240. Pain of Paying: Everything Your Business Needs To Know (Refreshed Episode)

Welcome to episode 240 of the Brainy Business Understanding the Psychology of why People Buy. Today's episode is all about the pain of paying.

Ready? Let's get started.

You are listening to the Brainy Business podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer.

Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast.

Today's episode is all about the pain of paying.

It's funny, this episode originally aired as number 59 in August of 2019, and.

A lot of the basis of the.

Episode came out of a research paper I had found. And this was before I started doing interviews on the show. So I never met or really considered connecting with the author of that main paper. His name is Dr. Ofer Zellermayer. This paper was his doctoral dissertation. And in addition to having an episode on this, I actually included a full chapter on the pain of paying in my first book, what your customer wants and can't tell you, which came out in May 2021.

And again at that time, I didn't.

Even really think about reaching out to the author of the dissertation. But funny enough, in October of that same year, he reached out to me. He said he had go to search something related to his paper and found the podcast episode, so he dropped everything to listen. He approved of it, thankfully, and reached out to Connect, which is such an awesome thing. I'm always amazed at the power of the podcast and all the relationships and connections that have come from it over the years and really being able to. I've always said I like the idea that I'm able to show papers that spent hours and hours and hours of people's lives to create, letting more people to be exposed to them, to learn about them. It's something I really enjoy. And do remember what I said last week in episode 238 about reciprocity.

Business is a long game.

Give freely and you'll be amazed at how great things can be.

So it's really cool to be able.

To connect with someone to help their dissertation get more exposure out into the world and to be shared and and now have a friendship that has formed with someone that I never potentially would have met before. So really cool. Anyway, you may be wondering why I chose this episode for today's refresh. For one with the holidays upon us and just finishing up Black Friday, Small Business Saturday, and Cyber Monday here in.

The States, it felt like a great.

Time to talk about the Pain of Paying Buying things can like physical pain, and it's important to know that, but.

Not go too over the top to.

Compensate for it in the way that you're communicating to your customers. Deals and discounts abound this time of year, and people buy differently when they're shopping for gifts. And at various times of the year, like the holidays, we have a lot more gift buying that's happening. It's all really interesting stuff to keep in mind as you consider your own buying this holiday season and any sales you may be running for your business or if you aren't running deals, what that can mean and considering the pain of paying. In addition, in this Friday's new episode with Dilip Soman, he mentioned that his dissertation was in the area of the pain of paying. And while we don't get into it too much in the conversation that you'll hear about this coming Friday in episode 241, it felt like the perfect time to refresh this episode for you here today. Now, before we jump into the meat of the episode where you get to hear all about the pain of paying, I want to remind you that your free Pain of Paying worksheet and links to past episodes and books and articles are all waiting for you in the show notes for the episode, which are found within the app you're listening to and at the brainy business.com 240 all right, let's talk about the pain of paying.

