Payment formats and hedonic consumption

Abstract

Payment formats have many important influences on consumer behavior. However, few studies have examined how the payment format affects hedonic consumption. This study explores how the transparency of the payment format (e.g., bonus points vs. cash) influences consumers' willingness to pay, budget assignments, and consumption choices through differences in their perceived pain of purchasing (exchanging) hedonic and utilitarian options. Specifically, consumers who pay with highly transparent payment formats (e.g., cash), compared with consumers who pay with less transparent payment formats (e.g., store points, bonus points, and gift certificates), are willing to pay less, assign a lower budget, and are less likely to choose hedonic products. The perceived pain of purchasing (exchanging) a hedonic product plays an important mediating role on the influence of the payment format on hedonic consumption. However, the perceived pain of purchasing (exchanging) a utilitarian option plays a parallel mediating role only when people have paid for the less transparent payment format (e.g., buying store points) rather than when they accumulate the points through previous consumption events. The research findings provide insights that can benefit both theory and practice.

The effect of material and experiential consumption on goal pursuit

“…This suggests that whether individuals engage in utilitarian or hedonic consumption at a point in time could also determine their later goal‐directed activities. In addition, given that different payments could also influence consumers choices on hedonic or utilitarian products (Liu & Chou, 2020), payments types could also impact consumers' subsequent behaviors such as goal pursuit.…”

“Looking sharp”: Price typeface influences awareness of spending in mobile payment

“…While the salience of physical form refers to the degree to which it is easy to experience that money is being spent, the salience of the amount refers to the degree to which it is easy to track the total amount spent (Falk et al, 2016; Soman, 2003). In general, when comparing cash, card, and mobile, transparency is highest for cash (high salience of physical form and amount), the lowest in the case of mobile payment (low salience of physical form and low‐medium salience of amount), and intermediate in the case of card (medium salience of physical form and low salience of amount) (Boden et al, 2020; Falk et al, 2016; Liu & Chou, 2020; Manshad & Brannon, 2021). Mobile payment is the least transparent of the currently available payment methods since it does not require the consumer to bring cash or card and take physical action such as handing over cash, signing a receipt, or entering a security code for card authorization.…”

“…The research that has been published to date on payment format also suggests that the experienced pain of payment, the negative emotion that consumers experience in parting with their cash, mediates the influence of payment methods on the awareness of spending (Liu & Chou, 2020; Prelec & Simester, 2001; Raghubir & Srivastava, 2008; Shah et al, 2016; Soman, 2003). Payment transparency positively influences the experienced pain of payment (independent of how much is paid for a particular purchase), and the experienced pain subsequently increases the awareness of spending.…”

“…However, emerging research suggests that the use of mobile payment may lead to unintended consequences among consumers, such as the possibility of profligacy or excessive spending (Boden et al, 2020; Falk et al, 2016; Liu et al, 2021; Manshad & Brannon, 2021). Adding to these findings, recent studies have suggested that an awareness of spending, which refers to the subjective perception of monetary loss associated with payment, is lower when people use mobile payments than when using other types of cashless payment (e.g., credit cards; Boden et al, 2020; Liu & Chou, 2020; Manshad & Brannon, 2021). Studies of cashless payment also suggest that the profligacy induced by cashless payment may not only result in financial problems such as indebtedness (Awanis & Cui, 2014; Pirog & Roberts, 2007; Stewart, 2009) but also to an increase in unhealthy consumption (Park, Lee, et al, 2021; Soman, 2003; Thomas et al, 2011).…”

“…However, emerging research suggests that the use of mobile payment may lead to unintended consequences among consumers, such as the possibility of profligacy or excessive spending (Boden et al, 2020;Falk et al, 2016;Liu et al, 2021;Manshad & Brannon, 2021). Adding to these findings, recent studies have suggested that an awareness of spending, which refers to the subjective perception of monetary loss associated with payment, is lower when people use mobile payments than when using other types of cashless payment (e.g., credit cards; Boden et al, 2020;Liu & Chou, 2020;Manshad & Brannon, 2021).…”