The Bottom Dollar Effect: The Influence of Spending to Zero on Pain of Payment and Satisfaction

Spending that exhausts a budget is shown to decrease satisfaction with purchased products relative to spending when resources remain in the budget. Six studies, including those in which participants earn and spend real resources and evaluate real products, explore this bottom dollar effect. This research contributes to prior mental accounting research regarding how costs influence decision making (e.g., bundling, coupling, sunk costs) and to the satisfaction literature. Supporting the role of pain of payment in this process, we show that the bottom dollar effect increases as effort required to earn budgetary resources increases, decreases in the presence of windfall gains, and decreases when there is less time between budget exhaustion and replenishment. Mediation analyses further demonstrate the role of payment pain in the bottom dollar effect. Implications are discussed in the context of behavioral research, marketing promotions management, and public policy.

[1]  Carey K. Morewedge,et al.  Unfixed Resources: Perceived Costs, Consumption, and the Accessible Account Effect , 2007 .

[2]  Mark V. Pezzo,et al.  The Psychology of Windfall Gains , 1994 .

[3]  E. Anderson,et al.  The Antecedents and Consequences of Customer Satisfaction for Firms , 1993 .

[4]  Carrie M. Heilman,et al.  Pleasant Surprises: Consumer Response to Unexpected In-Store Coupons , 2002 .

[5]  Jaime L. Kurtz.  Looking to the Future to Appreciate the Present , 2008, Psychological science.

[6]  A. Hayes.  Introduction to Mediation, Moderation, and Conditional Process Analysis: A Regression-Based Approach , 2013 .

[7]  Dilip Soman,et al.  Effects of Payment Mechanism on Spending Behavior: The Role of Rehearsal and Immediacy of Payments , 2001 .

[8]  M. Strahilevitz,et al.  Probability and Mode of Acquisition Effects on Choices Between Hedonic and Utilitarian Options , 2001 .

[9]  Manoj Thomas,et al.  How Credit Card Payments Increase Unhealthy Food Purchases: Visceral Regulation of Vices , 2010 .

[10]  Donald R. Lehmann,et al.  Consumer Expectations and Culture: The Effect of Belief in Karma in India , 2010 .

[11]  J. E. Swan,et al.  Equity and Disconfirmation Perceptions as Influences on Merchant and Product Satisfaction , 1989 .

[12]  Amar Cheema,et al.  The Effect of Partitions on Controlling Consumption , 2008 .

[13]  C. Fornell,et al.  The American Customer Satisfaction Index: Nature, Purpose, and Findings , 1996 .

[14]  John T. Gourville,et al.  Payment Depreciation: The Behavioral Effects of Temporally Separating Payments from Consumption , 1998 .

[15]  Kirk L. Wakefield,et al.  Spending on the Fly: Mental Budgets, Promotions, and Spending Behavior: , 2010 .

[16]  D. Soman.  The mental accounting of sunk time costs: Why time is not like money. , 2001 .

[17]  F. Bryant.  A four-factor model of perceived control: Avoiding , 1989 .

[18]  Mary Jo Bitner,et al.  Evaluating service encounters: The effects of physical surroundings and employee responses. , 1990 .

[19]  John G. Lynch,et al.  Resource Slack and Propensity to Discount Delayed Investments of Time Versus Money , 2004, Journal of experimental psychology. General.

[20]  Peter E. Rossi,et al.  Planning to Make Unplanned Purchases? The Role of In-Store Slack in Budget Deviation , 2010 .

[21]  A. Tversky,et al.  The framing of decisions and the psychology of choice. , 1981, Science.

[22]  R. Thaler.  Toward a positive theory of consumer choice , 1980 .

[23]  Jack B. Soll,et al.  Mental Budgeting and Consumer Decisions , 1996 .

[24]  William T. Ross,et al.  The Asymmetric Impact of Negative and Positive Attribute-Level Performance on Overall Satisfaction and Repurchase Intentions , 1998 .

[25]  A. Tversky,et al.  Prospect theory: an analysis of decision under risk — Source link , 2007 .

[26]  Bernd H. Schmitt,et al.  Waiting time and decision making: is time like money? , 1995 .

[27]  Amar Cheema,et al.  Malleable Mental Accounting: The Effect of Flexibility on the Justification of Attractive Spending and Consumption Decisions , 2006 .

[28]  R. Rozensky.  The effect of timing of self-monitoring behavior on reducing cigarette consumption , 1974 .

[29]  R. Thaler.  Mental accounting matters , 1999 .

[30]  Kristopher J Preacher,et al.  Statistical mediation analysis with a multicategorical independent variable. , 2014, The British journal of mathematical and statistical psychology.

