The second driver of price consciousness during recessions: Feeling guilt when spending money
Quick recap, customers become more price-conscious for three reasons; these are (1) anxiety about financial future (previous Nugget), (2) need to feel as ‘smart shopper’ (next Nugget), and (3) feeling guilty when spending money (this Nugget).
A most recent survey of senior marketers (97% VP-level or above) confirms that customers become more frugal today: 67% observe a lower likelihood to buy their products and services, and 43% find customers unwilling to pay the full prices.1
This feeling of guilt arises from two sources. First, people “know” that paying for nonessential products is not the right thing to do because it likely worsens their financial situation and also negatively affects those depending on them. Second, your customers’ social circle becomes more prudent and frugal. Spending money on luxury products violates a social norm and creates a painful feeling of guilt.
The question is, how could you elevate negative feelings linked to spending money?
Research suggests offsetting negative feelings by associating a purchase decision with positive emotions. For example, these positive emotions can come from messages that stress self-care by enjoying small indulgences: “you deserve it”2. However, in the current Covid-19 crisis, we see marketing campaigns that deliver a different source of good feelings: a warm-glow of giving to others. Researchers found that cause marketing makes customers feel good as they demonstrate altruistic acts when supporting the respective cause through their purchases3.
What are some examples of cause marketing during the Corona crisis?
Companies get creative during these difficult times and demonstrate various acts of charitable behavior:
- donate to local communities,
- support frontline workers,
- spread the advice of public health authorities: “social distancing”, “stay at home”, “wearing face masks” or “using hand sanitizers”,
- offer free access to online services or turn offline offerings into a digital experience,
- and much more.
You find an inspiring collection of examples here.
Does cause marketing pay off?
Researchers found cause marketing not only makes price cuts unnecessary, too deep discounts even backfire robbing the warm glow of giving.4 Cause marketing strengthens the emotional bond between customers and companies with a positive impact on customer loyalty. This more intense relationship improves the long-term profitability of customers5.
Hence, two-third of marketing managers state that their primary objective during the pandemics is on building brand value that connects with customers (33.0%) and on retaining current customers (32.6%).6
The bottom line: Make your customers feel good when buying your product and forget about the guilt of spending money.
Customers become more price-conscious during times of economic crisis for three reasons. So far we looked into customers' anxiety about their financial future and their felt guilt when spending money. In the next Pricing Nugget, we cover the third reason: feeling the need to feel as 'smart shopper'.
This Pricing Nugget is based on the new whitepaper "Pricing Advice in Times of Crisis". It takes the theory from the academic research summarized in the whitepaper and reflects about it in light of actual pricing tactics applied in the current crisis.
- The CMO Survey: Covid-19 and the State of Marketing, Special Edition – June 2020, p. 14.
- Quelch, J. A., & Jocz, K. E. (2009). How to Market in a Downturn. Harvard Business Review, 87(4), 52–62.
- Winterich, K. P., & Barone, M. J. (2011). Warm glow or cold, hard cash? Social identity effects on consumer choice for donation versus discount promotions. Journal of Marketing Research, 48(5), 855-868.
- Andrews, M., Luo, X., Fang, Z., & Aspara, J. (2014). Cause marketing effectiveness and the moderating role of price discounts. Journal of Marketing, 78(6), 120-142.
- Ballings, M., McCullough, H., & Bharadwaj, N. (2018). Cause marketing and customer profitability. Journal of the Academy of Marketing Science, 46(2), 234-251.
- The CMO Survey: Covid-19 and the State of Marketing, Special Edition – June 2020, p. 53.