Buying things isn't all fun and games, and the process of paying for things can actually cause pain for many people. In fact, Neuroeconomics has found that when scanning subjects brains in an FMRI machine while they're going through the process of buying stuff, there is activity in the insula, which is a known pain center in the brain. In many ways, it's just like physical pain, and the emotional pain can be very real for people. It doesn't impact everyone on every single purchase. And there are some times when it's more impactful and some people it's more impactful for. Let me share a little story from the dissertation of Offer Zellermeyer on the pain of paying, and I want you to consider how you relate to it. Mr. A plays tennis twice a week. Recently he discovered a small crack in his racket. Although the crack doesn't prevent him from playing, he feels that it impairs the level of his game. So last weekend he drove to the mall to buy a replacement. After spending more than an hour in each of two stores and looking at several rackets that he would like to own. Mr. A was still unable to let go of the money, so he left the mall without buying a racket. In a second scenario, Mr. B had a very similar situation, but ended up buying a racket without really needing one. When asked who they identified with more, nearly 65% felt their behavior was closer to Mr. A, while only 15% resonated with Mr. B. Yes, some people are more likely to feel pain in payments, which we call tight wads, and others that don't feel as much pain as others which are called spendthrifts. And yes, those are the official names in the academic research and I'll talk about them in more detail later on in the episode. But it is important to know that everyone experiences some level of pain of payment in various scenarios, and those conditions tend to be pretty universal. Let's talk a little bit more about them. Context is incredibly important when it comes to the pain felt by making a payment. Say, for example, you're buying a beautiful hand woven rug you've had your eye on to spruce up your living room. How does the pain in that purchase differ from if you were paying to recarpet the whole room, which will only depreciate over time? That same dissertation broke down a dozen common reasons and continuums that impact the pain felt in a payment, and here they are. And make sure you check out that freebie worksheet for you. This would be a good time to go download it. If you haven't yet, it's at thebrainybusiness.com 59 which shows all of these for you. All right, first is investment versus consumption and the question that you would ask is will it appreciate or depreciate like that carpet or rug scenario I was just talking about? Next is enjoyment. Length. Will there be a continuous stream of benefits? Duration? How long lasting is the product or service? Control? How much control does someone have over the type and amount of the expense? Routine versus Non routine? How normal is this expense among one's personal payment and a note on Necessity versus Luxury Social acceptance? How easily could you justify the expense to others? Visibility? How apparent is the reward for making the payment? Fairness? Is it fair or unfair that one faces this bill? Self versus other? Is the bill for an expense made for oneself or another person? And yes, I'll talk about gifts later on in the episode. Next is temporality. Typically, is the payment done before or after consumption occurs? Ramifications? How bad will it be if one fails to make the considered bill? Immediate versus drawn out? Will the payments take care of the problem or require additional payments to enjoy the ones you've already made? Also, there's some consideration to the motivation of the seller. The paper gave an example of a car dealership that discovered a particular model was now in high demand and so there was a low supply. In one version, participants were told that the dealership raised their price by $200, and in the other version, the dealership had been offering a $200 discount, which they stopped offering now that the item was in higher demand. Which group do you think people felt worse about and would have more pain in paying the higher price? That's right. Even though the increase was the same, people did not want to pay the added $200 versus the removed discount. And similar to that is how a consumer might write the story about the business. You know, I told you in episode 54 about how much the brain likes the story. So if you ordered from a boutique pizza place, you would expect to pay more than if you're buying from a franchise. Potentially because you perceive their costs as higher. Or maybe you think they put more effort into creation of your pizza, but in reality it may not be any better. This story though, can impact the pain felt by pain. So again, I know I went through those conditions pretty quickly and I am going to dig into each of them throughout the episode. Again, that freebie worksheet will be helpful for you to remember those as we move forward. Paying and consuming have sort of a reciprocal relationship because making a payment reduces the joy of consumption, but consumption reduces the pain of paying. When the pain is completely separated from the gain, you feel one much more than the other, or feel each as they're experienced. If you pay with a credit card so the pain is removed. All you have is the joy of getting a new toy until the bill comes, or you sit down and realize how big your overall balance has become. Or say, instead of paying for a vacation in advance, you chose an option where you would pay for it two months after completing the trip. In that case, the pain feels much more intense than if it's paid at the time of consumption or before. I really love this quote from that paper which really sums it up. You may have heard the saying no pain, no gain, but pain without gain is utterly agonizing. Keep