Impatient People Have Lower Credit Scores

Is there a psychological reason why people default on their mortgages? A new study, which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science, finds that people with bad credit scores are more impatient – more likely to choose immediate rewards rather than wait for a larger reward later.

The new paper is by two economists who were working at the Federal Reserve’s Center for Behavioral Economics and Decisionmaking in Boston at the time they did the research. People at the Fed are very interested in understanding how the default crisis came about. “Most often, the reasons economists put forward are, maybe there was not enough screening for mortgage applicants, or securitization, or other institutional reasons,” says Stephan Meier, who is now at Columbia University. His coauthor, Charles Sprenger, is at Stanford University. ”That’s definitely important, but in the end humans make those repayment decisions. So there must be more psychological factors that explain how people make those decisions to default or not?”

During tax season, Meier and Sprenger recruited 437 low-to-moderate income people at a community center in Boston that was offering tax preparation help. Each person was given a questionnaire in which they made choices between a smaller, immediate reward and a larger reward later. This is a common test for seeing if people are willing to delay gratification. The questions offer different time periods and different amounts. The participants also agreed to let the researchers access their credit scores.

Impatient people had lower credit scores. A low credit score can indicate some problems with credit in the past, like failing to pay bills or defaulting on a mortgage. “Conceptually, it does make sense that how people discount the future, i.e. how impatient they are, affects their decision to default on their loans,” Meier says. “Individuals accumulate debt and then have to decide whether to repay the money or use the money for something else?” If they don’t pay off their debt, they will have short-term benefits – any cash on hand is available for something else – but the costs/problems come much later, when a landlord, mortgage lender, or someone else sees their bad credit report.

Meier acknowledges that defaulting on a loan isn’t always a deliberate choice. People may default because they lose their job, for example. “But there is a little bit of strategic defaulting going on, where some people make this cost-benefit analysis” – those individuals rather have more money now and deal with the repercussions later.

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Impatient People Have Lower Credit Scores

China: The Most Valuable Social Commerce Market in the World?

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China: The Most Valuable Social Commerce Market in the World?

The Other Side of Things - Why Social Media is Shit

WHY SOCIAL MEDIA IS SHIT

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The Other Side of Things - Why Social Media is Shit

Future of Shopping

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Future of Shopping

Always On Women

Always On Women: A survey of how women are using technology today - download the AdAge Insights report by clicking here.

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Always On Women

Men Are Funnier Than Women

Open publication - Free publishing

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Men Are Funnier Than Women

How Shopping Malls Make You Buy

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How Shopping Malls Make You Buy

Another Day Older and Deeper in Debt: Why Do Events Seem More Important When Consumers Think About Weight?

Toting a heavy item around may cause you to judge an issue to be more important, according to a new study in the Journal of Consumer Research. But, interestingly, so does thinking about the concept of weight.

“Prior research has shown that the physical experience of carrying weight can influence people’s judgment in unrelated domains such as the importance of an event,” write authors Meng Zhang (Chinese University of Hong Kong) and Xiuping Li (National University of Singapore). “In this research we investigate how such an influence happens and when it will happen.”

In their research the authors measured consumer responses to actually carrying weight as well as their reactions to being primed to think about the concept of weight. The authors found that the metaphorical associations people form are just as important as the physical weight they carry.

In one study, the authors asked some participants to hold shopping bags full of water bottles. Others read a paragraph that described a heavy-duty crane, which included weight-related terms (“heavy,” “tons,” and “loaded”). They asked participants to give an opinion on an unrelated topic: whether it was important to list nutritional information on products. The participants who were primed to think about weight responded much like the people who actually carried weight. They thought the issue was more important than participants who weren’t weighed down—metaphorically or literally.

In another experiment, participants who carried heavy loads were instructed to think about light objects, like balloons and feathers. When they did so, the effect of the physical weight experience on their judgment was eliminated.

