Wednesday, October 13, 2010

The psychology of getting & spending

Although I buy a ticket for the main lottery draw each Saturday I would never buy a ticket for the big Euro lottery. Suppose Sod’s Law came into play & I won squillions of millions? Even just giving it all away & making sure I was all square with the taxman would probably finish me off.

Perhaps that is what the buyer of last week's winning ticket, worth over £100 million, has realised.

On a not unrelated question (ie completely irrational & illogical according to some), why do supermarket loyalty points seem more valuable the bigger the bill you using them to settle?

Loyalty points are oh so subtly marketed as a gift from the provider, when in fact they are just repayments of an interest free loan from you – a form of micro finance by which the loan is extracted through the medium of ever so slightly higher prices for the goods which you buy. So, from the purely financial & monetary point of view your most rational course is to cash in your loyalty points as soon as that becomes possible, setting them against the bill for something you would have bought anyway.

I understand all that, but I still have difficulty persuading myself to eally feel that £2.50 deducted from a bill for £2.50 is somehow worth less than £2.50 deducted from a bill for £25 or even just £5.

Probably it is because £2.50 is so very little, hardly even a cappuccino – practically ‘keep the change’ so if that is all you get you don’t feel you are getting any real help or benefit. Whereas someone who helps with a bigger bill is being really kind – just the psychology on which the purveyors of points rely with their ‘give yourself a treat’ propaganda.



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