that in mind when you set up payment structures for your clients. You may think people would like to experience your product or service and then pay later, but you actually may be setting up a system where they will regret something after the fact that they may have enjoyed in the moment. In other words, you could be setting up a system for one time customers. So what do you do if you have a really expensive product or service that might be hard for people to pay for or that you have a hard time talking about? Take solace in knowing that the studies show as the value of the item being purchased increases and there's a better explanation for why the expense exists. People felt less pain from the payments. Again, context and framing are really everything here. The way you talk about the price impacts the pain felt in paying more than the price itself. And you might be wondering right now, but what about the total amount being paid? Doesn't that impact the pain felt? Say as the amount goes up, does the pain also go up? Well, what's really amazing is that the total amount paid had a very weak association to the level of pain felt by the purchasers. Again, price is not about price. Everything that comes before the price matters much more than the price itself. And I have of course linked Back to the Truth about pricing Episode 5 of the podcast so you can check that out if you haven't listened already. And to sum up, what was found to be the most important pieces out of that big list I just provided for you are these few. So really take note. Listen here if you don't have your worksheet to read it yourself along with this, I know that you might want to take a note here. Studies found that the more a transaction is perceived as fair, an investment immediate for the sake of another person under one's own control and has payment before consumption, the weaker the pain of paying. So if you want to be reducing the pain of paying, look at how you can help the transaction to be perceived as fair, an investment immediate for the sake of someone else under that purchaser's own control, and to have payment before consumption. And don't worry, I will tell you more about ways to use those within your business. But before I get to that, I want to make sure to tell you about what happens when there are particular people who either feel the pain of paying too much or not enough when the pain of paying is too much. So people do not buy things that they need or would want because it's too difficult to give up money. They are called tightwads and those who spend too much too easily and do not feel an appropriate amount of pain before or during the spending process are called spendthrifts. A study of 13,000 people found that 25% of the population are tightwads, 15% are spendthrifts and the remaining 60% are unconflicted spenders. So they can buy the things that they need or want without having too much pain, and they don't buy things they don't need because they have an appropriate level of pain that they feel. And while nothing is entirely conclusive, it looks like the way people will lean and be for their entire lives can be known as early as 5 years old. So try to think back to how you felt about money as a child, if you were a natural spender, saver or otherwise, to see how your relationship with money may be at your core. And if you have small kids at home, definitely start working with them as early as possible to talk about money and how to understand the pain they feel or don't to help set them up for a lifetime of a better relationship with money. But that's not the point of the podcast, so I'm going to move on. I also have to read one of my favorite quotes from this article, which was actually called Tight Wads and Spendthrifts An Interdisciplinary Review, something I also really appreciate, and it's linked for you in the show notes@thebrainybusiness.com 59 so this quote is one of those where the wording is accurate and correct, but it made me giggle while reading it, so I wanted to share as it isn't verbiage you typically see in an academic paper. It says research over the past 10 years has demonstrated that one's degree of tight watism or spend thriftiness that is One's location on the tight wad spend thrift dimension has important implications for financial well being, overall well being and the quality of interpersonal relationships. Personally, I just love that there's a tightwad spendthrift dimension out there and I'm glad to be able to share it with you. One more really cool thing which I know my friends in banks or credit unions will appreciate, is that the research has shown determining if someone is a tightwad or spendthrift or unconflicted can significantly predict debt and savings amounts and credit scores and it has no relationship to current income. Essentially, someone who is a spendthrift will always be a spendthrift, whether they're in a low paying job or working in a lucrative profession. And similarly, those tightwads will not change their ways as their incomes fluctuate either. Another important distinction is that being a tightwad is different than being frugal as frugality is rooted in a joy felt when saving money, while tightwaterism is due to a pain felt when paying. They both encourage saving, but the motivation behind them is very different. These concepts of being either a tightwad or a spendthrift have also been found to be related to but different from materialism, self control, price consciousness, and time preference. They're also distinct from financial literacy because the person often knows what would be the right way to act but can't do it because of the pain or lack thereof, as well as dispositional greed, which is the feeling that once you got the thing you wanted, you immediately start thinking of the next next thing. In addition, and not surprisingly, spendthrifts are more likely to be impacted by time discounting