Running head: CAUSES OF IMPULSE BUYING

Impulse Buying
EN1320
ITT Technical Institute

Impulse Buying
Everyone does it from time to time. I’m talking about acting upon impulse. In some cases, impulsive actions can be harmless or even rewarding. This is usually not the case though when it comes to making impulsive purchases. Studies have shown that on average, between 50 and 65 percent of items purchased while shopping we’re not on their lists, and we’re bought out of impulse. The question at hand is why, and this is what I am going to try and answer. Impulse buying begins a downward spiral that, if not corrected, ends with owning up to unexpected and undesired consequences that can be very detrimental and life changing.
As defined by Merriam-Webster.com (2012), impulse buying is the buying of merchandise on impulse, rather than premeditation. Not a lot is known about the causes of impulse buying, and they have seemed to change over the years with evolving technology. One factor that has always been prevalent throughout time in driving spontaneous purchases is “sales prices”. When a customer thinks they can save money on an item, whether it’s on their list or not, they will more often than not give it a look over and consider making the purchase. The Yankee Group and Ernst & Young conducted surveys where they asked people why they would make impulse purchases on the web. According to The Yankee Group (November, 2000), 75% of survey respondents indicated that a “sale price” would motivate them to make a spontaneous purchase. The second most influential factor was free shipping with 49% of respondents.
Ernst & Young (January, 2000) reported that 88% of impulse purchases were because shoppers found products that were offered at good price on sale. Research on impulse purchases made online suggests otherwise. Findings state that sales prices draw customers to the site, but a large portion of the impulse purchases are not made on the items on sale, or are made on items that are not even related to the ones they set out to buy. An E-commerce paper by Jared Spool posted on UIE.com (2011), shows the results of their own private research. Instead of asking shoppers why they might make an impulse purchase, they observed people shopping on the web. They focused their observations by forming a hypothesis based on the findings from The Yankee Group and Ernst & Young surveys: “If we actually watch shoppers make impulse purchases, we should see them make purchases based on price.” They decided to test this hypothesis. The group conducted a shopping experiment with 30 people. They asked these people to make shopping lists of items they wanted to buy. They didn’t suggest what the participants should buy, and did not ask them to complete hypothetical tasks. These were real people shopping for real things the shoppers really wanted. The shoppers were given money to spend on their purchases, and were directed to web sites that had the products they wanted. Many people bought what they came to buy, but many also purchased products they didn’t plan to buy – impulse buys. Even though these shoppers came to stores with specific buying missions, armed with detailed shopping lists, 34% of the items added to shopping carts were impulse buys. This represented 39% of the money spent by these shoppers. If the hypothesis about price influencing impulse purchases was true, we should have seen that when people bought on impulse, price was a major factor. The group found that only 8% of the online impulse purchases were related to price. Website design seems to be a more relevant driving factor in impulse purchases rather than sales prices. In the study mentioned above by Spool (2011), a major driver of impulse purchases is the use of the category links on the website. Certain designs led shoppers to find products through category links rather than the sites search engines. When shoppers used these categories, they were far more likely to make impulse purchases than when they used the search engines. In the study, 87% of the dollars spent on impulse purchases resulted from users navigating the site by the category links. Users spent the remaining 13% of the money after navigating via the sites search engines. If a visitor sees a “popular products” section or a “clearance” banner on a site, those are the things they are most likely going to click. Even if they went to the site looking for a particular product, this strategy is usually taken advantage of. Many retailers put a “may we suggest” section on each and every product page with items that are relevant to what the customer was looking for, and this is also very enticing.
Other ways online pages encourage impulsive purchases is with the use of things such as time sensitive sales. This can be sales such as Memorial Day sales, deal of the day, or just random clearance sales. It doesn’t matter what the occasion is, making a banner that says something like “Sale ends at Midnight!” will encourage people to click the link, venture further into the store, and possibly make a purchase. This strategy is effective because a lot of online shoppers will have the mentality of, “well I can’t miss this deal, I better buy it while it’s on sale”, whereas if the product wasn’t on a limited time sale they may have not been so inclined to buy it. This limited time sale can also be combined with advertisements of “Free Shipping” to become even more irresistible to shoppers, making it appear that they are receiving an even larger discount. The free shipping tactic can also advertise that it is only good on purchases over a set amount, encouraging the buyer to spend more than they anticipated, just to receive the free shipping. Even if they aren’t getting the product for free, the very idea of some part of the transaction being free can be too good to pass up.
There is research that implies that none of the above is correct, and that impulse purchasing is purely psychological. Carnegie Mellon, Stanford and the MIT Sloan School of Management (2011), performed a study using fMRI imaging. They also gave participants money to go shopping. They then monitored activity in various parts of the brain. They found that when we anticipate buying something, the pleasure center, the nucleus accumbens, is activated. We begin picturing ourselves in possession of a product and visualizing ourselves using it. We start to build neural pathways that reinforce what it would be like to have the product. But, if the price is extremely excessive, the study found that the brain has a shut off mechanism. A part of the brain known as the insula is activated and the part of the brain we use to balance gains versus losses, in other words, is the product worth the price, the medial prefrontal cortex, begins shutting down. We literally put the purchase out of our mind because the price is more than we’re willing to pay. It is suspected that we get into shopping “modes” where the parts of the brain associated with acquisition of a product sustain some activity. We’re prepared to buy, so the nucleus accumbens kicks into gear and keeps firing. We’re in “buy” mode, and we’ve accepted that we have budget available. We start out looking for the product we intended to buy, but, on the way, if we see something we also decide we need, especially in a related category, our “buying” mechanism is already activated. We’re already primed to consider purchase. We’re not looking for a bargain (although finding one certainly wouldn’t hurt), but by the same token, an outrageous price would probably shut down the process by kicking in the insula. Think of the insula as the brain’s sprinkler system, snuffing out any impulsive sparks before we burn ourselves. As long as the price is reasonable, and doesn’t introduce significant “pain” we’re more likely to purchase. The fMRI study also showed that once we flip into buy mode, we tend to stay in this groove. This is why it’s much more dangerous to shop with credit cards than cash. Credit cards allow us to put off the “pain” that might kick in the insula, letting the nucleus accumbens have its way. When cash runs out, it runs out. It forces us to pay more attention to the “pain”.
In conclusion, there are many “Whys” when it comes to making impulse purchases. Whether we are influenced by big flashy banners, pressure of limited time savings, offers of free or discounted shipping, just have a few extra dollars to spend, or really do have a “buying mode” in our brains, we are all subject to making impulse purchases. If they are monitored and made within pre-determined limits, they can usually be managed and do not lead to things such as financial ruin. Without careful management, impulse buying can begin a downward spiral that, if not corrected, ends with owning up to unexpected and undesired consequences that can be very detrimental and life changing.
References

* Merriam-Webster (2012). http://www.merriam-webster.com/dictionary/impulse%20buying * * Spool, Jared (2011). What causes customers to buy on impulse? Retrieved from http://www.uie.com/publications/whitepapers/ImpulseBuying * * Carnegie Mellon, Stanford and the MIT Sloan School of Management (2011) Retrieved from http://www.cmu.edu