Monday, April 15, 2013

Why regret makes buying experiences better than buying stuff

In the past, I have written about ways to spend money to make yourself happier.  One general rule that comes from research by Tom Gilovich and his colleagues is that it is better to buy experiences than to buy objects.  That is, if you spend big bucks on a trip to Mexico, you are likely to feel better about that purchase in the long run than if you spend the same amount on clothes.

A paper by Emily Rosenzweig and Tom Gilovich in the February, 2012 issue of the Journal of Personality and Social Psychology shows that an important reason for this difference is that experiences and stuff lead to different kinds of regrets. 

When you buy an object, like a computer, you may experience buyer’s remorse.  That is, soon after buying it, you may regret buying that particular computer, because you could have bought another one (or something else entirely).  You are much less likely to regret buying an experience.  Think about a big concert going in on your town.  You are more likely to regret passing up the opportunity to go to the concert than you are to regret buying a ticket to go. 

Why is this?

In one study, Rosenzweig and Gilovich examined the uniqueness of objects and experiences.  One big reason why people regret buying objects is that after they own the object, they can continue to compare it to other objects that are available.  You buy a computer, and a month later, you find another one that is faster, smaller, and cheaper.  So, now you feel like you didn’t get a good deal.  When you go on a vacation, though, that experience is relatively unique.  It is hard to compare a particular trip to Mexico with other trips you might have taken, and so you spend less time comparing your experience to other things you might have done. 

Indeed, in one study in this paper, participants listed specific purchases they had made of objects or experiences.  People listing objects felt that their purchases were interchangeable with other objects.  People listing experiences felt that their purchases were unique.  In addition, the more interchangeable the objects, the more that people were likely to regret making a purchase. 

Looking at regret in this way also suggests two ways to avoid regret from purchases.  First, if you are going to make a significant purchase of an object, try to make it something unique.  In another study in the paper, participants were asked to imagine a purchase of an object that was either fairly common (a dresser) or unique (a particular antique dresser).  In this case, participants were much more likely to regret buying the common dresser, but to regret not buying a unique dresser.  Other participants imagined buying a plane ticket to a common experience (their yearly family reunion) or to a unique experience (the first ever family reunion).  For this experience, the same pattern held.  People were more likely to regret buying the ticket to the yearly reunion, and to regret not buying the ticket for the first-ever reunion.

The second way to avoid buyer’s regret is to find objects that can be treated as experiences.  Many objects have an experience component to them.  If you buy an expensive car, for example, you can treat it as an object or you can savor the experience of owning and driving the car.  Indeed, car makers like BMW focus on the driving experience as a way of making the car feel unique.

As support for this view, a final study had people think about two friends, Mark and Joe who were each considering buying a 3d television.  Ultimately, Mark bought the TV and Joe did not.  For one group, the description of the TV focused on the object itself.  For another group, the description focused on the experience of having a third dimension when watching TV and sharing that with friends.  The group that was focused on the TV as an object assumed that Mark (who bought the TV) would regret the decision more than Joe (who did not).  In contrast, the group that was focused on the experience thought that Joe (who passed on the TV) would regret the choice more than Mark (who bought it).

Obviously, you have to buy a certain number of objects in your life just to survive.  But if you have some extra money around and are looking for a way to spend it to increase your happiness, then you should buy experiences.  And whenever you can, you should think about the great experiences you can have with the objects you buy.