and potentially take on extra debt because when thinking about the future and how much money they have, they often do not properly quantify how an expense today will impact their spending potential tomorrow. Now that you know a little about the difference between spendthrifts and tightwads, I want to let you know how this should impact your messaging tactics. In general, you won't really know which group you're talking to because you won't be giving them a survey in advance of selling things to people, but that doesn't have to be a problem though. As a side note, I really think all you financial institution folks listening should pay close attention to what I've said about the distinction because it can impact lending policies and how you set up budgeting workshops and all sorts of interesting implications. If anyone is listening from a bank, credit union or other provider and is interested in putting together a study or looking at a way you might be able to implement this at your organization, send me an email melinathebrainybusiness.com I would really love to work with you on that. Alright, so how to message in the best way possible when you know there are these three types of people out there tightwads, spendthrifts, and unconflicted. If you remember 60% of people are unconflicted, 25% are tightwads and 15% are spendthrifts. If we didn't know how they reacted to messaging, the general advice would likely be to speak to the biggest group, those who are unconflicted, and just hope for the best. But you don't need to do that. First, let's break down the problem. In a business that's selling goods or services, your biggest issue is overcoming the 25% of the population who are tightwads because they have a hard time spending money even when they know they should and they want to. Here are a couple of simple tweaks that helped alleviate the fear and pain felt by tight wads, making it easier for them to spend and they did not have any negative impact on the other 75% of the population. It turns out tight wads are most sensitive to framing adjustments, so that's where you can make a difference. In this first example, a fee was labeled as either a $5 fee or a small $5 fee. Amazingly, adding the word small made it so tightwads were more likely to buy and feel less pain in paying. Another framing trick is to know that for tightwads, it isn't about the hedonic benefit or the joy they would feel in getting the product or service. While this can work on the other two groups, it's not as big of a motivator for them. Instead, when the message was framed as an investment, it was more likely to decrease the gap. So make sure to use that in your messaging to help those tightwads overcome the pain of paying and spend in the same way as everyone else. Also, tightwads can have a real difficult time paying for things with cash because it triggers loss aversion. So making it easy for people to pay with a credit card is your best bet. And whenever you can work that credit card fee into your overall pricing. For example, almost all of my clients pay me via PayPal and I do not add a processing fee onto the cost of the service I provide. It's a flat rate and I absorb that fee to make it as easy as possible to buy from me. When going through the buying process, do you ever like doing all the mental math in your head and then going to pay and having it say, oh by the way, this merch merchant wants you to pay this other fee so it's actually 3% more? Of course not. Have you ever gone through a payment process and expected you were going to be charged an extra fee and then found you weren't and had a positive wave of thankfulness wash over you? Me too. Now which feeling would you like your customers to have associated with your business? Trust me, work that fee into your pricing structure. It's worth it. Lastly, the pain was found to have less of an impact when buying what are considered virtue products like fat free yogurt or baked beans. Those items that were more necessities or good for you purchases as it was for vice products like cookies or soda. When people feel good about themselves, as when purchasing a virtuous product, there's less pain felt and associated with the payment across the board. So it's important to know what category your product falls into when you're looking at how to frame your message. And as a note, I've mentioned framing a lot here and I want you to know if you've not yet listened to episode 16 and 17 on framing, you really should and they're linked for you in the show Notes so decreasing the pain of paying has an impact on tightwads, allowing them to spend more. In the reverse, increasing the pain of paying has an impact on spendthrifts, so they spend their money more wisely and potentially feel less regret later on. While this may not be your job to regulate how much people spend, it doesn't have to be a bad thing, especially if those people will feel some sort of appreciation toward you for helping them to spend money wisely. Also, again, for any of the financial institution employees listening or money coaches or or those of you who know your spendthrifts keep all of this in mind. One of the big issues for spendthrifts is they do not account for or intuitively understand the opportunity cost in the moment when they're getting ready to buy or they want to buy things. By making that opportunity cost more salient, you can encourage them to make a better buying decision. In the study, they had people choose between buying a good $700 stereo or a better thousand DOL stereo. In one version, the message was altered to say leaving you $300 in cash when asking about buying the $700 stereo. This is something that logically should be easy to understand and make mental notes of during the buying process. You assume someone choosing between the two options would realize that they would still have $300 in cash if they bought something that was $300 less.

