Mental Accounting bias
Mentally categorising money based on what it has been allocated for in our budgeting process.
What is the Mental Accounting bias?
Mental accounting is the process we go through where we partition our money into distinct categories or "accounts."
This mental separation of different aspects of our financial lives plays a pivotal role in how we make decisions related to money and distorts our view of how easily money can be exchanged for other goods or services.
As a result, this habit has the potential to increase our susceptibility to cognitive biases such as the sunk cost fallacy, ultimately affecting the way we manage our finances.
If you are persuading us to part with money, it can be useful to understand where we have already allocated it..
The evidence it works
In a classic study, participants who were given a $50 bonus showed a higher inclination to allocate the extra funds towards indulgences such as entertainment or luxury items in contrast to individuals who earned the same amount through their usual employment.
Separately, in a simulated debt repayment task, participants were more likely to focus on paying off a $500 debt with a 5% interest rate before tackling a $2,000 debt with a 10% interest rate.
Also in a field experiment, customers at a bakery were more likely to purchase additional treats when paying with a credit card compared to those paying with cash.
How it builds brand memorability
One of the key drivers of brand memorability is ‘Ease’.
If you make your brand easy to access, deal with and buy from, you’re going to build strong, positive connections that lead to memorability.
At the point of purchase, or during the journey to purchase, customer’s decision-making can be made easier by leveraging behavioural biases. And METRIC is our tool for harnessing the power of these biases - snap judgements that help the brain make quick decisions in context - for clients.
METRIC organises the biases into six categories - because these are the key ‘resources’ we always have to spend when make decisions. They are Money, Effort, Time, Risk, Individuality, and Conscious thought. Which handily spells METRIC.
So presenting choices in one of these six frames can tip the balance in comms.
Great examples of Mental Accounting in marketing
Pots for you money
Building a bank that’s “built for the way you live today”, mobile-bank Monzo cater to consumers with an app that makes keeping on top of finances, simple.
Plus they provide you with Pots to separate your money however you wish.
It’s just fuel
A car is an investment, so you mentally account for all the things you’ll have to pay on it. But Peugeot’s “Just Add Fuel” boils it down to just one thing – fuel.
A shortcut to getting on the road, consumers know their money is going on what they’ve saved for.
