In the lead up to Black Friday and Cyber Monday, Sage Pay released some interesting statistics and information concerning the way in which consumers would be shopping this year, highlighting the psychological motivations which urge people to buy into the frenzied purchase of Christmas bargains. In collaboration with Professor Vince Mitchell and psychologist Dr Tomas Chamorro-Premuzic, they gave us an interesting insight into the psychological reasoning behind the spending habits of the British public, a few of which we will discuss in further detail below:
Fear of Missing Out: Triggering Primal Impulses
With Sage predicting £1.7 billion to be spent this year, it’s clear that the increase in Christmas sales is not simply due to the fact that everyone’s feeling a little more charitable during the festive season. ‘Fear of Missing Out’ is an important factor in urging people to part with their money in cases where they would normally abstain from buying, which plays on our primal hunter-gatherer instinct to prioritize our survival of over that of others. While the conscious, logical mind knows that the prospect of getting a brand new television over the next person is far from being a life or death situation, 39% of shoppers said that the concept of getting the best deal was what urged them to buy. Consequently, 60% of shoppers admitted that they later regretted buying a bargain due to lack of need or use for the product, which demonstrates just how easy it is to play on people’s instincts in order to override the voice of reason which would usually prevent them from taking action.
Types of Customers: Why One Size Doesn’t Fit All
While there are some shared instincts inbuilt into every human, there are also many individual personality traits which retailers should consider in order to target certain types of shoppers. Dr Chamorro-Premusic split these into a list of categories, which highlight the recognizable characteristics presented by certain types of spenders:
- The Hyper-Maximisers: Have a detached relationship with their money, spending it on things they need rather than want. Furthermore, they put a great deal of energy into finding the best deal and being careful with their money.
- Old School Savers: Careful with their money and unlikely to splash out, they are put at a disadvantage by their slow adoption of technology.
- Old School Spenders: Impulsive and carefree with money, focusing more on the short-term than the long-term. They are more likely to pay in cash.
- Click and Collectors: More likely to spend on utilitarian needs rather than hedonistic wants, although such purchases are not typically price-sensitive. More likely to use technology for convenience rather than saving money.
- Carefree Clickers: Use technology in their purchases for the experience’s sake rather than to save money, and are more likely to splash out on a treat than on essentials.
- Cash Flashers: less likely to go cashless; their relationship with the cash they spend is both conspicuous and carefree.
- Sanctioned Indulgers: Members of this group are careful with their money, but tend to spend it on indulgences and associate it with emotional benefits. They are not particularly open to new financial technologies.
- Hunter-Gatherers: Risk-averse savers and budgeters who use the latest gadgets to help them in this quest. They are likely to enjoy this process of hunting for bargains and use technology to save money.
Online Ease: Why Cyber Monday is Likely to Outperform Black Friday
With Sage predicting £828 million to be spent on Cyber Monday this year, it’s interesting to consider how the popularity of online shopping could cause the in-store Black Friday deals to become somewhat obsolete. Apparently 71% of us prefer shopping online simply out of convenience, but it also seems to be an environment in which we are more willing to make larger purchases and spend impulsively. 43% of UK shoppers said they experienced feelings of guilt when handing over cash; a process which is eliminated by the ease of online transactions. Professor Mitchell noted that “in the online world, the reality of things such as money can get distorted, removing the guilt we associate with face-to-face spending”. With many of the negative experiences associated with in-store shopping removed, it is hardly surprising that online sales are progressively out-performing those seen on the high street.
In conclusion, Sage noted that while the Christmas shopping scramble is an important time for retailers, they should also remember to consider long term loyalty when targeting their customers. While impulse inspiring deals can prove to be profitable short-term, a universal model won’t keep customers coming back. Retailers should be catering to different types of customers by selling and promoting in different ways, in order to alleviate feelings of remorse and secure a sense of loyalty. Business should also keep in mind their capabilities and resources before attempting to keep up with larger corporations, in order to ensure that any action taken is good for their business as opposed to being detrimental to their reputation.
All information provided by http://www.sagepay.co.uk/