Less, right?

Well, as it turns out, making the opportunity cost salient and noting that they would be left with $300 in cash reduced the gap. And spendthrifts were more likely to get the less expensive stereo at the same rate as everyone else. Pretty cool, right? And note that just like the framing shifts we made for the tight wads, this doesn't have a negative effect on the other two groups. Everyone has some issue with fully grasping opportunity costs. It's part of how our human brains work, so taking a second to point this out may seem unnecessary, but it will do almost no harm and potentially lots of good. And it doesn't have to be used between two of your own products. Let's say you have a product that's less expensive than a competitor that your customer is debating about buying. Even if they have higher quality, it doesn't have to be the thing you focus on. You could say something like, sure, you can buy that washer and dryer, but at the end of the day, they all get your clothes clean. And if you go with this one, you'll have an extra 200 bucks in your pocket. What do you think you could use that for? The main thing to remember is everyone will feel some sort of pain when paying. It's just the nature of the beast. It's your job as the person selling to figure out what the buyer needs, what would benefit them the most, and then present it to them in a way that will have the least pain felt so they can actually enjoy spending the money. Let me give you an example. Say you're going to be staying two nights in a really expensive hotel. It's $500 a night in one scenario. You're staying there because it's a milestone birthday for you, or maybe an anniversary or you're celebrating something else getting married. Whatever. You're treating yourself to this glamorous once in a lifetime experience and are planning to soak up as much of the joy from the trip as you can. Think about how you feel and what it would be like to stay in that room. Give them your card, and the joy you would experience throughout the whole treating yourself trip. Now, in another scenario, you're staying in the exact same hotel and paying the same $500 a night. Not because you chose it, but because you waited until the last minute to book a room and everything else was booked. You know, the average room you usually pay for in that city is 100 or maybe $200 a night, but you're stuck paying this astronomical price for a room. Sure, it's a little bigger than you would have normally stayed in, but you don't need all that fancy stuff. You're barely going to be in the room anyway. What a waste of money that you could have used on something you really wanted. What do you think your mindset will be like when you get to the hotel and into the room and hand over your credit card and see the charge on your statement? Same room, same price, same days. Completely different experience and pain level for your business. Think about how people interpret what they're getting. Did they choose the circumstance or was it thrust upon them if it was not their choice? Are there some other areas where you can help them feel like they did? Make a choice so they'll have less pain felt in the experience. This next example is of a business that used logic to make a change and found out that their usage levels were Completely illogical. Do you remember using AOL back in the day? In the 90s, this was pretty much the only Internet option here in the states. And they sent out those discs in the mail and people could pay for the time they wanted to use. You could apparently choose to have 20 hours for 1995 or 5 hours for $9. 95. 95. Obviously 20 was a better deal if.

