up something in exchange for something else. When paying by card or smartphone, there’s no recognizable exchange going on – there’s no indication that something of value has been passed from us to the merchant. The cost is realized later, when the bank statement is viewed. By then, it’s largely disassociated with the actual purchase and/or consumption.
Think back to your introductory psychology class, and the concepts of balance and dissonance reduction. We strive to equate the cost of something with the value provided. If we pay more, we tell ourselves that we got more. If something’s a little harder to get, it will be valued more once attained. We justify our behaviour.
I wonder if these concepts also apply to the digital transformations currently underway in so many sectors. For example, we’re making it extremely easy to shop and purchase online, eliminating the “pain” of shopping at an actual retail store. We’re simplifying the processes to open bank accounts or investment accounts, or to get a loan, so that in many cases a few clicks on a smartphone will do the job. The “pain” of filling out forms and (horrors!) actually talking to someone is lessened or eliminated. As with the migration from cash transactions, however, convenience comes at a cost. When we take away enough of the pain, we also take away some of the commitment to the purchase, and much of what builds brand/product loyalty. Merchants beware – simplify at your own risk.
I swear by the coffee served at my local independent coffee house. I’m one of a very large, very loyal group who will gladly pass by many chain outlets to enjoy their coffee here – and that’s not just for the opportunity to hear the proprietor’s wisdom on all sorts of political and social issues. The coffee is worth going out of the way for. And, at this coffee house, it’s cash only. Coincidence?
Meanwhile, pity the poor mysterious man. He’s unsatisfied, but doesn’t know why. He has cool technology, though. Maybe if he’d paid cash for his gadgets he’d like them even more.