Moments of Weakness: Five Impulse Spending Triggers

Do you know what your weak spot is? Is it the shoe section in Harvey Nicks or those racks of beauty products at the airport? Do you buy more food when you're hungry (who doesn't)? More clothes when you're stressed? More gifts when feeling guilty? More of anything-that-isn't-nailed-down when you're pre-menstrual and have just been paid?

People rarely buy stuff for utilitarian reasons. Buying is more often the result of mind-boggling marketing tricks, seductive store layouts and a whole host of biological, psychological and even evolutionary factors.  

Purchasing decisions aren't always made rationally

We aren't always in as much control as we'd like to be, as the growing number of people with credit card debts or compulsive shopping disorders will testify. And men and women shop differently, with more women inclined to spend on impulse.

Impulse buys are a buyer's curse and a seller's dream. 

A recent article on the excellent Huffington Post website has captured the Five Big Moments When You're Most Likely to Overspend. 

According to their writer Candace Braun, those moments of weakness are when:

You're Mindful of The Time:  A slogan that urged people to "spend a little time, enjoy C&D's lemonade," resulted in more people buying a drink, and paying 51% more for it (compared to a those who saw a sign that asked them to "spend a little money"). This 2008 study from Stanford University showed that  'spending time' feels more like buying an experience, not just handing over hard-earned cash. Slogans linked to time, like 'thank Crunchie it's Friday' work in the same way.

If the time seems right.....

You're Trying to Avoid The Crowds: You may feel super-organised shopping at 7 a.m. on a Wednesday, when Tesco is blissfully quiet, but your purse could take a bigger hit.  Being in a crowd makes us less likely to overspend, according to a Journal of Consumer Research study. We are more focused on getting out unscathed than on making another purchase.

I know you didn't come out to buy this, but here you are!

You've Got Money in Another Account: That offer of the £100 bonus for opening an extra account seems a no-brainer. However, a May 2013 study found that people tend to save more when they have just one place to deposit money.  Researchers say that with one account it's easier to keep track of how much is in there -- and how much you're spending. When we have multiple accounts, it's easy to spend from one while feeling reassured there's money in the other account too.

You've Got to Buy Something Embarrassing: To try and mask the embarrassing item in their basket, almost 80 percent of people will pile in unnecessary extras to divert the cashier's and other shoppers' attention, a Journal of Consumer Research study found. Online shopping could be the answer here!

Gift purchases are less guilt-ridden

You Need Some Retail Therapy: It's common to feel the urge to splurge when emotions are high or mood is low. My research has also shown that 75 percent of women are more likely to overspend or impulse buy when treating someone else. Feeling low can lead to us literally trying to buy happiness and buying gifts for those we care about can help us feel more connected to them, as we say in Sheconomics. Of course, buying for someone else doesn't induce as much guilt either when money is tight.

Thanks again to the Huffington Post for bringing these spending triggers to light, and for including Sheconomics in their article - it's always nice to reach out to our US readers - issues with money cross cultural boundaries and oceans too.

Losing trust... or... would you frisk your friends?

Looking back over the past year of economic doldrums, how has it most affected you?

Are you saving more for a rainy day?

We all should be. But we’re also a bit more worried about who to trust with our savings (more so if we live in Cyprus).

Are you cutting back on spending?

Again, a sheconomical strategy. But there comes a point where you can’t cut back any more. The point where you feel so miserable you have to buy something to cheer yourself up.

Are you less trusting?

Let’s do a quick trust check. Who do you think is most trustworthy?
a) a banker enjoying a massive bonus while taxpayers bail out the bank

b) a journalist with an unhealthy interest in others’ mobile phone activity

c) a politician with a bad memory for policy pledges

d) a sleazy disc jockey

e) none of the above

It’s no wonder, given recent events, that we are all eyeing high profile figures with more suspicion. In fact a third of us say we are less trusting than we were a year ago, according to a Trust Study published by the Yorkshire Building Society* today.

You do trust me don't you Vera ... I mean Joan..?

Trust matters. Why? Because we need to know those around us have our interests at heart. That they won’t harm us, lie to us or let us down. To believe that those in positions of power won’t abuse that power. When trust is broken we feel shaken, vulnerable and panicked into looking after Number One. In fact, trust is so important that humans are hard-wired to decide in a micro-second whether or not someone is trustworthy.

Imagine living in a world where nobody trusted anyone.

Just buying a coffee would be a nightmare. The barrista offers the cup but won’t let go until he’s got your money in his hand. You won't part with the cash until you’ve got your coffee in case he whips it away. It'd be like being caught up in one of those perpetual childhood games where neither side will give in.

Imagine not trusting friends who visit your house and frisking them as they leave.