You were going to use a lot.

And in both cases, if you went over your prepaid amount, it was $2.95 per hour. Then in 1996, right around Thanksgiving, they decided to swap and put everyone on an unlimited plan and just have everyone pay the 1995 per month. When they were determining how much bandwidth they would need for the new model, they looked at existing usage charts. They had a pretty standard bell curve with the peak somewhere between 10 and 15 hours. And only a few people that were using over 20 hours a month. Using their logical brains, they figured people over 20 hours would spread out and use more. And those down to about 18 hours might use a few more as well when they weren't worried about hitting their 20 hour limit. But below that behavior shouldn't change too much because after all, someone using 10 hours still had plenty of room before hitting their 20 hour limit. So they must only have 10 hours worth of stuff to do in a month online. Right? Totally logical and totally wrong. When they switched to the unlimited plan, usage quadrupled basically overnight, and they couldn't keep up with demand. They had service issues and all sorts of problems. They were even sued by a few users who struggled to use the system. So what happened? Why did everyone go bonkers once their Internet access became unlimited? Well, it turns out there was this little meter running in the corner whenever you logged on. You may remember it if you were using AOL about 20 years ago, but it was constantly tick, tick, ticking and counting the amount of time you were spending online, keeping the time you were spending salient, and always reminding you that there was a point spending time soon where you might go over your limit. When they went to unlimited, they removed the clock. And we all know how easy it is to get sucked into Internet rabbit holes and not realize how long you've been jumping from site to site without a giant clock to remind you of the pain you'll feel if you go over your limit. You're free to surf as much as you want. AOL learned that lesson the hard way. And I've talked about this on the podcast before, but. But FedEx still does this. At least the Last time I was in there about a year ago. When you need to use their computers, like to print out documents that are in your email. They charge you by the minute and it's constantly ticking in the corner. It puts you in this totally frantic state of trying to get through the process as quickly as possible. Why isn't this document loading? I don't want to be charged another 75 cents. It's stressful and unnecessary and they can could benefit from a tweak to the model. The crazy thing is if the clock is removed, people will use more time, be charged more, and likely be happy about it. When the pain of paying isn't felt as much, it doesn't impact the experience as negatively. If FedEx was my client, I would recommend looking at a minimum charge. Say the first 10 minutes are free as long as you print a minimum of $5 worth worth of stuff and have plans for 30 minutes or an hour for people who are truly there to surf the Internet, which I'm guessing is a very small number these days. And this is definitely something you want to prepay on because it gets rid of the pain of payment before the process, allowing them to separate that from the consumption and enjoy the whole experience more. This is also why Uber is so much easier to use than traditional taxis, where you're watching the meter tick up while you sit in traffic. Uber and Lyft found a way to remove the pain of payment from the experience completely, so you accept the amount in advance and then don't ever have to think about it again because it gets added to your credit card statement. It's a really smart model. Consider another somewhat commonly used example of eating in a restaurant. What if someone watched how many bites of food you took and charged you per bite instead of for the meal? Sure, it may cost less overall and be good for the waistline, but the entire experience would be ruined. And think about the old model of buying songs on iTunes versus paying a membership fee with unlimited access to all the music. What if Netflix or Spotify or Pandora had meters running and charged you per minute? Would you listen a lot less even if it was $0.01aminute? And would each song be tainted with the thought in the back of your head that playing it cost you a few cents? What if the gym charged you for minutes in the facility or number of steps taken? Or actually, this could be an interesting model. What if you flipped that and told people they can reduce their membership fee if they actually use the gym? Wouldn't that be interesting? This would say a lot about the brand and what their true intentions are. Say Your membership is $50 a month and you can reduce it by up to 25% if you come in a certain number of times. Could be a cool model that helps people actually stick to their goals. In all of these cases, loss aversion is a big contributing factor to having the meter running and the pain of paying. In some ways, you're making the loss and pain much more prevalent, reducing usage by customers and impacting the overall experience. This can be useful in some cases. Can you think of any for your business? One example of this would be the electricity bill. If they made the usage more closely tied to the expense, people would probably use less, which is better for the planet. Or buying airline tickets where they have that little pop up that there's only one ticket left at a particular price that helps you overcome the pain of paying and shift your loss aversion from giving up cash at all to having to pay more if you wait. And one other great example where having a countdown is important is when people are waiting. When the countdown is helping them get through the thing they're dealing with to get to the thing they really want. It can help keep people engaged, increase anticipation and dopamine, and not make them want to jump ship. Think of when you're using an app and there's an ad that comes up before you can keep using it, probably while you're playing a game or maybe reading an article. When there's a countdown, you have something to focus on. You know you won't be trapped in limbo for too long, and that the app hasn't frozen or anything. When there isn't a countdown, those 30 seconds can feel like eternity and a lot of people will then realize they should be doing something else because their brain gets bored, so they close the app completely. The countdown actually helps you wait it out in this case. And that does bring up another point. The payment that's triggering pain doesn't have to be from money. It can be time as well. Are there places in your business where your customers are paying in time and feeling the pain of that and maybe you could alleviate it by increasing the price? Think of a time you've been on hold for an exorbitant amount of time and the message can keep saying your call is very important to us. This can be continually triggering the pain felt in the lost time and causes all sorts of problems for the business and its experience. How could you use the lessons from today's episode to make the hold time experience better and less painful. Think of Disneyland and other amusement parks. They started making the process of waiting in line into an experience so it feels like part of the ride. Lots of detail and interesting things around to help distract people. And those who don't want to wait and are willing to trade money in exchange for reducing the pain felt by waiting a long time can do that. Sometimes people are willing to pay money