Customers' Satisfaction Relies On Their Budget; What Is The 'Bottom-Dollar Effect?'

Customer Satisfaction Depends On Their Piggy Bank
The amount of money a person has in their budget affects their purchase more than the price of the purchase itself. Photo courtesy of Shutterstock

How happy are you buying those new pair of shoes, a car, or that new laptop you’ve always wanted? Marketing researchers have found your satisfaction has nothing to do with price tag or even the quality of the product, but instead, what’s in your pocket. The study conducted at the University of Arkansas and the University of Texas at Austin and William Bearden at the University of South Carolina, will be publish their findings in the October 2014 issue of the Journal of Consumer Research.

The new findings confirm the direct correlation of the “bottom-dollar effect,” which occurs when the purchaser’s satisfaction decreases as their budget decrease. Previous research has been done on the relationship between consumer spending and purchase satisfaction, but this is the first time researchers have decided to look at a key factor: How financially stable or budget-limited is the person making the purchase?

The study’s lead author, Robin Soster, a professor in the Sam M. Walton College of Business said the findings will have 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.

Participants who purchased anything that drained their budget dry reported the lowest satisfaction compared to those who could make the purchase with more money left over for other goods and services. In the case of this particular study, a group of participants with a large budget downloaded a movie and were compared to another group who downloaded the same movie except the paid for it with a small budget.

“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.”

What does it mean for retailers, marketers, and salespeople? When researchers gave their participants free money or were told their budgets would be replenished soon after when they were near budget exhaustion, it eliminated or decreased satisfaction. Free money made no difference in satisfaction to those with a larger budget.

Timing of the purchase may also change satisfaction reports considering if a participant’s satisfaction changed based on if they knew their money was going to be replaced soon after the purchase. Purchases made right before pay day may yield much higher satisfaction than if it was purchased at a different point in the month. Same goes for coupons, which would act as the free money the participants found so satisfying.

“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,” Soster said.

Source: Soster R, Gershoff A, Bearden W, et al. The Bottom Dollar Effect: The Influence of Spending to Zero on Pain of Payment and Satisfaction. Journal of Consumer Research. 2014.

Join the Discussion