When browsing websites like booking.com or Airbnb, you might notice they inform you that a particular accommodation "is usually booked” or that there are other people also considering the same hotel room. Ever wondered why? Let’s dive into the science behind these communication strategies and what they reveal about consumer behavior.

We spend much of our income on experiences (things that you ‘do’) and objects (things that you ‘own’), and research has explored the psychological and social benefits that each type of purchase offers us. A number of studies shows that experiences tend to make us happier than do material object. The excitement we feel before an experience—like a trip or a concert—often surpasses the anticipation of buying a product (Kumar, Killingsworth, & Gilovich, 2014). While consuming them, experiences also allow us to connect with others more than do material objects (Rosenzweig & Gilovich, 2012), they give us richer stories to talk about with others (Bastos & Brucks, 2017), and they feel closer to who we are as a person (Carter & Gilovich, 2012). 

But what happens when prices go up? Do we react differently when the cost of experiences increases compared to that material object? 

Whether due to rising costs, inflation, or the need to maintain profitability, price increases are a crucial part of staying competitive and ensuring a firm’s long-term success. For consumers, higher prices mean having to spend more to get the experiences and objects they want, which is a big reason why people sometimes decide not to buy. Higher prices are normally received negatively by consumers; an idea captured by the pain of paying phenomenon (Prelec & Loewenstein, 1998), which refers to the emotional discomfort people feel when spending money. This discomfort is greater with immediate and tangible payment methods like cash, compared to credit cards for example. The pain is reduced when payment is separated from the actual experience, like prepaying for a vacation. This discomfort often makes the consumers think twice before spending and choosing payment methods that feel less painful. However, price increases can turn customers away, they are common and often necessary; in fact, about two-thirds of all price changes are increases. For firms, figuring out when and how much to raise prices is one of the toughest decisions they face.  

CUBE researcher Wilson Bastos, in his paper “Now or Never: Perceptions of Uniqueness Induce Acceptance of Price Increases for Experiences More Than for Objects” presents a novel insight into consumer reactions to price increases that is crucial for both consumers and firms. Bastos’ research reveals that consumers respond differently to price increases depending on whether they are purchasing an experience or an object.

“The idea for this paper falls in the category that I call ‘gift from the mind’. It was not deliberate or planned. I was simply doing research on how experiences bring people more happiness than do material objects and suddenly became curious about what happens when the prices of an experience and that of an object go up. Do people react differently, I wondered. At that point, all my research was really focused on happiness. I had no particular interest in pricing (or at least consciously). But when you’re fully immersed in a topic (as I was for experiences versus material objects), all types of questions just start coming to mind. Some are trivial questions and so are not worth investigating, but others are more substantive and lead to findings that can be informative to managers and society at large.” – Wilson Bastos 

Through seven studies, including inquiring about people’s behaviors in real-life situations where they encountered a higher price and had to decide whether to make the purchase, the research concludes that consumers are more inclined to go ahead with the purchase of experiences over objects when prices rise. This preference stems from the greater sense of uniqueness that experiences offer, with the key factor being the perception of a unique opportunity. Experiences, unlike objects, are seen as one-of-a-kind moments that can't be easily replicated in the future, which thus creates an unavailability threat. According to Jack Brehm's reactance theory (1966), when people sense that their freedom to choose or access something is restricted, they experience a strong desire to reclaim that freedom, which makes the unavailable option even more desirable. This theory explains why the perceived scarcity of an experience—its limited availability—can lead consumers to value it more highly and accept a higher price. Interestingly, Bastos finds that even encouraging consumers to see the same purchase (e.g., a BBQ grill) as an experience instead of a material object is enough to generate the difference in reaction to price increase.  

Practical Takeaways 

These findings offer valuable insights for both firms and consumers. While they don't suggest that firms should just raise prices without thought, they do show that managers selling experiences can be more flexible with their pricing, especially if they can effectively highlight how unique their offerings are, or more specifically, how they are a unique opportunity—get it now or never. These tactics create a sense of urgency, making people more willing to pay higher prices. For managers focused on material objects, the research offers the mental framing strategy—The one where consumers are encouraged to focus on the experiential instead of the material aspects of what they are buying—be it a TV set, or a pair of jeans. Doing so helps them see the uniqueness of it and makes them more willing to accept a price increase. 

“In my opinion there are various takeaways for managers who read this paper. First, companies are often communicating about their material objects with campaigns focusing on its tangible properties, physical features, etc. I find in this paper that focusing consumers’ minds in the experiential aspects of the object is a better approach if the manager wishes a more receptive consumer reaction to higher prices. Show consumers what they can do with the product, the activities in which the object can be embedded, the social moments the object can generate. Interestingly, the same experiential framing approach works too if the managers’ goal is to increase consumer happiness. Me and my colleagues’ research have found that simply framing an object as an experience instead of a material thing increases the happiness people get from that object.”

To access the full research article please visit the Journal of Consumer Psychology website here or you can request a copy directly from the author here.