Homing in on your hard-earned money
Online retailers make it easy for us to overspend on unneeded products
Imagine never having to shop for laundry detergent or coffee beans. Your washing machine or coffee maker would note that you were running low on supplies and automatically reorder them — a hightech feat that would make even the Jetsons feel at home.
Fortunately, these innovations are now available as developers race to bring us more convenience and more personalization: smarter homes, seamless shopping experiences and faster payment processes.
Unfortunately, in our increasingly cashless society, we already mindlessly and perhaps frivolously blow our cash with the tap of our credit card and the wave of our mobile phones. And with the advent of connected homes, we can spend with the push of a button or a casual remark to a virtual assistant. As the technological juggernaut, the so-called Internet of Things, takes over our lives, what does this mean for how we buy and manage our hard-earned bucks?
“It could become incredibly easy to spend money,” says Jeff Marshall of Scotiabank. He oversees hundreds of designers and scientists at the bank’s unit for digital innovation. “Part of (our role) would be: how do we help customers understand their budgeting?”
Well, most of us understand that money can be spent many times faster than it is made; however, we may not appreciate how the ease of payment affects our money mindset. Scientists who study behavioural economics often talk about the pain of paying. The more attention that you pay to the payment, to money leaving your wallet and to your account, the more it hurts.
Seeing a price tag or spending cash triggers the part of your brain that is associated with pain. But using credit cards anesthetizes this pain, as does, say, hitting a button.
With last year’s roll out of the Wi-Fi-enabled Amazon Dash buttons, we’re now able to reorder items with ease. Each button costs US$4.99 and can adhere to any flat surface in your home. Run out of laundry detergent? Tap a Tide button and Amazon will deliver it to your home. (OK, there is one more step: You’ll get an order alert on your mobile device before you confirm the purchase — in case your kid mashes the button 40 times for fun.)
Other companies, such as Kwik Commerce, are working to unveil their own buttons that will supply you with everything from diapers to drinks. It’s the next step in a more seamless shopping experience for the masses who have come to expect more customization and connectivity to their devices.
But a button has little psychological link to money. No price counter. No bill. Just a brand.
“(Retailers) don’t want us to have go through some soul-searching process about whether we want to part with our hard-earned $50. The easier they can make the mode of transaction, the more likely we are to spend,” says James Roberts, a marketing professor at Baylor University in Texas and author of Shiny Objects: Why We Spend Money We Don’t Have in Search of Happiness We Can’t Buy.
“With Amazon, they’ve made it very easy,” he says. “We’ve got an account, we have our credit card on there … Now we’re taking it one step further. We’ve got to add these digital assistants where there’s nothing more than just making a request. That reduces the pain of paying substantially.”
In a step up from its Dash buttons, Amazon’s Echo device uses an intelligent voice assistant named Alexa to help users with tasks such as ordering products on Amazon Prime.
Launched in the U.S. earlier this year (Amazon has yet to release any details of Echo’s Canadian debut), the smart speaker offers voiceactivated help for a slew of tasks — from volume control to asking Alexa to read you the morning’s headlines while you make breakfast. Of course, if while making breakfast you realize you’re out of coffee, you can ask Alexa to order more. Actually, if you’ve previously ordered almost any household items, such as toilet paper, pop, pizza or flowers, you can ask Alexa to get more since the app already has your payment information and shipping address.
It’s definitely convenient, but buying items this way means we’re less apt to shop around or research prices. Whatever the listed price is on Amazon.com is what you’ll pay if you make Alexa your personal shopper.
Another potential downside is that if we can refill our pantry and fridge with ease, research shows that we’ll consume more and faster.
“If you have your chips on auto refill, you’ll end up eating more chips than you used to,” says Scott Rick, associate professor of marketing at the University of Michigan. “For discretionary food goods, people will wolf them down at a greater rate if they’re visible …. That might be bad news for people if they’re refilling naughty stuff.”
That being said, having to order goods through your assistant could be a deterrent if you’re buying something that you feel guilty about. According to research on how we interact with computers and robots with human-like qualities, we actually feel as awkward around them as we would if they were people.
“If people have to announce that it’s time to refill the Twinkies, it’s something that we don’t mind doing discreetly through a button or just having it arranged online. But having to say it, even it’s to an algorithm, to a robot, is aversive,” Rick says. “That can help people behave.”
As it turns out, we’re not desperate to order foodstuffs and household items online anyway. According to a recent BMO survey, while 48 per cent of millennials (aged 18 to 35) prefer to shop digitally, only 14 per cent prefer to grocery shop online versus in person.
And Roberts points out that people with the Dash button have actually been slower to purchase. In June, the Wall Street Journal reported that fewer than half of those who bought a Dash button had placed an order in the last year. Those who did bought something once every two months.
“People want to comparison shop,” Roberts says. “When products are consumed in private — toothpaste, cleaning solution — people are less likely to worry about what other people think. We want the best deal we can get.”
The purpose of all of this convenience, even if it costs a little more, is to gift us with precious time and lighten our stress.
A new study published in the journal Social Psychological and Personality Science finds that people who choose time over money are happier people. And if a button or a voice order saves us from a midnight run to the store for toilet paper, perhaps that is worth it.
“When I’m in the basement, I might realize that I need more detergent. But I will guarantee forget that fact by the time I walk upstairs,” Rick says.
“It can help consumers manage their overwhelmed and imperfect memory.”