to reduce the pain of lost time and they enjoy the entire experience more even though they they paid more because they had a choice and were able to take control of the situation. Even if they choose not to pay more, they know they could have, which reduces the overall pain felt by everyone so they can all enjoy the experience more at the park. What can you learn from this experience and implement into your business? Before we wrap up this episode, I want to talk a little bit more about when it's best to have prepayments and when ongoing payments are the better option. If you remember from earlier in the episode, payments and consumption typically have an inverse relationship. Consumption can reduce the pain felt by paying, but paying can reduce the joy felt during consumption. This is a concept called coupling, and when consumption and payment are coupled together, you pay. As you consume, it has a certain level of pain and joy associated, but when you uncouple them, you experience each item separately, which can increase each unless you implement them properly. And remember from our episode on loss aversion, the joy felt by a gain needs to be doubled to equal the pain felt by a loss, so uncoupling in the wrong way could be really detrimental for your business. I talked about this on the mental accounting episode, but consider paying for a vacation, which people have generally shown they prefer to pay for in advance. Before you go on vacation, you have the excitement of the trip coming up. You're thinking of all the things you'll do and experience so there's less pain felt as you make payments. And if you've paid for the entire vacation before you go, say it's at an all inclusive resort. You can truly just enjoy every minute while you're there. The consumption is completely uncoupled from the pain of payment, which was reduced because it was paid in the halo before the trip. Afterward, all you have to reflect on are the fun memories and you can start planning for your next trip. What if instead you got a big bill after the trip was over? This makes the pain so much more apparent and it feels like you're paying for nothing because the joy is done. It's like rubbing salt in a wound. Think about this for your business. Say if you put on a conference, you should always know when the next one will be and have an option for people to prepay before they leave from the one they're at. This is often done with a special discount that's only available to those at the event and that will not be available after they head home. Again, this shifts the loss aversion to being about taking advantage of their special offer. Instead of thinking about giving up cash, they're in the glow of the event. You want to offer this at a real high point where people are having fun and really reflecting on the great things they've done there, the connections they've made to help overcome the pain that might be felt by paying. And again, it makes it so they can really just enjoy the event when they get there next year and they'll actually have a better time, which is awesome if you it creates a virtuous cycle for your business. Those are examples that go against the traditional time discounting models and it's because the pain of payment is removed and taken care of before the consumption. Try and think about yourself as a consumer and how you would feel if you got a bill for the product or service that you're selling after the fact. Some other ways to use this concept are to let people buy drink tickets or use chips at a casino, or converting cash in into a foreign currency before going on an international trip. The cost of taking out the money and the pain of that is done by the time they consume. And those other forms of cash like items don't spend like cash in the human brain. So if you can remove the payment from the consumption by having that taken out in advance, it can make a really positive difference for your business and people will actually spend more and enjoy more. Take a minute to think about your business. Are there any points in your business where you could use coupons or tokens or chips or beads instead of cash to reduce the pain of paying? Alright, those are times when prepayment is beneficial. So what about payment plans? Anytime you have something people will continue to use over time, like a washer and dryer, a car, a house, a dishwasher, furniture, things they can see the value in regularly. It's okay to do a payment plan after the fact. Just remember to classify it as an investment to help the tightwads be willing to pay for the item. For anyone, the biggest thing is to make sure that they feel they're really gaining something when they spend money and that it's not just being thrown away. This is why People feel more pain when paying for car insurance or credit card fees than other ways of spending money. It feels worse and like it's money for nothing. So the pain is higher. I think this paper said it really well, so I'm going to read a quick quote for you. Strong buffering and hence reduced pain of paying occurs when the consumer can directly connect the costs in terms of money with the benefits in terms of product or service. The ability to associate costs and benefits is just as important in physical pain. To a dental patient, an aching tooth may feel less painful if told that the tooth will be cleaner and shinier after the pain fades than if told the pain is an inconsequential byproduct of the treatment. Contemplation of the aching tooth tranquilizes the pain when one can expect benefits in the form of a beautiful future smile. Conversely, such contemplation exacerbates the current pain when one cannot visualize future benefits as a result of it. Likewise, to a consumer who is making a payment, contemplation of this payment will feel more or less painful depending on how much a product or service can be directly associated with it. Again, context, context, context and framing. And one last note before we close out this show. If you can ever classify your product or service as a gift, you absolutely should because it really helps overcome the pain of paying. This could be because people feel that the money spent is an investment in their relationship and that gifts are expected to be extravagant, something people would not buy for themselves. You feel joy when you give the gift. That eliminates the pain of paying. And for some people, the swing on an 11 point scale of pain felt was as much as nine points. When an item was being purchased went from something they were just buying to being a gift, it's a huge difference in pain felt. Think about your own life. Say you were in a store and saw a pair of shoes you really loved, but they were more than you plan to spend. They're extravagant, so you choose not to buy them. Then you get home and see that your significant other, whom you have joint accounts with by the way, has bought you the shoes as a gift. Are you happy to receive them and do you feel better about getting them than if you paid for them yourself? Again, even though the money came out of the exact same account, the pain of paying was potentially completely eliminated when it was given as a gift, and that was removed on both sides. Is there anything in your business that could be given as a gift? Even if you offer a service, consider how it could be gifted and it could increase your sales by reducing the pain of paying. And as one last reminder, the more a transaction is perceived as fair, an investment immediate for the sake of another person under one's own control and has the payment before consumption, the weaker the pain of paying.

