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Psychology of Consumption definition


The Psychology of Consumption is an important concept that looks at not only selling a product or service but how the after-purchase consumption rate is important in guaranteeing repeat purchases. With the high amount of competition present for almost every product and service today, the key to long-term success is not only securing an initial purchase but ensuring people actually use the product and services they buy.

Whereas we often associate an increased likelihood in making a sale with helping to make the price and payment process as unobtrusive as possible, this tactic doesn’t often work when we want a customer to actually make use of that product and become a returning customer. One of the most effective ways to ensure someone makes use of something they’ve parted money with for is to consistently remind them of that fact. This is in line with the Sunk-Cost Effect, which describes how individuals will make sure they use something, even if they no longer want to, simply because they will feel like it was money wasted otherwise.

For example, a health club might offer customers the option of paying for an annual membership. Whilst this one-off payment will help to reduce the pain of paying as it condenses what could be a large amount of money in to one smooth transaction that they know will last them for a whole year, it also reduces the likelihood that they will continue to workout regularly and ultimately renew their membership next year. In studies, it’s been clearly shown that people who have annual memberships utilise them heavily for the first month or few months - whilst the amount they’ve paid is fresh in their minds - but when the sunk-cost effect has dissipated somewhat, they only use it infrequently, if at all, and are highly unlikely to renew at the end. In contrast, people who pay for a membership monthly are constantly reminded how much it is costing them and so the sunk-cost effect stays intact, motivating them to make the most of it, which ultimately means they’ll see the most benefits and be much more likely to want to continue on longer term.

In order to encourage initial purchase but also tap in the to psychology of consumption, tactics to lessen the pain of paying such as bundle pricing, annual memberships, advanced payments etc. can still be used, but testing sending out regular emails to remind people afterwards of how much each item in their bundle cost them individually or how much their annual membership is costing them per month, whilst perhaps seeming counter-intuitive, could be key to encouraging consumption and therefore increasing retention.

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