Cash bet­ter than a card, it makes a pur­chase more mean­ing­ful: re­searcher

The Hamilton Spectator - - BUSINESS - PHYLLIS KORKKI

Pay­ing with cash is painful — and that’s a good thing, ac­cord­ing to new re­search.

When peo­ple pay for items us­ing cold, hard cash rather than by card or on­line, they feel more of a st­ing and there­fore as­sign more value to the pur­chase, ac­cord­ing to Avni M. Shah, an as­sis­tant mar­ket­ing pro­fes­sor at the Univer­sity of Toronto Scar­bor­ough.

Her find­ings were born of per­sonal ex­pe­ri­ence: One day she for­got her debit card, so she paid for a latte with phys­i­cal dol­lars — and felt her drink tasted bet­ter that day. Could her method of pay­ment have been the rea­son?

She tested her the­ory two years ago, when she was a doc­toral stu­dent at Duke Univer­sity in Durham, N.C. She de­cided to sell dis­counted mugs with the Duke Univer­sity logo on them to school staff and fac­ulty in their of­fices. She asked one group to pay $2 for the mugs with cash. The other group had to pay with a card.

Then Shah re­turned to each pur­chaser two hours later and said she needed to buy the mug back. To soften the blow, she asked the buy­ers to name their price. The peo­ple who had paid for the mug with a card asked for an av­er­age of $3.83 back, while those who had paid with cash asked, on av­er­age, for $6.71.

“Some of the cash folks lit­er­ally blocked their hand over the mug and said, ‘You can’t take this back,’” Shah said.

Shah, who also teaches at the Rot­man School of Man­age­ment at the Univer­sity of Toronto, pub­lished her study in The Jour­nal of Con­sumer Re­search. Her co-authors are Noah Eisenkraft, James R. Bettman and Tanya L. Char­trand.

In an­other study, Shah gave $5 to her re­search par­tic­i­pants to do­nate to one of three causes. One group re­ceived the amount in cash, and the other in the form of a voucher. Then she gave the par­tic­i­pants a rib­bon they could wear on their lapels to show that they had made a dona­tion.

Later, about half the peo­ple who had made the dona­tion with cash re­ported wear­ing the rib­bon, whereas only 14 per cent of the voucher group had done so. It sug­gested that the cash group — and it hadn’t even been their cash — felt more of an emo­tional con­nec­tion to the cause.

Of all the pay­ment meth­ods, “Cash feels the most painful,” Shah said. “Even a cheque feels quite painful.” There­fore the pur­chase is more mean­ing­ful. In a sep­a­rate study in­volv­ing char­i­ta­ble do­na­tions, she found that peo­ple who do­nated by cheque were more likely to make a re­peat dona­tion the next year com­pared with those who had do­nated by card.

Card and dig­i­tal pay­ments seem less real than cash, she said. It’s true that the un­re­al­ity of these meth­ods can cause peo­ple to make more pur­chases in the first place. But those same peo­ple tend to be less loyal to par­tic­u­lar brands, Shah said.

“It’s an ‘out with the old, in with the new’ men­tal­ity.”

“I’m not say­ing we should re­vert to cash,” she added. But there are ways to make the fact that peo­ple are part­ing with their money more vivid, she said — for ex­am­ple by in­tro­duc­ing a buzzing noise into the process or send­ing an email re­minder of the trans­ac­tion.

If com­pa­nies and or­ga­ni­za­tions want to en­cour­age re­peat busi­ness, they may want to re­turn a lit­tle more pain to the pay­ment process, she said.

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