Imagine that as you enter a friend's dinner party, he says, "You owe me $65 for dinner." The punch-in-the-gut sensation that follows won't be because you're hungry. This is called the "pain of paying." It's likely that you'll enjoy dinner a little less than if it had been free. In a study by Prelec and Lowenstein, researchers showed that when payment is paired with an experience, we enjoy the experience less. When the goal is to deliver an enjoyable experience, it's important to decrease the pain of paying as much as possible. For a dinner party host, the solution is simple: Don't charge guests for the meal and expect they will eventually return the favor.
But what about when you're running a business and "free" isn't an option?
The good news is that the pain of paying decreases when payment is a less salient part of the experience. For example, an all-expense-paid, pay-ahead-of-time vacation is more enjoyable than one where you take out your wallet before every margarita.
Here are three creative ways businesses are decreasing their customers' pain of paying:
1. Create a membership program
We've all felt the painful jolt of paying $5 for a coffee.
New York cafe Fair Folks and a Goat tackles this problem with a membership program. For $35 a month, consumers get unlimited beverages. Members likely enjoy their coffees more than non-members, because membership fees are paid far in advance of the coffee-consumption moment, whereas non-members experience a pain of paying each time they go into the cafe. From a business standpoint, membership programs have been found to increase sales, as consumers perceive a link between membership fees and savings, then end up spending more than they would have otherwise.
Fair Folks reports an average of seven new members a day, which shows consumers willingness to pay-ahead so they might more deeply enjoy an experience later (and repeatedly).
2. Rely on an honor system
The quaintness of picking fruit from a farm stand is heightened when you pay by the honor system.
Swanton Berry Farm, like many farm stands across the country, operates on an honor system. Berries are priced by pound or container, and visitors leave what they owe in an unmonitored cash box on a counter. As social psychologist Michael Cunningham explained to NPR, people not only enjoy receiving delicious berries, but they also appreciate the business for trusting them. The payment process is more friendly and less transactional.
The honor system may be so effective in decreasing the pain of paying that it may create a desire to pay: Swanton's founder reports, "most people leave more money than they owe."
3. Frame payments as donations
The stress of overpaying for a yoga class defeats the purpose of being there in the first place.
Cross-country organization Yoga To the People eliminates this irony with its donation model. At the end of class, instructors ask students to consider leaving a donation. People can drop any amount of money into a shoebox as they leave. Research on the psychology of charitable giving shows that this model is especially effective in social groups (much like the yoga class): Seeing one person contribute makes others more likely to contribute as well.
Within months of opening, Yoga To the People saw massive success, with studios all fully operating on donations and enough demand to open two additional studios.
Consider ways you might decrease the pain of paying for your product or service. Whether it is as profound as changing your business model or something as simple as changing the framing or moment of pay, it may dramatically increase how much people enjoy your product or service -- and perhaps the experience of paying for it too!