So what got your brain buzzing as you learned about the pain of paying today? For me, I always think it's fascinating to consider how the same item in a different context or frame can make it so we feel completely differently about it and value it differently as well. Isn't that just amazing really? The fact that we think about gifts differently than something we need and that we want to spend less on the things we functionally need and is super interesting. Our brains love a treat. And to learn more about that, I've linked to the episode on the Dose Brain Chemicals. This is my top recommended next episode for you to listen to as you'll find it in the show notes. It was episode 123, so those dose brain chemicals are those four main feel good chemicals our brain loves so much. As I said, that was episode 123, so it wasn't out when this one originally aired. But it's really important to think about how anticipation and dopamine or oxytocin or serotonin can impact our buying decisions and how we feel about things and when and how they interact with or overcompensate that Pain of Paying Truly just really interesting stuff that I love to let my brain wander and think about.

What about you?

What do you like to let your brain wander about? Come share it with me on social media. You can find me as the Brainy Biz pretty much everywhere and as Melina Palmer on LinkedIn. And as I mentioned at the top of the show, the Pain of Paying.

Has a full chapter in part two.

Of my first book, what your Customer Wants and can't tell you. If you want to expand your thoughts on this and dig in even more on the Pain of Paying and how to apply it to your work, go ahead and flip to chapter 16 in your copy of what your customer Wants and can't tell you to learn even more about that. And of course, don't forget about your free Pain of Paying worksheet as well as related past episodes like those on the Dose Brain Chemicals and Mental Accounting Partitioning as well as related books and articles.

They're all waiting for you in the.

Show notes@the brainybusiness.com 240 and yes, of course the original dissertation from Dr. Zeller Mayer is in there and thank you so much again to him for for connecting after the fact and for this amazing research that you've done. We here at the Brainy Business are all very, very thankful for you. So again, all that waiting for you at the brainy business.com240 and just like that, episode 240 on the pain of Paying is done. Join me Friday for a brand new episode with Dr. Dilip Soman 2 discuss behavioral science in the wild.

It's going to be a lot of fun.

You don't want to miss it. Until then, thanks again for listening and learning with me. And remember to be thoughtful.

Thank you for listening to the Brainy Business podcast. Molina offers virtual strategy sessions, workshops, and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness.com.