Gizmos and Gadgets – Avoiding Impulse Purchases and Understanding Consumer Psychology
For most of us, the purchase of a new gadget is exciting. Opening the box and holding something which feels and looks shiny and new can be a great feeling. This interaction between the shiny new item, the act of opening the packaging and the anticipation of the experience is an important driver in encouraging consumers to make expensive purchases. This information is utilised by the advertising industry to sell big-ticket items to the public.
The psychological and cognitive processes in making a purchase are fuelled by the feel-good neurotransmitter dopamine, which is released in ‘anticipation’ situations. This important neurochemical can boost mood, motivation and attention and is released in anticipation of the reward, as opposed to receiving the reward itself. Therefore, for many consumers, the ability to resist a purchase can become a difficult task. Modern advertising does a great job at projecting the perceived social benefits of owning a cutting-edge gadget, leading consumers to pay exorbitant prices for the latest toy, which could be obsolete within 6 months.
In our previous article (Available HERE), we investigated the impact of advertising on teenagers and young adults and the pressures which drive consumers to spend.
A theory which lends support to the pressures placed on consumers to own the latest technology is the distancing of the ‘self’ from the ‘cash’ aspect of the interaction and the ever-changing methods in which we choose to finance large purchases. This includes the expensive electronics and gadgets that are seen by many as necessities of surviving in the modern world, as opposed to the ‘luxury’ items which older generations may view them as.
Changes in relationships with money & credit – A brief history
Even as recently as my parents’ generation, wage payments were often provided in cash envelopes by employers. The physicality of money meant that saving processes necessitated storing money in a jar or piggy bank.
In the early 1970s, around 60% of the population were paid in cash, despite cheque-less and cashless payments first being promoted in the ’60s. This promotion of a movement away from cash payments of salary to cashless transactions was first introduced by Citibank, and over a decade long period, approximately 30 million adults moved on to the cashless payment system.
This cashless system evolved over time, with the introduction of credit as a means of obtaining the items that consumers wanted but weren’t necessarily able to afford. This meant that many were able to live beyond their means to obtain the lifestyles portrayed in advertisements and popular culture. Due to government concerns regarding an increased usage of consumer credit, the Consumer Credit Act was introduced in 1974 as a means of protecting consumers’ rights and providing recourse in situations where credit situations went wrong.
The consumer credit market and the ability of consumers to purchase items through credit has grown exponentially in the years since, with the 2018 average UK monthly figures showing a £17.3 billion spend on credit. With this growth has come diversification and the ability for consumers to make purchases of items through credit cards, store credit and credit agreements with companies like mobile phone providers.
For many, this has removed the so-called ‘pain of paying’ when parting with physical cash that was felt by previous generations who had seen their funds accumulate in jars in front of them. There are theories that this emotional distancing from the physical value of money has meant that consumers are more likely to spend without running the risk of feeling emotional regret following the purchase.
Consumer pressure to conform
“My friends would make jokes about my phone. Part of me knew that they were not being serious, but I also felt slightly out of sorts using my phone in front of them. It was more about the money than anything else for me…the reason I didn’t have the latest gadgets was because I didn’t make as much as they did.”
Claire highlighted that the inability to afford certain items meant that she had an increased feeling of inadequacy as a result, and this sometimes led to her avoiding social interaction with her friend group.
“I knew that I shouldn’t be letting it get to me, but it’s one of those things that gets worse over time. I decided to take a phone out on hire purchase and pay it over a longer period. My poor credit rating meant that I couldn’t get it from the mobile company I was with, and the only option was to buy this through hire purchase.”
Claire took out finance on this item by entering into a hire purchase agreement and ended up paying a lot more than she would have had she been able to get the item through her service provider. The higher APR % mean that in the long-term, this cost her almost double than it would have in a standard credit agreement with her mobile phone provider.
Claire is not alone in her situation. Many consumers are being placed into detriment as a result of not being able to obtain credit through conventional means. With exorbitant interest rates and the pressures of marketing, many consumers now spend beyond their means.
At consumeradvice.scot, we have put together our top tips for avoiding consumer catastrophe when faced with the temptations of clever marketing for expensive items -
Sleep on it – Larger and more costly commitments do not need to be purchased there and then. Taking time to come to a decision can make us realise that we may want the item, but don’t actually need it.
Research is key – When unfamiliar with an item, knowing your stuff is important. Look at specifications of items and comparisons between older and newer models. This will ensure that you are not paying a premium for what is essentially the same item.
Shop around – Don’t be reeled in by the first ‘special offers’ you see. Compare deals between retailers and consider whether you are really getting value for money or not. Weigh up the options available.
Haggle if you can – People often forget that even with big companies, there can still be room to negotiate a lower price or increased benefits of purchasing from a specific retailer or provider. If you don’t try, you don’t get!
Recycle old hardware – If you do decide to upgrade your gadgets, remember that there are companies out there who buy older devices. Shop around for the best price and remember to reset any items such as phones and tablets to factory settings before giving them away.
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