Defining Happiness to Build Brands: Experiential versus Material Happiness July 2016
Subscribe to Insights in Brief to be notified about new Featured Content as it becomes available!
In 2010, a study of 136,000 individuals in 132 countries examined the common question whether money buys happiness (http://www.sciencedaily.com/releases/2010/07/100701072652.htm). Answering this question requires separating definitions of happiness: overall life evaluation (or "life satisfaction," ranging from "worst possible life" to "best possible life") and actual, everyday psychological feelings of happiness (what one enjoys doing each day and what other people do that makes one feel happy). The study sample by Gallup and a representative of the Earth population—a survey first—came from telephone surveys in developed areas and from door-to-door surveys in rural and underdeveloped regions. The statistical findings follow.
Income (log transformed to minimize the influence of extreme incomes) shows a positive correlation with life evaluation. However, raw income numbers show a convex relationship with life evaluation, which means that the benefit of money on life evaluation decreases after a point. Standard of living and daily conveniences (possessing a television, possessing a computer, and having access to the internet) best explain the relationship between money and life evaluation worldwide. Psychological happiness—actual feelings—is not predicted by money but by "learning, autonomy, using one's skills, respect, and the ability to count on others in an emergency." For example, one question asked respondents whether they were treated with respect the previous day (yes/no).
What explains the limits to how much life satisfaction money can buy? In their 2011 article "Income, Relational Goods, and Happiness," Leonardo Becchetti, professor of economics, and his colleagues at the University of Rome show that income can reduce happiness indirectly, because time spent earning money takes time away from social relationships and the consumption of "relational goods"—consumption experiences that people best enjoy in the company of others. Thus, a seesaw effect describes the relationship between economic and psychological well-being at higher levels of income. Similarly, work in clinical psychology shows that affluence reduces parents' ability to raise well-adjusted children and results in a juvenile syndrome of neglect—including anxiety, substance abuse, and feelings of isolation from parents—among the rich that parallels the experience of poor children.
Thus, happiness in economically developed countries may come at a cost of psychological well-being, particularly at higher levels of income. In a comprehensive 2014 study, Thomas Gilovich (professor of psychology at Cornell University) and his colleagues have argued that people can overcome the psychological costs of living in a materialistic society by framing consumption as a series of life experiences rather than a series of acquisitions. One can easily construe eating in a restaurant or going on vacation as having an experience; one can easily construe buying a new couch or laptop as acquiring a material possession. Obviously, overlap exists between these conceptualizations. A brand-new BMW can be a material possession; buying a brand-new BMW can be an experience that includes sharing time with others, experiencing the car itself (speed, handling, comfort), and so on. Published studies show that focusing on experiential aspects of a purchase can make consumers across many demographics happier than focusing on material aspects of a purchase.
Dr. Gilovich and colleagues also show that the happiness boost from having experiences comes, in part, from the increased social connections that experiential consumption creates. On average, for example, people report feeling closer to individuals with whom they share an experiential—rather than a material—connection. For example, people feel closer to each other after finding out they've spent time at the same vacation spot, in comparison with finding out that they own the same television set.
A common phenomenon involves consumers' comparing themselves with other consumers. Such comparisons can reduce well-being when people believe they own fewer material possessions than somebody else does. Research in 1998 by economics professor Sara Solnick (University of Vermont) and professor of health policy David Hemenway (Harvard School of Public Health) has specifically focused on people's comparing amounts of money versus assessing the potential for experience. Drs. Solnick and Hemenway asked participants the following two questions:
- Would you rather live in a world in which you make $100,000 but everyone else makes $250,000, or in one in which you make $50,000 and everyone else makes $25,000?
- Would you rather live in a world in which you get four weeks of vacation and everyone else gets eight, or in one in which you get two weeks of vacation and everyone else gets one?
Participants were evenly split on the first question but overwhelmingly preferred four weeks of vacation, attesting to the fact that judgments involving experiences are less influenced by other people than are judgments involving material possessions. Similarly, participants in a series of studies reported feeling less upset after finding out another person spent less money on an identical vacation than they did than they did after finding out another person spent less money on an identically equipped laptop. Initial evidence also suggests that people may be less price sensitive when procuring experiences than when purchasing belongings, increasing happiness and reducing postpurchase regret for experiences, in comparison with happiness and regret for material possessions.
More recently, professor of psychology Gus Cooney and his colleagues at Harvard have shown that some experiences apparently have a dark side. When experiences become extraordinary, the social-comparison process reduces happiness—in contrast with the case for more ordinary experiences. Specifically, people who have extraordinary experiences (such as an exotic vacation or a meetup with a celebrity) enjoy those experiences but suffer a social cost after the event. An extraordinary experience is isolating, promotes envy, and limits conversation, because others did not have the same experience. The research also included prediction tasks. Before having an extraordinary experience, research participants predicted they would be more socially liked afterward because of having more social currency, and they failed to anticipate the rejection. The paradox is that extraordinary experiences are enjoyable and desirable but can reduce social well-being. In sum, the social benefits of shared consumption and the associated level of happiness that derives from experiences also appear to follow an inverted U-shape, depending on how extraordinary the experience is.
From a branding perspective, the differences between materialism and experientialism may be a matter of degree, rather than a pure dichotomy. Consumers often spend more money on particular brands precisely because they expect additional emotional, social, or self-expressive benefits from their purchase. In other words, spending extra money spent on particular brands rather than spending money on generic products maintains a connection to economic value but extends the economic-value concept to experiential sources of value, such as feeling certain emotions or sharing brands socially with other people. For example, a traditional economist might frown on the practice of purchasing an expensive brand of tennis shoe rather than a generic version, if product research showed that the two pairs of shoes were functionally identical. A marketer, by contrast, understands that consumers justify spending the extra money on a particular brand of shoe (for example, Nike), in terms of additional emotional (feeling authentic, like a true athlete) and social (wearing the same shoes that professional tennis players wear) benefits. Thus, consumers often justify branded purchases of objects with intangible, experiential benefits, suggesting that economic value and experiential value dimensions coexist in many consumers' minds.