Why Songs Are Like Monetary Losses: Leveraging Insights from the Neurophysiology of Memory to Strengthen Our Understanding of Consumer Experiences
Martin Reimann, Chinmai Basavaraj, Armin Heinecke, Kobus Barnard, and Michael I. Norton, 2019, 19-104-01
Why are we often disappointed when choosing and consuming experiences such as a vacation to an exotic location, a three-course meal at a fancy restaurant, or a newly available song from our favorite genre?
Consumers are generally risk-seeking for positive experiences and risk-averse for negative experiences—the mirror image of choices for money. One reason for disappointment stemming from experiential consumption could thus be the notion that we utilize extreme reference points to arrive at an experiential choice. Should the best song one has listened to represent a reference point when choosing between two songs, then paradoxically many of the available positive options could be treated in prospect as comparative losses, hence the disappointment.
In this study, Martin Reimann, Chinmai Basavaraj, Armin Heinecke, Kobus Barnard, and Michael Norton set out to test some of these ideas. They posit that, if consumers indeed use more extreme reference points for choices of experiences (vs. money), one would expect to see a greater involvement of consumers’ explicit memory of facts and events because experiential choices could—to a greater extent than monetary choices—be based on extreme reference points, which could ultimately tap the decision maker’s explicit memory of facts and events.
They employed both a behavioral decision task and functional magnetic resonance imaging to test their proposition. Data were subjected to a machine-learning algorithm aimed to derive prediction accuracies of risky choice.
Their results provide interesting preliminary insights into the possible underlying neurophysiological and psychological mechanisms of experiential (vs. monetary) decision making. Specifically, participants in this study preferred high-variance options more often than low-variance options for experiences but less so for gambles.
While future work is warranted, these behavioral and neuroimaging results suggest the possible existence of “extreme” references points for experiences when compared to monetary gambles.
Martin Reimann is an Assistant Professor of Marketing and an Assistant Professor of Cognitive Science (by courtesy), Eller College of Management, University of Arizona. Chinmai Basavaraj is a doctoral student in computer science, and Kobus Barnard is Professor of Computer Science, both in the Department of Computer Science, University of Arizona. Armin Heinecke is Head of Support at BrainVoyager. Michael I. Norton is the Harold M. Brierley Professor of Business Administration, Harvard Business School, Harvard University.
The authors thank C. Clark Cao, Anika Schumacher, and Scott Squire for support during data collection. The authors also thank Oliver Schilke for helpful advice and feedback on thisresearch. This research was funded by grants from the Marketing Science Institute, the Center for Management Innovation in Healthcare at the University of Arizona, the dean of the Eller College of Management, and a Start for Success grant from the University of Arizona.
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