Want Happy Customers? Bet Your ‘Bottom Dollar’

Regardless of the price, the more money your customers have in their pocket at the end of a transaction, the better they will feel about the purchase, new research suggests.

Consumers experience significant differences in satisfaction based solely on their budget status or financial condition at the time of purchase, rather than the quality of the product or how much it costs, according to a study set to be published in the Journal of Consumer Research The research confirmed the existence of the so-called “bottom-dollar effect,” when a consumer’s satisfaction for a product decreases as that buyer’s budget is exhausted.

One of the study’s authors, University of Arkansas assistant professor of marketing Robin Soster, said the study has major implications for retail marketers and managers.

“Because the status of consumers’ budgets may influence satisfaction with a product, marketing managers might consider the timing of promotions to coincide with resource availability,” Soster said. “If a marketer’s goal is to attract new customers, initial promotions might be better timed at the beginning of a month or immediately after consumers receive tax refunds, to ensure that budgets are not approaching exhaustion at the time of purchase.”

As part of the study, researchers focused on the distress consumers feel when spending their final dollars and how this distress alone influences satisfaction with products. Researchers measured how satisfied people were with movies purchased at different moments in the budgetary cycle.

“We predicted that as budget balances dwindled, the remaining dollars would be more painful to part with,” Soster said. “This, in turn, would make products feel more costly, so people were less satisfied with what they bought.”

The authors considered the pain of spending in various ways. For example, they found that if consumers think it is difficult to earn resources to replenish a budget, or if budget replenishment is a long way off, they get less satisfaction from the same item.

Source: NJCEE