Beware impulse spending and buyer's remorse

Beware impulse spending and buyer's remorse
12 May 2013

Every day we wrestle with opposing viewpoints that battle it out in our minds, a tension known as cognitive dissonance. Effectively we strive for the reconciliation of two conflicting thoughts, and often resort to a third to justify the eventual decision. Rationalization (making excuses) is often involved in reducing anxiety about conflicting thoughts and behaviour.

An example of cognitive dissonance is when people smoke (behaviour) yet they know that smoking causes cancer (cognition) and they know this is not good for them. So they may seek to justify the behaviour with a thought such as: “my grandfather smoked all his life and lived until he was 92 years old.”

To reduce the mental tension which we feel caused by the difference between our thinking and our behavior the mind rationalizes the behavior by ‘inventing’ a comfortable new thought, which we convince ourselves is stronger than the original thought.

In other words, we create a belief that contradicts our knowledge and therefore feel inner contentment through this justification of our behaviour. Behavioral scientists George Akerlof and William Dickens indicate that these “cognitive dissonance justifications are self-limiting as there is no gain to rationalizing the behavior.”

Buying things we regret

Cognitive dissonance research is prevalent in consumer buying decisions. In particular, researchers Sweeney, Hausknecht, and Soutar have created a buyer’s remorse scale which helps people consider the emotional and cognitive (wisdom of the purchase) aspects of buying things. The emotional element encompasses such questions as; After I bought this product: “I felt disappointed with myself.” “I felt hollow.” “I felt I’d let myself down.” The cognitive aspects of the questions are categorized under the ‘Wisdom of purchase.’ Such as: “I wonder if I really need this product.” “I wonder whether I should have bought anything at all.”

Psychologists call the tension that occurs after such decision making the regret effect.

I am sure most of us can admit to making purchases we later regret and do not need. See for example these photo submissions from cashy community members of purchases they later regret and read the stories connected to the photos.

Buying on impulse

There are many reasons why we buy things we know we do not need then justify the purchase. Impulse buying is one of the most common reasons. Impulse buying is often called ‘immediate and mindless reactive behavior.’ Bellenger, Robertson and Hirschman found that almost 40% of consumers' department store purchases fell into the impulse category. 

Hands up if you have found yourself in a store to fill in the time and left with a new shirt, blouse, DVD (which you watch once), CD (never fully listened to) or book (never made it past page 33). I certainly have, and frequently too!

Recreational shopping is dangerous on our wallet. We may feel good at the time but when we get back home, or a day later cognitive dissonance or buyer’s remorse sets in and we find ourselves making excuses. A few years later we may even end up having a garage sale and selling, what has now become a dust collector for a fraction of the cost or enjoyment we received from it. Although I have to admit a garage sale can be fun and rewarding when you get some cash for your cast-offs…

Overcoming buyer’s remorse

We know in the long run that cognitive dissonance is self limiting and causes us more potential pain than matching our behavior to our beliefs, but if the gap between our thoughts and action was watertight why do we fail to live up to our own expectations of our self?

When it comes to money use these 3 ideas to help you before you suffer buyer’s remorse.

1.       Unplanned purchases

Just say no. Imagine 40% of your material purchases could be on unplanned purchases. That’s a frightening thought. I know we all have problems making a budget and sticking to it. But imagine what you could do with all that money you have spent on impulse.

2.       Experiences over material things

Wouldn’t it be more rewarding to buy experiences with the money in the first place rather than things? Researchers often indicate experiences receive much more pleasure than material possessions.

A trip to the cinema, concert or exhibition stays in our memory far longer than the fleeting joy from buying material things. Especially ones bought on impulse. Think of saving for a holiday instead of buying the expensive jacket, all those DVD’s and unread books.

3.       Saving over spending

I’m stating the obvious here, but we save far too little and waste far too much. As soon as you receive your salary payment put a percentage away into a savings account. The age old saying ‘it’s better to be safe than sorry,’ is especially true when it comes to impulse spending. If you must spend the money and are particularly tempted to buy on impulse think of the traffic light rule. Think before you buy and sleep on it.

What have you bought that you have later regretted? How do you overcome impulse buying? Share your tips with cashy.

 

 

 

 

 

Comments

  • VictorS
    VictorS
    2013-07-27T10:50:41

    Great post to know. In connection,If you have chemistry on the brain, consider this. With too much dopamine in the attic, customers are more vulnerable to impulse shopping. If stores were to weaponize this, God help us all. A personal finance loan will be needed to pay for all purchases if it is not controlled.

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Head of Behavioral Finance
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