Guest Essay: Paying for something can be a painful business.

This is psychological

This is psychological

BEFORE YOU EAT – MONEY HAS NO VALUE

Jerry Seinfield – The Stock Tip (season 1 episode 5)

(This week’s essay courtesy of David Roylance)

Many a psychologist has posited that the idea of paying for something is a painful experience. That is why I kicked off with a quote from the Seinfeld episode. Talking and thinking about money is a challenging experience, it’s also probably one of the biggest thinking problems we’ve all faced… since they invented in China 700 years ago.

Mankind has been living in settlements and trading for at least 9,700 years more than that, which probably explains why we see money but think about value more like we’re bartering seal skins for grain…

 

The Peak-End Rule

I’d like to introduce you to the Peak-End Rule as defined by Nobel Prize winner, psychologist Daniel Kahneman.
This is based on the idea that your memory of any experience is defined by the peak, either the high and low climax of any experience and by the end.

Think now about the last time you did something you really love. How was it for you? Notice where the memory most concentrates?

This is the reason that filmmakers when shooting a film that they want you to feel is exciting will focus the majority of their energies making sure you get one hell of a climax at the end of the movie. Hitchcock was a great believer in this idea. What an audience retain is the last thing they see before they leave the movie theatre. This is why he was such an excellent exponent of suspense and holding people in anticipation of the big climax.

If we take a visit to a cinema as an example, imagine what it might be like if you had to troupe out of the cinema at the end of your movie and then hand over your cash to the ticket office, after the experience was over. How do you think you might remember and rate the cinema experience?

Jerry Seinfeld’s monologue in The Stock Tip is about a visit to a restaurant only to have the experience spoiled by the arrival of the large bill at the end of the evening. The idea is that paying in advance separates the pain from the pleasure of the experience and suggests that perhaps advance payment in a restaurant might improve your experience and also allow you to exercise some control on your spending.

I would like to posit advancement on that theory here.
 

Paying can be pleasurable

Paying for what you need is never ever going to be a painless experience.

Paying for what we want is a pleasurable experience.

Let’s try a little thinking excercise:

When was the last time you went to buy something that you needed to have? What was the emotional experience for you? What was your thinking process as you made that purchase? What kind of item was it that you needed? How much use have you made of it? What has been your experience whilst using this item that you need?

Now think about the last time you went out and spent money on something just because you wanted to? What emotional experience do you have whilst you remind yourself of this? What did you experience at the time? What kind of item was it you purchased? How much use have you made of it? What is your experience whilst you use it?
 

The result:

If I think about the last time I did a food shop to make sure the family was fed I remember the process of sliding the debit card into the machine, and my thought process during the shopping experience was all related to price and making sure I spent the least possible to get the maximum amount possible. At no point were any positive feelings involved.

If I think about the last time I bought a luxury item for myself, then I remember very well how pleased I was to be in a position to put this money towards owning something that I knew I would value a great deal and often too. In this instance, I am thinking of a favourite film, on blu ray. There were positive experiences at the point of sale, at the point of arrival (I bought online) and whenever I remember that I now have a stunning copy of this favourite film which I will be free to watch and show others many times. Even thinking about this experience as I write brings back the feelings I had when purchasing.

Recently I performed an experiment on several of my newest clients. If you work for yourself or run a business, give this a try.
 

The client filter

In the last few months I have divided my new clients into 2 groups, those who pay a large advance deposit and those who pay in arrears.

There is a 3rd group, a couple of new clients who I have engaged on a skills swap basis.

Here is what I have noticed:

There are patterns that reveal themselves in the behaviours of the different groups. All my clients get the opportunity to meet with me twice a month for a maximum of 2 hours. The clients who pay in arrears all arrive either just as the session is due to start or late by up to 15 minutes. They are always polite and apologetic about it, but they still let other circumstances get the better of them. Often there is homework to be done between sessions and the arrears clients all have the same experience. They find it hard to find time to do the homework or exercises.

The clients who pay in advance all have a different experience. The clients who have paid in advance all arrive early, sometimes an hour beforehand and they have always practised all their homework and exercises, with evidence if possible.

I mentioned as well a 3rd group. Those who have a skill swap arrangement with me. The key point here about a skills swap is that there is an absence of the trading of money for a service. These all have the same experience too. They struggle to find the time to do the work, they never find the time to do the homework, they lose their notes and arrive late and unprepared.

It may seem anecdotal, but even I have been surprised at the way that despite each clients’ different needs and circumstances, that they have all fallen, without any prompting other than the payment arrangement, into the structural pattern.

Those who get the most from the experience are the people who pay in advance. Those who create the most momentum in their lives as a result of the work we do together are those who pay in advance. In short they have the most pleasurable experience. This experience creates the mindset that moves them into new types of thinking, the adoption of new behaviours and the kind of action that serves as an engine for change.
 

The psychological power of paying in advance

The act of paying in advance separates the feelings of pain associated with payment from the experience of the service or product purchased. All of this is linked to the perception of value. If you’re involved in a business where your product or service is a commodity, then it doesn’t matter when people pay, no one will associate your product with a pleasurable experience.

On the other hand if your product or service has value over and above its stake as a commodity, then you have the power to create a pleasurable experience, and often a more pleasurable experience by charging a higher price.

Our brains are hardwired to get the most out of that we have already traded for. Once we have paid for something we will do our damnedest to squeeze the value out of whatever we have paid for. Thus the peak-end of the experience is not associated with pain but with pleasure and value. So whether you are a customer or a business selling a product or service it is always going to be beneficial for both parties if the customer pays in advance.

Customers, think how differently you might view a night out in a fine restaurant if you made payment for your food before your ordered.

To business owners who offer value propositions, consider this. You will be more engaged with your customers if they pay in advance. Get payment out of the way and your clients will engage with you in a different way.

The advice to business owners and sales-people is simple. Make it as attractive a prospect to pay in advance as you possibly can. For customers, remember when you order something you remember the peak as the excitement of opening the box, not the pain of queuing up at the till.

It’s a win/win for everyone’s brains, experiences and often their wallets too.