10 Aug 2015 | Richard Shotton

Why all tenners aren’t the same

ZenithOptimedia’s Richard Shotton explores how consumers treat money differently dependent on whether it’s hard earned or not – and what marketers can do about it..

Dexter Koh achieved a degree of notoriety in 2012 by running up a bar bill of over £121,000. His bill included £26,000 for a single bottle of champagne, albeit a 6 litre Methuselah, and an eye-watering tip of nearly £16,000. If you look closer at his bill though, he did get a complimentary jug of orange juice.

Koh’s extraordinary celebrations were sparked by a six-figure win at a casino. This should be of interest to brands, especially ones in discretionary categories, as there’s considerable evidence that we treat money that comes to us easily in a different way to hard earned cash.

The easier the money comes the more likely we are to spend it on hedonic goods. Importantly for advertisers, this doesn’t just affect casino wins but also more common sources of cash, like bonuses.

Academic evidence

Three psychologists, Hal Arkes, Cynthia Joyner and Mark Prezzo, ran a classic experiment amongst Ohio University students which investigated this strange phenomenon. When they recruited participants for the experiment half were told a week before that they would be paid, while the rest were surprised with a cash bonus just before the experiment started.

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Towards the end of the study the participants were given the chance to gamble with their own cash. Interestingly, those who had been in the windfall condition gambled on average twice as much.

These results, whereby windfalls are more likely to be splurged than standard income, have been repeated in a remarkable range of settings.

Luc Christiaensen, an economist at the World Bank, even found similar findings in Tanzania and China. Unearned money was more likely to be spent on clothes, alcohol, tobacco and gifts whereas earned money tended to go on staple foods and education.

The marketing application

These findings offer a great opportunity for luxury brands to prise money from affluent workers. Whilst the rich have enough disposable income, in theory, to buy what they want when they want, in practice they are more likely to buy discretionary items just after a bonus.

Advertisers can target these moments as there is some seasonality to the City bonus season, which tends to be at the end of January. However, a number of sites, like LinkedIn, can target ads according to what company people work for. So any advertiser who gathers data on when bonuses are paid, on an individual company basis, can run a far more tailored campaign.

Mass market discretionary items can also tap into the opportunity of unearned income by targeting consumers after their birthday. Again it’s an easy moment to target on sites, like Facebook, which collect the necessary data.

Facebook’s scale means that this is far from a niche approach: in the UK there are roughly 760,000 people who can be reached by within a week of their birthday on the site.

These experiments prove yet again that advertisers shouldn’t just think about target audiences. The same person will react very differently to a message dependent on the context.

It’s time advertisers thought as much about target contexts as target audiences.