Or having to pay for everything you order from the restaurant menu before you get it.

Or finding out the bracelet your husband gave you on your anniversary is actually an electronic tagging device.

It’s good to trust others. It's nice to assume positive intent in everyone we meet. Because I truly believe that most people are kind and caring and trustworthy. 

Unfortunately though, we tend to hear a lot more about the minority who aren’t.

More on the Yorkshire Building Society Trust report here

Banks or building societies?

It’s worth noting that Yorkshire Building Society is a mutual, which means they’re owned by and run for their members. Because they have no shareholders to answer to, any profits they make are used to maintain the financial security of the business and then returned to members in the form of better rates and service. That's nice to know.

CHANGING CULTURE IN OUR BANKS

A GUEST BLOG FROM DO SOMETHING DIFFERENT ABOUT WHY IT'S TIME FOR OUR BANKS TO CHANGE - AND QUICKLY:

It’s been a rough week for the UK banking sector. Again.

Fines for Barclays fixing the LIBOR rate, with at least two other major banks rumoured to have been up to the same tricks. Mis-selling interest rate swaps to small and medium sized businesses. A new proposal for a European banking union, setting the rules from outside London.

The Radio 4 chatter this morning was about culture change. Separating investment banking from retail banking – taking the casino out of the supermarket – is considered a step in the right direction, but banks need to refocus their culture. They need to put ethics back at the heart of their operations.

This was then picked up by Bank of England governor Sir Mervyn King, who said: “We can see we need a real change in the culture of the industry.”  Prime Minister, David Cameron, speaking from the EU summit in Brussels, also added his weight to the argument: “British people are crying out for a return to good old-fashioned banking… That’s why the governor is so in favour of changing culture at the banks and so am I.”

So if you are in charge of change management at a big bank, how do you do that? Change management consultants are fond of telling us that it takes seven years to change a culture. The banks simply don't have that long.

What is culture change?

Essentially, it’s people taking different actions. 

That may be based on a new set of values. Or, as is more often the case, it might be about trying to get people to behave in-line with existing values that have been forgotten or ignored in the commercial frenzy. 

Either way, the key is – actions. For culture change to be real and sustainable, it has to be about what people physically do, not just what they think.

Reminding people about old values, or teaching then new ones, and then letting them go back to their desks, their trading screens or their customer service counters is not enough. We’re habit machines. The old ingrained behaviours will soon rise to the top. Most people will go back to doing the same things they’ve always done and nothing will change.

Culture change is not about telling people about new values. It’s about getting them to live new values. 

To evolve a new culture by doing things differently. Put ‘doing’ at the heart of a culture change strategy, and change can happen in seven weeks. Not seven years.

How banks discriminate against female customers

Just imagine.

You’ve got an exciting and bomb-proof proposal for a start-up and approach your bank for investment. Later you find out that you were:

-       asked more questions

-       offered less money

-       ask to provide higher collateral

than a male applicant approaching the same lender. Because you are female.

I'm pregnant, not brain-dead.

That’s just one of the findings in a new report published today by Noreena Hertz who is based at Duisenberg School of Finance, RSM, Erasmus University and University of Cambridge. She also reveals how women are refused mortgages, and their business acument is called into question, if they are pregnant.

Professor Hertz’s key findings include:

-        Evidence in the UK of banks discriminating against pregnant women and women on maternity leave seeking mortgages. This seems to be an ongoing industry-wide practice, with a number of leading UK high street banks named.

-        Evidence in Europe of banks discriminating against women entrepreneurs. Research suggests women are being asked for more collateral than men for loans, being charged higher interest rates and being refused loans more frequently than men.

-        Evidence of gender stereotyping by bank loan officers internationally. Examples of this include women entrepreneurs being questioned significantly more often than male applicants whether they have undertaken sufficient research into their business, and pregnant women being assumed by lending officers not to return to work after having a child.

The report asks banks to think carefully about whether their staff may be negatively stereotyping women, either consciously or unconsciously, and to take measures to address this. 

And it points out that the UK government has a responsibility to investigate this type of discrimination, which contravenes the United Nations Convention dictat on the Elimination of All Forms of Discrimination Against Women and the Equality Act of 2010. 

In fact it states that the government is legally obliged to take action after the disclosure of such discrimination, and such action would mean prosecuting the banks found guilty of such practice and compensating those who have been discriminated against.

Recently David Cameron could be heard pontificating about entrpreneurship being the ‘only strategy’ by which the UK economy could achieve significant growth. 

He also highlighted the need for entrepreneurs to have access to credit from banks in order to thrive. 

I wonder if he was aware that such access would be strongly influenced by the applicant’s gender?

You can download Professor Hertz's full report here.