Payment methods and their effect on durable goods replacement

Abstract

Purpose Unlike point of purchase behavior, not much is known about how payment method impacts post-purchase behavior, especially for durable goods where user experience can last over long periods. The purpose of this paper is to link two strands of literature for the first time by uncovering systematic linkages between the payment method (upfront cash vs loan) used for purchase of durable goods and the replacement timings for the same. Design/methodology/approach The authors predict that cash purchases are more likely to have shorter replacement horizons compared to loan purchases and propose a psychological mechanism that accounts for the same. Their arguments are based on how the strength of coupling, which is the degree of psychological association between payment and consumption, depends on the payment method and differentially influences the consumption experience and consequently leads to different replacement horizons. They conduct a field study to test their predictions and find support for their model. Findings The authors find that individuals who financed their durable goods purchases using loan, expressed their intentions to replace the goods after longer period than those who financed their durable goods with cash down payment. As loan installments remind people of painful thoughts of payment, they tend to reduce the dissonance by positively evaluating both retrospective and anticipated usage experiences. This dissonance reduction mechanism eventually leads to reduced willingness to let go of the durable. Practical implications Marketers are faced with a tradeoff between increasing purchase likelihood versus ensuring long-term post-purchase satisfaction. In this paper, the authors uncover the psychological mechanisms that can explain how payment method chosen to pay for a durable can have direct effect on post-purchase consumption experiences and subsequently in the replacement intentions. This finding is crucial for marketers who are interested in planning the product line launches and other post-purchase engagement strategies such as buy-back scheme and upgrades. Social implications Understanding the psychological mechanisms that explain individual’s likelihood to replace their durable goods allows policymakers to design appropriate interventions to induce more sustainable and efficient use of durable goods in the market. While on one hand, marketers might be interested in increasing sales of their product line by inducing faster replacement of older product versions, environmentalists nudge towards the opposite. This paper provides a possible way to achieve the dual objectives. Originality/value While past research on downstream effects of payment methods on behavioral outcomes focused only on consumables, the authors focus on durable goods. Further, they identify the effect of payment method on both psychological and behavioral outcomes.

Meaning and willingness to pay: the role of expectation disconfirmation

“…The results of a one-way analysis of variance (ANOVA), summarized in Table 1, showed that participants in the low effort condition ( M = 3.42) valued their painting significantly lower than participants in the high effort condition ( M = 6.14, F (1,57) = 4.764, p = 0.033). This test replicates the previous research findings that show how effort increases the favorable valuation of the outcome (Kim and Tanford, 2019; Pickup et al , 2019; Tatavarthy and Mukherjee, 2019; Norton et al , 2012).…”

“…The pretest study was a one-way between-subjects design (high versus low effort) with WTP as the dependent variable. The goal of this study was to replicate prior research findings that higher effort results in higher favorable valuation of the task outcome (Kim and Tanford, 2019; Pickup et al , 2019; Tatavarthy and Mukherjee, 2019) intended to be used for the main study (i.e. Study 1).…”

“…It has implications for how various organizational stakeholders, including employees and consumers, associate value to various organizational initiatives (Zeglat and Janbeik, 2019; Rosso et al , 2010; Ariely et al , 2008; Wrzesniewski, 2003; Wrzesniewski et al , 2003; Wrzesniewski et al , 1997). In particular, research on meaning in business ethics and behavioral economics, including research on the effort justification theory (Aronson and Mills, 1959), has generally shown that effort enhances the meaning and favorable valuation of and willingness to pay for economic activities by various organizational stakeholders (Nadav and Schonberg, 2021; Harmon-Jones et al , 2020; Kim and Tanford, 2019; Pickup et al , 2019; Tatavarthy and Mukherjee, 2019; Czaczkes et al , 2018; Norton et al , 2012; Lydall et al , 2010; Alessandri et al , 2008).…”

Métodos de pago y su efecto en post-compra del consumidor del sector comercial

“…De acuerdo con Prelec y Loewenstein citado por Tatavarthy & Mukherjee (2019) postulan que cuando las personas realizan una transacción, adoptan reglas mentales sobre los costos y los beneficios obtenidos en la compra de uno o varios bienes. La fuerza del acoplamiento esta influenciada por varios factores, como la separación temporal entre los eventos de pago y de consumo, facilidad de reconocer los beneficios de consumo específicos con los pagos correspondientes y las características individuales de los productos (Tatavarthy & Mukherjee, 2019).…”

“…Debido al gran número de transacciones de compra y venta, las empresas necesitan contar con diferentes medios de pago (Sotomayor-Yánez, Delgado-Noboa, & & Tonon-Ordóñez, 2021) El sector comercial debe mantener facilidades de pago, pueden ser crédito o débito, ya que, para los consumidores la decisión de financiamiento puede tener un impacto significativo en las decisiones de compra posteriores, especialmente en bienes de larga duración. De acuerdo con (Tatavarthy & Mukherjee, 2019)not much is known about how payment method impacts post-purchase behavior, especially for durable goods where user experience can last over long periods. The purpose of this paper is to link two strands of literature for the first time by uncovering systematic linkages between the payment method (upfront cash vs loan los métodos de pago sobre los bienes duraderos, generan un vínculo entre el método de pago y el comportamiento posterior a la compra de bienes duraderos y el tiempo de remplazo de los mismos.…”