“The physical experience can directly cause the mental state or abstract judgment,” the authors write. “The results of our five experiments, however, show that weight experience relies on people’s subjective inference to exert its effect.”

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Another Day Older and Deeper in Debt: Why Do Events Seem More Important When Consumers Think About Weight?

Do Consumers Purchase Interesting Products with Credit and Boring Products with Cash?

People who pay cash focus on different aspects of products than people who use credit cards, according to a new study in the Journal of Consumer Research.

“Our research suggest that, when it comes to product evaluation, beauty truly lies in the eyes of the cardholder,” write authors Promothesh Chatterjee (University of Kansas) and Randall L. Rose (University of South Carolina).

Although previous research has already proven that consumers are willing to pay more when they use credit cards instead of cash, the authors found that consumer perception of products is also affected when thinking about paying with one or the other.

In the experiments, the authors induced people to think about either credit cards or cash as means of payment. They then examined the ways participants evaluated different product attributes. “We find that people attend more to product benefits when concepts related to credit cards are highlighted in their minds as compared to cash concepts,” the authors write. “On the other hand, when cash concepts are primed, people tend to focus more on product costs (monetary and non-monetary).”

The authors note that consumers develop mental associations about credit cards and cash from early ages. Credit card advertising, for example, links the use of credit cards with highly desirable products and lifestyles and immediate gratification. Cash, on the other hand, is closely linked to the pain of payment.

“While convenient, credit cards do not encourage consumers to deliberate over their spending behavior,” the authors write. “Our findings suggest that marketers may be affecting not just the amount of money consumers are willing to spend but also the nature of the goods and services that find their way into consumers’ market baskets.”

“The effects of credit cards go far beyond increasing consumer spending power and shifting consumption from the future to the present; fundamental product perceptions are affected as well,” the authors conclude.

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Do Consumers Purchase Interesting Products with Credit and Boring Products with Cash?

If Consumers Are Close to Their Fitness Goals, Do They Prefer a Larger or Limited Variety of Related Products?

Consumers who believe they are making progress toward their goals are motivated by limited product variety, unlike people who think they are further from their goals, according to a new study in the Journal of Consumer Research.

“Consumers often buy products to help them pursue their goals,” write authors Jordan Etkin and Rebecca K. Ratner (both University of Maryland). “For example, if someone has a goal to be physically fit, the person may buy a variety of protein supplements (bars, powder, shakes) to help achieve a fitness goal. We investigate how the amount of variety within a set of goal-related products impacts consumers’ motivation toward pursuing their goals.”

The authors conducted five experiments on a college campus. In each experiment, they varied whether participants evaluated low-variety or high-variety sets of products to pursue goals. For example, in one study, they asked participants to write down a fitness goal and then induced either a high or low sense of progress toward achieving that goal. They next showed the participants a set of six protein bars, differing in flavor only (low variety) or in form (a protein bar, protein shake, etc.; the high-variety set). Finally, they measured participants’ motivation to achieve their fitness goals.

“We found that when goal progress was low, people reported being more motivated to achieve their fitness goal when presented with a high-variety set of six different types of protein supplements rather than the low-variety set of six different flavors of protein bars,” the authors write. The pattern reversed when goal progress was high: Those participants reported that they were more motivated to achieve their goals when they were presented with less variety.

Stores may want to note what kind of customers they cater to when they develop marketing plans, the authors explain; they may want to highlight or minimize the perceived variety among product offerings. “For example, stores like GNC that cater primarily to consumers who have already invested time and energy in being fit may wish to de-emphasize the variety of their product offerings,” the authors write. “Alternatively stores like Walmart that might cater to consumers who have made less progress toward a goal of being physically fit may wish to highlight the variety among their product offerings.”

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If Consumers Are Close to Their Fitness Goals, Do They Prefer a Larger or Limited Variety of Related Products?

Put Yourself in Someone Else’s Shoes: What Type of Perspective Makes Consumers Self-Conscious?

