Pain of paying
How to make paying hurt less?
What do paying and physical pain have in common? A lot - says George Lowenstein, professor of economics and psychology at the Carnegie Mellon University. His research shows, that when we evaluate prices, especially unfairly high prices, the same part of our brains is activated than the one responsible for processing physical pain.
Why should marketers and businessmen care?
There is one simple reason. People are consciously and subconsciously trying to avoid unpleasant experiences. The unpleasant experience is in our case paying.
Everybody will agree that a customer who loves shopping but avoids paying is not a jackpot.
Nowadays, we know quite a lot about the pain of paying. Not only we know what causes the pain, but extensive research reveals how can we minimize it.
In his book Predictably Irrational, Dan Ariely reveals the first rule of pain of paying. The first dollar spent hurts the most and the pain gradually decreases with every additional dollar.
What does it mean?
Well, it simply means that the decision whether to buy a 10$ product or not will be more unpleasant than deciding whether I buy something for 90$ or 100$.
How can we use it in our business?
Sell in bundles.
Instead of selling three different products separately to your customers, create a bundle. Chances are that you will eventually sell much more.
The second important finding about the pain of paying comes from Dilip Soman’s research from the University of Toronto. The method of payment we use greatly influences the pain we experience. This is caused by the fact that our mental accounting becomes partly damaged and much less transparent.
It turns out that there are payment methods which minimize the pain of paying even more. Using prepaid credit or membership is more pleasant for customers than cash and credit cards.
Why is it so?
Because the entire pain was experienced at the beginning, when credit was prepaid and membership bought. Now, customers can fully concentrate on enjoying your service without worrying about paying.
The conclusion is clear. Whenever you can, try to use payment methods which are as far from cash as possible. You will greatly increase your customers’ willingness to buy as well as their enjoyment.