People tend to assign subjective value to their own money
Description
People tend to assign subjective value to their own money, usually in ways that violate basic economic
Example
You’re walking down the street, and you happen to find a $100 bill lying on the sidewalk.
It's your lucky day, you barely have any money after paying for the rent. Today, however, you take your newfound $100 and buy a video game for it.
You tell yourself this isn't regular money. This is a one-off, special occasion.
Research:
There was research that found out that consumers often set and track budgets for certain expense categories. Because it is hard to perfectly judge the consumption, people tend to under consume and overconsume goods in categories with too little or too much money.
Another study compared cash to credit card consumption behavior in supermarkets. Comparing prices to the smaller mental account of cash led to spending less.
Application
Personalized Offers
Utilize mental accounting principles to segment your audience based on their perceived value of your products or services. Offer tiered discounts or incentives based on perceived categories such as "essential," "luxury," or "occasional indulgence," catering to different mental budget allocations.
Limited Time Promotions
Frame time-sensitive promotions in a way that triggers the mental accounting bias towards immediate gratification. Highlighting the short-term savings or exclusive benefits within a specific timeframe can encourage consumers to allocate their mental budget towards making a purchase sooner rather than later.
Bundle Pricing
Employ bundle pricing strategies that create perceived value by bundling related products or services together. By framing these bundles as a single purchase, consumers may mentally allocate their budget more generously, feeling they are getting a better deal compared to purchasing each item individually.