Certain emotions are heightened when we view ourselves from a first-person perspective, while others amplify when we observe ourselves from the outside, according to a new study in the Journal of Consumer Research.

“People often feel various emotions when they recall past events or visualize future ones,” write authors Iris W. Hung (National University of Singapore) and Anirban Mukhopadhyay (Hong Kong University of Science and Technology). “For example, one might feel excited about going to a rock concert, but at the same time guilty about not studying for an important exam; proud about winning an award, but also embarrassed about tripping en route to the podium.”

The authors found that people who are “in the moment” (also called an “actor’s perspective”) experience emotions such as joy, sorrow, or excitement more strongly than people who use an observer’s perspective—as if they were watching a movie of themselves—which heightens self-conscious emotions like pride, guilt, and embarrassment.

In one experiment, the authors asked half of the participants to imagine choosing to attend a concert instead of studying for an important exam. The other half imagined choosing to study rather than going to the concert. The participants were instructed to use either an actor’s perspective or an observer’s perspective.

“Actors felt more happiness but less guilt than observers when imagining themselves choosing going to the concert over studying for the exam,” the authors write. “In contrast, actors felt more sadness but less pride than observers when imagining themselves studying for the exam over going to the concert.”

The authors found similar results across a variety of situations, both real and imagined. They also discovered that actors were more likely than observers to focus on situational circumstances (how much they want something), whereas observers were more likely to focus on how others might evaluate them.

“Emotions people feel are often influenced by the information they attend to,” the authors write. “Hedonic emotions get amplified if we view the situation in the first person. In contrast, self-conscious emotions are amplified if we view the same situation in the third person.”

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Put Yourself in Someone Else’s Shoes: What Type of Perspective Makes Consumers Self-Conscious?

Tell the Story

Joe Gebbia: The Power of Story from Piers Fawkes on Vimeo.o

Tell the Story

The Brain Acts Fast To Reappraise Angry Faces

If you tell yourself that someone who’s being mean is just having a bad day—it’s not about you—you may actually be able to stave off bad feelings, according to a new study which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science.

Having someone angry at you isn’t pleasant. A strategy commonly suggested in cognitive-behavioral psychotherapy is to find another way to look at the angry person. For example, you might tell yourself that they’ve probably just lost their dog or gotten a cancer diagnosis and are taking it out on you. Stanford researchers Jens Blechert, Gal Sheppes, Carolina Di Tella, Hants Williams, and James J. Gross wanted to study the efficiency and the speed of the process of reappraising emotions. “You can see this as a kind of race between the emotional information and the reappraisal information in the brain: emotional processing proceeds from the back to the front of the brain, and the reappraisal is generated in the front of the brain and proceeds toward the back of the brain where it modifies emotional processing” Blechert says.

Blechert and his colleagues came up with two experiments to study this process. Participants were shown several series of faces and tested on their reactions. For example, in one set, they were told to consider that the people they’d seen had had a bad day, but it’s nothing to do you with you. “So we trained the participants a little bit, not to take this emotion personally, but directed at someone else,” Blechert says.

They found that, once people had adjusted their attitude toward someone, they weren’t disturbed by that person’s angry face the next time it appeared. On the other hand, when participants were told to just feel the emotions brought on by an angry face, they continued to be upset by that face. In a second study, the researchers recorded electrical brain activity from the scalp and found that reappraising wiped out the signals of the negative emotions people felt when they just looked at the faces.

Psychologists used to think that people had to feel the negative emotion, and then get rid of it; this research suggests that, if people are prepared, it’s actually a much faster and deeper process.

“If you’re trained with reappraisal, and you know your boss is frequently in a bad mood, you can prepare yourself to go into a meeting,” says Blechert, who also works as a therapist. “He can scream and yell and shout but there’ll be nothing.” But this study only looked at still pictures of angry faces; next, Blechert would like to test how people respond to a video of someone yelling at them.

