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- Title
The Mental Accounting of Gift Card versus Cash Gift Funds.
- Authors
White, Rebecca
- Abstract
While the popularity of gift cards has dramatically increased in recent years, there has been little investigation into how monetary gifts in the form of a gift card may lead consumers to spend and conceive of gift funds differently than if the gift were offered as cash. From a logical, economic point of view, consumers should treat gift funds equivalently, regardless of format (e.g., cash, gift card). However, research on the topic of mental accounting has demonstrated that equal funds are not always regarded, allocated, and consumed equivalently (e.g., Kahneman and Tversky 1984; Thaler 1985, 1999). The theory of mental accounting provides a broad description of cognitive processes through which people perceive, categorize, evaluate and engage in financial activities. Through the process of either literally or figuratively categorizing funds into budget categories, wealth accounts, and income sources, consumers typically treat assets within mental accounts as of nonfungible, or imperfectly transferable. One relatively overlooked source of mental accounting effects involves the format in which funds are presented. When money is offered in a gift card format, the process of perceiving and evaluating how these funds should be used may qualitatively differ, and consequently the consumption of these funds may be influenced. The simple presentation of gift funds as a gift card versus cash may influence the primary income mental accounting of the funds themselves, which could in turn influence how the gift money is spent. However, consumption of funds may also be influenced by the payment mechanism through which the funds must be spent (e.g., Soman 2001). Gift card funds are typically more limited in their exchangeability compared to cash gifts, which may lead one use gift card funds differently than equivalent cash solely due the practical restrictions of gift card funds. The current research was designed to address whether the presentation format of funds- specifically as a gift card versus cash gift-influences the manner in which these funds are regarded and consumed, as well as whether any fund format effects are primarily due to the influence of income mental accounting or to payment mechanism restrictions. In the first experiment, the influence of gift fund format upon intended spending was examined. Participants were asked to imagine a scenario in which they received and spent either a cash gift, a gift card, or a gift card with a cash-back feature, all of equivalent monetary value. The participants were asked to report whether they would spend funds above and beyond the gift amount received in the scenario. When gift funds were presented as a gift card rather than as cash, individuals' likelihood to consume all of the gift funds was increased. When given a gift card, the participants were not only more likely to spend the gift funds, but also to spend additional funds from their current assets. When concerns about lack of fungibility and possible waste of unspent funds were removed by the cash-back gift card condition, participants were nevertheless significantly more likely to consume gift card funds than cash gift funds. Therefore, any increase in consumption resulting from the gift card format does not solely appear to be due to the effect of payment mechanism, or related concern about waste or inability to use the gift money. Rather, it seems that the simple presentation of funds on a gift card led to increased spending of those funds. In the second study, the magnitude of this spending increase as a result of gift card format was examined. Participants were asked to imagine receiving a cash gift or an equivalently valued gift card, and were then asked to indicate whether they would intend to purchase a series of items on a shopping trip.…
- Subjects
CONSUMPTION (Economics); CUSTOMER services; PROSPECTING costs; BANKING research; OPERATING costs; ENERGY tax credits; QUALITY of service
- Publication
Advances in Consumer Research, 2008, Vol 35, p722
- ISSN
0098-9258
- Publication type
Article