Avoid fear factor in financial purchases

Knowledge is the best way to combat marketing aimed at consumer anxieties

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Fear is a powerful motivator for consumers, and it underlies more of our spending decisions than we'd care to admit.

We're afraid of identity theft, so we buy credit monitoring. We fear our new iPhone will break, so we buy an extended warranty. We fear pesticides and hormones in our food, so we buy organic. We fear bad breath and "ring around the collar," so we buy products offering solutions.

Facebook walls and Twitter feeds can be full of well-meaning posters warning friends and followers against the latest dastardly health scare, money scam or tale of woe — many of which have a consumer product or service to alleviate the fear. Marketers have long known they can scare consumers into buying.

Fear — caused by a real or anticipated danger or threat — can be a good thing.

If we worry about our loved ones suffering financially if we die, we buy life insurance, usually viewed as a prudent personal finance component.

Public health ads can use fear to warn us against the hazards of smoking tobacco or driving drunk and encourage us to participate in pre-cancer screening.

About half of women fear one day ending up a "bag lady" — losing all their money and becoming homeless, according to a 2013 study by Allianz Life Insurance Co. of North America.

If that means adding a few extra dollars to a retirement plan, that might be a positive.

Other times, however, consumers are targets of fear-based marketing, which may not be a good thing for their wallets.

For example, many consumer advocates recommend against buying extended warranties, and many don't see the value in buying identity theft protection.

Anti-bacterial soap has been shown to be of dubious value. Yet all can be sold with fear, suggesting the purchase will protect against some threat.

So our fears and purchases are tightly linked. One recent academic study even found that when consumers are fearful and alone, they might turn to brands for comfort, much as they would toward a human being.

"Since people cope with fear through affiliation with others, in the absence of other individuals, consumers may seek affiliation with an available brand. This, in turn, will enhance emotional attachment to that brand," said the academic study published this year in the Journal of Consumer Research by Lea Dunn, a professor at the University of Washington, and Joandrea Hoegg, of the University of British Columbia.

It's similar to a child's attachment to a teddy bear or blanket when things go bump in the night. Only this study showed that consumers who go through a fearful experience actually bond with not only an object, but its brand. (An experiment by Dunn showed that consumers in a "fear condition" didn't develop an attachment with no-name jelly beans but did with branded ones.)

So sitting through a horror movie with a Diet Coke might mean you feel more attached to the Coke brand afterward, Dunn said in an interview.

"Brands have the ability to provide human qualities that allow us to feel better in situations," she said.

Dunn said the relationships are not just metaphorical but literal — that frightened people can make psychological, personal connections to brands.

That's important for marketers, because consumers who feel a strong attachment to a brand will be more loyal and pay more, according to the study.

So what can we do to limit fear's role in purchasing decisions that are bad for us?

Be aware. Acknowledge that fear makes us feel risk-averse and out of control, Dunn said. So we're more open — perhaps vulnerable — to anything that allows us to feel more certain.

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