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The Brain Acts Fast To Reappraise Angry Faces

How Women Are Using Technology Today

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How Women Are Using Technology Today

‘Digital waste’ pollutes the online world as brands fail to listen to what people want

Businesses are wasting time and money trying to reach people online without realising many resent big brands invading their social networks – according to findings from a global study launched by today by TNS, a Kantar company and part of WPP [NASDAQ:WPPGY].

The findings were revealed by TNS’s Digital Life study, the most comprehensive view of how more than 72,000 consumers in 60 countries behave online and why they do what they do – an interactive data visualisation of the key findings can be found at www.tnsdigitallife.com.

The race online has seen businesses across the world develop profiles on social networks, such as Facebook or YouTube, to speak to customers quickly and cheaply – but TNS’s research reveals that if these efforts are not carefully targeted, they are wasted on half of them.

It found that 57 per cent of people*** in developed markets* do not want to engage with brands via social media – rising to 60 per cent in the US and 61 per cent in the UK. Instead, misguided digital strategies are generating mountains of digital waste, from friendless Facebook accounts to blogs no one reads. This is being combined with ever-increasing content produced by consumers – the study shows 47 per cent of digital consumers now comment about brands online.

The result is huge volumes of noise, which is polluting the digital world and making it harder for brands to be heard – presenting a major challenge for businesses trying to enter into dialogue with consumers online.

“Winning and keeping customers is harder than ever,” said Matthew Froggatt, Chief Development Officer, TNS. He continued, “The online world undoubtedly presents massive opportunities for brands, however it is only through deploying precisely tailored marketing strategies that they will be able to realise this potential. Choosing the wrong channel, or simply adding to the cacophony of online noise, risks alienating potential customers and impacting business growth.”

TNS’s Digital Life study asked consumers around the world whether they actually want to engage with brands on social networking websites – either to find out more or to make a purchase.

Although 54 per cent of people*** admit social networks are a good place to learn about products, the research shows brands must harness digital more carefully if they are to use it to their advantage and deepen relationships with customers and prospects.

The study also reveals big geographic contrasts which highlight the risks of brands employing a catch- all approach that doesn’t take the needs of different consumers into consideration.Fast growth markets** were found to be far more open to brands on social networks. Just 33 per cent of Colombians*** and 37 per cent of Mexicans*** said they don’t want to be bothered by them, while 59 per cent of people*** across fast-growing countries see social networks as a good place to learn about brands. However, even here brands must still plan and manage online engagement carefully to avoid alienating consumers and doing more harm than good, according to TNS.

Matthew Froggatt explains: “Digital waste is the accumulation of thousands of brands rushing online without thinking who they want to talk to – and why. Many brands have recognised the vast potential audiences available to them on social networks; however they are failing to understand that these spaces belong to the consumer and their presence needs to be proportionate and justified.”

“The key is to understand your target audience and what they want from your brand – social networks aren’t always the right approach. If consumers in one market don’t want to be talked to, can you use an alternative online method – creating owned digital media platforms, targeted sponsorship or search campaigns – to engage in an appropriate way that will achieve business results, without adding to the digital waste pile?”

TNS’s Digital Life study also sheds vital light on why people do engage with brands online. 46 per cent of those motivated to post comments on companies do so for the simple desire to impart advice – with Romanians the most helpful online (55 per cent).

Findings showed that more people like to praise than complain online (13 per cent vs 10 per cent). The Spanish are the least likely to praise online, with just one in ten people saying that they would do this, and Argentineans are the most likely to complain about brands online (12.5 per cent).

However, motivations of online commentators can be self-serving. 61 per cent of consumers are driven to engage with brands online by a promotion or special offer.

When examining global contrasts, TNS found that consumers in fast growth markets are incredibly keen to spend more time and money online than they currently do – presenting major growth opportunities for brands.

There are, however, infrastructure challenges still to be overcome in these countries before businesses can really tap into the enthusiasm for the digital world. 48 per cent of people already online in fast growth markets would use the internet more if it was less expensive – rising sharply in Africa, to 81 per cent of people in Ghana, 71 per cent in Nigeria and 68 per cent in Kenya.