[31]  W. F. V. Raaij,et al.  Mental budgeting and the management of household finance , 2011 .

[32]  A. Mukhopadhyay,et al.  When Choosing Makes a Good Thing Better: Temporal Variations in the Valuation of Hedonic Consumption , 2010 .

[33]  R. Oliver.  A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions , 1980 .

[34]  Robert Biswas-Diener,et al.  Prosocial Spending and Well-Being: Cross-Cultural Evidence for a Psychological Universal , 2010, Journal of personality and social psychology.

[35]  Richard H. Thaler,et al.  Mental Accounting and Consumer Choice , 1985, Mark. Sci..

[36]  C. Fornell,et al.  Rational and Adaptive Performance Expectations in a Customer Satisfaction Framework , 1995 .

[37]  A. Tversky,et al.  Prospect theory: analysis of decision under risk , 1979 .

[38]  John G. Lynch,et al.  Spotlights, Floodlights, and the Magic Number Zero: Simple Effects Tests in Moderated Regression , 2012 .

[39]  Drazen Prelec,et al.  The Red and the Black: Mental Accounting of Savings and Debt , 1998 .

[40]  Elizabeth W. Dunn,et al.  Money Giveth, Money Taketh Away , 2010, Psychological science.

[41]  John T. Gourville,et al.  Transaction Decoupling: How Price Bundling Affects the Decision to Consume , 2001 .

[42]  V. Zeithaml.  Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence: , 1988 .

[43]  Stephen A. Spiller,et al.  Opportunity Cost Consideration , 2011 .

[44]  Richard G. Netemeyer,et al.  A Generalizable Scale of Propensity to Plan: The Long and the Short of Planning for Time and for Money , 2010 .

[45]  P. Chiappori,et al.  A Theory of the Allocation of Time " , 2014 .

[46]  Ashwani Monga,et al.  Tracking Costs of Time and Money: How Accounting Periods Affect Mental Accounting , 2010 .

[47]  Ashwani Monga,et al.  How I Decide Depends on What I Spend: Use of Heuristics is Greater for Time than for Money , 2007 .

[48]  Adam L. Alter,et al.  Financial Deprivation Prompts Consumers to Seek Scarce Goods , 2012 .

[49]  R. Oliver.  Satisfaction: A Behavioral Perspective On The Consumer , 1996 .

[50]  D. Ariely,et al.  The 'IKEA Effect': When Labor Leads to Love , 2011 .

[51]  Stephen J. Hoch,et al.  Spending Time versus Spending Money , 2004 .

[52]  Katherine N. Lemon,et al.  A Dynamic Model of Customers’ Usage of Services: Usage as an Antecedent and Consequence of Satisfaction , 1999 .

[53]  A. Parasuraman,et al.  The nature and determinants of customer expectations of service , 1993 .

[54]  Lauren G. Block,et al.  Chocolate Cake Please! Why do Consumers Indulge more when it Feels More Expensive? , 2011 .

[55]  A. Herrmann,et al.  Choice Goal Attainment and Decision and Consumption Satisfaction , 2007 .

[56]  Amar Cheema,et al.  Earmarking and Partitioning: Increasing Saving by Low-Income Households , 2010 .

[57]  P. Ellsworth,et al.  Saving the Last for Best , 2012, Psychological science.

[58]  Ritesh Saini,et al.  Currency of Search: How Spending Time on Search is not the Same as Spending Money , 2008 .

[59]  Geoffrey W. Sutton.  Stumbling on Happiness , 2008 .

[60]  Caryn Christensen,et al.  The psychophysics of spending , 1989 .

[61]  R. Thaler,et al.  Mental Accounting, Saving, and Self-Control , 2011 .

[62]  Preferences Scientific.  Kahneman, Daniel, and Amos Tversky. , 1982 .

[63]  David Huffman,et al.  A Monthly Struggle for Self-Control? Hyperbolic Discounting, Mental Accounting, and the Fall in Consumption Between Paydays , 2005 .

[64]  P. Nelson.  Information and Consumer Behavior , 1970, Journal of Political Economy.

[65]  Arul Mishra,et al.  How Salary Receipt Affects Consumers' Regulatory Motivations and Product Preferences , 2010 .

[66]  Elizabeth W. Dunn,et al.  Spending Money on Others Promotes Happiness , 2008, Science.

[67]  J. Neyman,et al.  Tests of certain linear hypotheses and their application to some educational problems. , 1936 .

[68]  Wagner A. Kamakura,et al.  How Economic Contractions and Expansions Affect Expenditure Patterns , 2012 .