Published May 11, 2023
Consumers are not rational. Economic theory suggests that people consume products and services to address tangible needs, whether for food, shelter, or warmth. But reality shows - and we're all guilty of it - that consumers engage in emotional spending for various reasons.
To be fair, this has been the case for over 100 years. Wealthy people have always been able to buy 'nice to have' rather than 'need to have.' As societies become wealthier, this trend accelerates to the point where consumer behavior is heavily shaped by the need to address their emotional needs rather than the purely practical.
Companies continue to be at the forefront of developing this idea of emotional spending and finding ways to create an emotional connection with their products or services. Let's explore retail therapy in more depth and how companies can best leverage it to drive better engagement, brand loyalty, enhanced customer experience, and ultimately, customer satisfaction.
Research suggests there are distinct and tangible psychological benefits that people enjoy, whether shopping in-store or online shopping. Let's explore them in more depth.
Shopping brings forth a sense of control
Retail therapy is a known - and effective way - of helping people regain control of their lives and enhancing their mental health. Whatever challenges life throws at a person - for good or ill – one response that can help put them back in the driver’s seat might be to indulge in a cup of coffee and a nice slice of cake. Alternatively, other customers might have a preference for a high-end takeout, a night out with their spouse, or a piece of expensive jewelry.
Shopping can ease anxiety
Buying anything can bring a change to the day’s grind, however small and fleeting. Using a new product often helps customers change their routine, so they can look at the challenges in their life from a different perspective, reduce the anxiety involved and maybe come up with a solution to problems.
Retailers - especially luxury retailers - are skilled at giving their customers many emotional triggers during a shopping experience that appeals to this aspect of consumer psychology. The whole end-to-end experience, from entering the store, engaging with the staff, selecting a product, as well as packaging and wrapping the product, and even exiting the store, is carefully planned. Their whole approach is to make the customer feel very special while in their care. The effect is to help develop a deep emotional connection and a user experience that can inspire customers to spend money on their credit card time and again. They even extend this insight into digital marketing as part of their inbound marketing strategy.
While it is easy to talk in terms of emotion when shopping, the physical effects of retail therapy are just as important. The shopping experience is known to trigger the release of dopamine, which helps improve one's mood.
This benefit to consumer psychology extends from the research (or browsing) that is part and parcel of the shopping experience, as well as the actual purchase itself and the use of the product or service.
A person experiences a great deal when they go shopping, and with the acceleration of technology, more opportunities are emerging for companies to leverage the psychological aspects of retail therapy.
A spending trigger that sales and marketing managers are always looking for is a compelling event to start the buying process that encourages a buyer to make a purchasing decision.
Emotion, especially for B2C buyers, plays a significant part in the purchasing decisions they make. There are a range of different emotional spending triggers. Let's explore a few.
Achievement can be a positive emotion to drive sales. A spending trigger here might be a promotion at work, closing an important business deal, getting engaged, or something equally significant that encourages someone to make an important purchase. In essence, it all boils down to someone making a buying decision to reward themselves for all the hard work they put into achieving an important goal.
Negative emotions can also create emotional spending triggers. Sadness, which may be a result of one of life's disappointments, can encourage people to make a purchase decision by providing someone with some kind of compensation for their disappointment. A significant purchase can help them deal with the stress involved, although there is potential for this type of shopping habit to develop into some kind of addiction.
Jealousy is a hugely influential trigger for emotional shopping, and companies are very adept at using it to promote a brand or product. Whether triggered by the idea of achievement or sadness, the notion of 'I'll show them' is a powerful motivator, which can trigger both healthy retail therapy and unhealthy retail therapy.
Companies are skilled at using this tactic, whether in advertising or other promotion, but it must be subtle. By and large, people do not want to admit they are jealous; however, they do want to feel they are better than 'the other person.' While an obvious appeal to jealousy will surely backfire, a more subtle approach will provide a more effective emotional spending trigger, likely creating significantly better results, especially with premium or luxury goods.
Guilt can be a powerful trigger to do a little retail therapy too. For example, it goes to the heart of much advertising targeting children. 'Pester power' is designed to trigger guilt in the parent, so they can feel they are looking after the best interests of their children. Like tapping into jealousy, however, no one wants to feel their personal value system is being exploited.
Fear is undoubtedly a compelling event that motivates people to buy. However, it is difficult to think of how fear can be seen in the context of healthy retail therapy. A shopping habit driven by fear has the potential to create a shopping addiction in someone and will likely antagonize potential customers rather than offer some shopping therapy.
It is fair to say that people buy almost anything on an emotional basis. Beyond the basics for nutrition and shelter, you can argue that anything else - beyond legal compulsion - is an emotional purchase. Even buying something like organic milk or almond milk is an emotional purchase, given that there are cheaper alternatives.
Diving deeper into the emotional dynamic, just because a purchase is emotional doesn't mean it is spontaneous. Buying a high-end sports car is undoubtedly an emotional decision, but it is rarely spontaneous and is likely the outcome of months, if not years, of work, effort, and financial planning.
A spontaneous purchase is more likely a response to a range of spending triggers and events that crystallize the emotions we explored earlier. In this situation, the need to assuage an emotional spending habit NOW will drive action, whether it be a visit to that coffee shop or a high-end jeweler.
A planned emotional purchase will involve significantly more planning as the prospective buyer of our high-end sports car - for example - will spend much time specifying the paintwork, the upholstery options, the technology options, and much else in the months running up to their purchase.
People buying at the emotional level need to be engaged with at the emotional level. The buying experience - online and in-store - must be polished, seamless, straightforward, and problem-free. As people's expectations rise, what was considered 'normal' 5 or 10 years ago might seem old-fashioned now. Technology is driving changing perceptions of the norm, with capabilities like product virtualization changing how people expect to interact with products, as well as the customer service experience.