Likewise, while just a quarter of people*** in developed markets see social networks as a place to buy products, this rises to 48 per cent across fast growth markets. Some of the most eager online consumers are found in India, where 59 per cent see social networks as a good place to buy products from brands.

And when it comes to online shopping habits, Asian consumers are leading the adoption of group buying and purchase via mobile. Almost half (46 per cent) of digital consumers in China already use

group buying tools - in stark contrast to Europe where adoption rates are as low as 6 per cent in Sweden and Finland.

Adoption of shopping via mobile is also high in the region – 34 per cent of mobile internet users in China and South Korea shop on their phone, falling to just two per cent in Egypt.

Matthew Froggatt adds: “There is a huge appetite for increased internet access and mobile services among consumers in fast growth markets. Digital Life shows that as online communities mature, brands that can cut through the digital noise have fantastic potential to drive rapid growth from this nascent consumer base.”

*Developed markets: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Republic of Korea, Singapore, Slovak Republic, Spain, Switzerland, Sweden, Taiwan, United Arab Emirates, United Kingdom, United States.

** Fast growth markets: Argentina, Brazil, Chile, China, Columbia, Egypt, Estonia, Ghana, Hungary, India, Indonesia, Kenya, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Peru, Philippines, Poland, Romania, Russia, Saudi Arabia, South Africa, Tanzania, Thailand, Turkey, Uganda, Ukraine, Vietnam.

***This refers to Social Network Users only.

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‘Digital waste’ pollutes the online world as brands fail to listen to what people want

A Brief History of Sharing

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A Brief History of Sharing

Which Way You Lean—Physically—Affects Your Decision-Making

We’re not always aware of how we are making a decision. Unconscious feelings or perceptions may influence us. Another important source of information—even if we’re unaware of it—is the body itself.

“Decision making, like other cognitive processes, is an integration of multiple sources of information—memory, visual imagery, and bodily information, like posture,” says Anita Eerland, a psychologist at Erasmus University Rotterdam in the Netherlands. In a new study, Eerland and colleagues Tulio Guadalupe and Rolf Zwaan found that surreptitiously manipulating the tilt of the body influences people’s estimates of quantities, such as sizes, numbers, or percentages. The findings will appear in an upcoming issue of Psychological Science, a journal published by the Association for Psychological Science.

When we count, we think of smaller numbers to the left and larger ones to the right. The researchers surmised that leaning one way or the other—even imperceptibly—might therefore nudge people to estimate lower or higher. To test this hypothesis, study participants—33 undergraduates—stood on a Wii Balance Board that imperceptibly manipulated their posture to tilt left or right or stay upright while they answered estimation questions appearing on a screen. The participants were told they probably didn’t know the answers and therefore would have to estimate; they were also instructed to stand upright throughout the trials. A representation on the screen, below the question, of the person’s posture showed it to be upright even when it was not.  The participants answered the questions one by one verbally.

In the first experiment, the estimations were of different kinds of quantities—e.g., the height of the Eiffel Tower or percentage of alcohol in whiskey. In the second, the quantities were all of the same kind—How many grandchildren does Queen Beatrix of the Netherlands have? How many Number 1 hits did Michael Jackson have in the Netherlands? The answers were all between 1 and 10.

As expected, participants gave smaller estimations when leaning left than when either leaning right or standing upright. There was no difference in their estimates between right-leaning and upright postures.

The researchers point out that body posture won’t make you answer incorrectly if you know the answer. “Your body posture may nudge your estimates in a particular direction,” says Zwaan. Adds Eerland: “Posture doesn’t overwrite knowledge.”

Still, says Zwaan, we should not mistake our cognitive processes as perfectly and consciously rational. “Decision-making is not a pristine process.  All sources of information creep into it, and we are just beginning to explore the role of the body in this.”

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Which Way You Lean—Physically—Affects Your Decision-Making