Neuroeconomics is an emerging field whereby scientists take real-time MRIs of individuals while they make purchases. A study appeared in the journal “Neuron”, which looks at the mental processes that drive economic decision-making.
In the study, adults were each given $20 to spend on a series of products that would be shipped to them. The participants viewed the products while lying in a magnetic resonance imaging (MRI) machine. Researchers studied which regions of the brain activated during each participant’s decision-making process.
“We were so excited when we got the results from the first scans, and saw that the insula, a section of the brain associated with pain processing, activated when subjects saw prices that were too high,” said the Carnegie Mellon professor directing the research. The amount of activity helped determine whether the participant was labeled a penny pincher, a spendthrift or unconflicted, lying somewhere in between.
Other research has suggested that penny pinchers, which make up 24% of buying adults, are most sensitive to situational determinants of the pain of paying, and spendthrifts (15% of adults) may be the most distinctive of the three types of consumers. That is, unconflicted consumers (61% of the population) often appear more similar to penny pinchers than to spendthrifts. For example, unconflicted credit users were 13% less likely than penny pincher credit users, and 27% more likely than spendthrift credit users, to pay off their balance in full each month. Similarly, unconflicted consumers are only 7% more likely than penny pinchers, and 21% less likely than spendthrifts, to have $10,000 or less in savings.
Selling to Spendthrifts
Spendthrifts, or those with unusually low sensitivity to buying pain, are almost exclusively found in luxury markets. To sell to them, marketers should:
1. Emphasize the luxurious. While penny pincher buyers tend to focus more on utilitarian tendencies, spendthrifts are often just as concerned with how the purchase makes them feel.
In one study on back massages, researchers tested pitching the massage through two approaches:
- As a relief to back pain
- As a pleasurable experience and a stress reliever
Spendthrifts responded to the second option 103% more often than penny pinchers. Both responded favorably to the more utilitarian approach.
2. Focus copy on the ease of purchasing. Penny pinchers hate multiple purchases, which is also the reason why they prefer bundling: Making payments means separate (and recurring) pain points. Spendthrifts care far less about these.
Since deferring and spreading out buying pain is less likely to affect spendthrifts, they will be more interested in hearing about payment plans and other solutions that allow them to get access to the product or service they want now.
Selling to Penny Pinchers
Penny pinchers are conservative spenders who are less willing to part with their money. Speak their language and frame value in ways that doesn’t activate their buying pain trigger.
Penny pinchers are notably harder to sell to. You have to pay close attention to how you frame value.
1. Use copy to reframe perceived value. Many people struggle with large numbers, they just aren’t as easy to digest as smaller amounts are. Penny pinchers have a hard time evaluating potential value for long-term expenses. A service that costs $1,000 per year is harder to comprehend value than the equivalent of $84 per month.
For penny pinchers though, being able to evaluate price on this smaller time scale has been shown to make them much more likely to buy, so you should focus your copy on emphasizing this facet rather than focusing on long-term costs.
2. Emphasize value at every turn. One well-publicized study by Carnegie Mellon revealed that changing the description of an overnight shipping charge on a free DVD trial offer from “a $5 fee” to “a small $5 fee” increased the response rate among penny pinchers by 20 percent!
With a 20% increase in conversions by adding a single word, you need to be sure that your copy speaks to penny pinchers by pointing out details that frame the price as less expensive.