When consumption benefits precede costs: towards an understanding of ‘buy now, pay later’ transactions

Abstract

An experiment investigates a real-money 'buy now, pay later' transaction, whereby subjects experienced a varied time-delay between transaction benefits and costs. Individuals were more satisfied when transaction benefits and costs occurred temporally together. When a time-delay was imposed, respondents preferred a short delay to a long delay. Transaction satisfaction was found to mediate the effect of time-delay on behavioral intentions to complete the transaction again and perceived transaction fairness. Results suggest that a previously-incurred transaction benefit becomes disassociated with its' transaction cost over time, causing the later transaction cost to be perceived as a greater loss at time of payment. The findings provide preliminary indication of the length of delay necessary for benefits to begin psychologically decaying. Implications for 'buy now, pay later' transactions and consumer satisfaction are discussed.

Creating and capturing value from freemium business models: A demand‐side perspective

“…They found that consumers who paid more for their season tickets, and thus moved further down the value function in the domain of losses, attended significantly more plays than consumers who paid less for their tickets. Additionally, in her study of “buy now, pay later transactions,” Siemens () showed that individuals were more content with transactions for which the costs incurred and the benefits offered were joined in time. Satisfaction was considerably lower for transactions where a time delay was imposed such that individuals were first offered certain benefits and had to pay for them later.…”

Financial Literacy, Debt Burden and Impulsivity: A Mediation Analysis

“…In fact, high impulsive individuals discount the value of delayed rewards more than self‐controlled individuals do and are less sensitive to the negative consequences of their choices (Potts et al ., ; Wittmann and Paulus, ; Martin and Potts, ). When it comes to decision to demand for debt (in particular unsecured debt, such as consumer credit, credit cards), such present‐biased preferences push individuals to go for ‘buy now, pay later’ solutions that bring immediate gratification at a future cost, disregarding the ensuing sustainability of debt (Meier and Sprenger, ; Siemens, ; Stango and Zinman, ). Point‐of‐purchase stimuli, logos, advertisements, discounts, product design, marketing channel innovation and sale promotions constitute examples of efforts to activate impulsive behaviour (McCall et al ., ).…”

Proceedings of the 2010 Academy of Marketing Science (AMS) Annual Conference

“…Consumer resellers' budgeting with a minimal account accentuates on the trade-off between money savings and time spent. In order to easily regain the psychological comfort, when reselling, consumer resellers will go for a break-even pricing, or a selling price slightly higher to recoup the sunk costs in exchange for a faster recovery rather than a long delay (Siemens 2007). In a topical account, consumer resellers do not set a budget and only consider the subjective value of the topical product (Kahneman and Tversky 1984;Ranyard et al 2001).…”