Five Keys to Selling to Spendthrifts
Neuroeconomics research suggests that roughly 15% of your consumers are “spendthrifts” – they have unusually low sensitivity to the pain of paying, i.e., the neural discomfort associated with parting with money. Selling to people who feel little or no buying pain should be easy, right? With reduced buying inhibition, a spendthrift is more likely to take advantage of any given offer compared to a tightwad or even a normal, “unconflicted” person. Nevertheless, making the sale isn’t a given. For one, your offer is competing with other offers both for similar products or services as well as offers for dozens of other, unrelated items. Unless your spendthrift has the net worth of Bill Gates, he will have to make choices – as much as he might like to, he can’t buy everything. So, in our ongoing effort to translate academic neuroeconomics into practical neuromarketing, here are five ways to help close the deal with these free-spending customers:
1. Appeal to Hedonistic and Utilitarian Tendencies. Unlike tightwads, spendthrifts are concerned both about utilitarian issues as well as how the product or service will make them feel. Neuromarketing readers will recall the study of a $100 massage which was offered to subjects in two different ways: for some, as a relief from back pain, and for others, as a pleasurable experience. Spendthrifts were much more likely to buy than tightwads when the offer was couched in terms of the massage being a pleasurable experience. Almost half of the spendthrifts bought a pleasurable massage, compared with only about 22% of the tightwads. That’s more than 100% higher. Interestingly, though, spendthrifts were more likely to buy the therapeutic massage, too – almost 80% of the spendthrifts bought the massage, vs. a little under 70% of the tightwads. This shows that the most effective offer by far for the spendthrifts was the utilitarian service, but they were also much more responsive to the idea of a pleasurable experience. What’s a marketer to do? If possible, hit BOTH hot buttons – you NEED this product, but it’s FUN too. A good example of this kind of marketing is the luxury pickup truck market – a buyer may need the pickup truck for his contracting work, but he wants it to look good and be fun to drive, too. (A tightwad corporate buyer, who won’t be driving the vehicle personally anyway, might choose an anonymous-looking utility van for the same application.)
2. Provide and Emphasize Credit Options. Research shows that spendthrifts are the most likely group to have credit card debt. Since this group is above-average willingness to use credit cards, providing both credit card options as well as other easy financing will help close the deal. While financing options can help in selling tightwads, too, the reason is different. For tightwads, financing defers and spreads out the buying pain; for spendthrifts, financing options are more important in their role of simply enabling the purchase.
3. Don’t Sweat the Language. Although framing a $5 shipping fee as a “Small $5 fee” was highly effective in selling to tightwads, it had little effect on spendthrifts. This doesn’t mean that wordsmithing should go out the window entirely, but rather that efforts to put the pricing in the most favorable light won’t help much.
4. Offer instant gratification. Although this was not a conclusion of the CMU study, I think the behavioral characteristics of spendthrifts suggest that they will be more susceptible to offers which offer either instant or quick gratification. What’s better than a sexy sports car? One you can drive off the lot right now, and in minutes be showing it off in your driveway or taking it for a spin in the country.
5. Improve Margins With Options. Spendthrifts have less sensitivity to buying pain, so some selling situations might use an attractive initial offer to get the buyer to commit, and then improve margins with desirable options. The net effect on the package price might be no different than an all-inclusive or bundled offer, but the closure rate might improve. Are spendthrifts more likely to buy an extended warranty? We have no data on that, but it is likely that in making the tradeoff between “peace of mind” (knowing that whatever goes wrong with your purchase, you’ll be covered) and a hefty fee (often 10% or more of the purchase price), a spendthrift is more likely to take the offered warranty. Indeed, the reason electronics store clerks are trained to ask every customer about adding the warranty (not unlike the automatic fast food queries, “fries with that?” and “supersize it?”) is that 15% of the customer base is wired to be more receptive to that pitch.
Why Worry About Spendthrifts? If less than one out of six customers falls into the spendthrift category, and they are relatively easy to sell, why worry about them as a group? I think it is likely that certain types of goods – luxury items, expensive vacations, and the like – are purchased disproportionately by this group. Is a tightwad likely to buy an expensive Coach purse or Hermes tie? Probably not, unless that tightwad has so much actual wealth that there’s little pain associated with buying those items. Marketers of luxury items, not to mention products that are frivolous or at least non-essential, should pay particular attention to spendthrift psychology.