Digital Overspending

More and more, gamers are going the digital distribution route for their games. While it certainly is a convenience and often a deliverer of great game bargains, there are a few things that I feel need to be pointed out as a matter of consumer interest. For some, it may prove to be insightful, but at the very least, I hope you find it to be interesting. Digital downloads, by their nature require us to either use credit cards or pre-paid (scrip) cards (eg a $20 PSN card) as a means of purchase. A lot of research has been conducted that states that these payment methods are linked to overspending and what I want to do is to explain, as simply as I can, what some of the research says.

Spending physical money causes you pain. At least that is what MRIs say. When you physically spend money, the reaction of the brain is similar to that of a painful event. The same areas of the brain “light up” when imaged by MRI. Technology aside, people have been shown to recall their cash payments better than their credit card expenses. We remember cash expenses better because we feel pain at the point of purchase and we spend time trying to figure out if the pain is worth it. With a credit card, we don’t associate the purchase with pain. The pain comes at the end of the month. On the other hand, making money gives pleasure. When you make money, the pleasure centers in the brain light up. These are the same areas of the brain light up as when someone does a drug like cocaine. There – I just explained the behavior on The Wolf of Wall Street to you.

When you purchase something, the brain tries to reconcile the pain caused by parting with the money with the pleasure to be gained from the purchase. You do a mental balancing act and try to figure out if the item in question is really worth it. Will the pleasure outweigh the pain? Yes, that Japanese love pillow is worth every penny – don’t you judge me! We all enjoy new things. A bit of “retail therapy” can be a good thing in moderation.

However, when you substitute cash for other payment forms like credit cards or scrip cards, the brain does not do as good of a job at cost-benefit analysis. When you aren’t physically handing someone money for a purchase, the outflow of money becomes less vivid. You can’t see the money in your wallet dwindle. It is less psychologically painful to swipe a credit card than to physically hand over cash. Credit and other non-cash payment options can serve to anesthetize the pain of paying for what you want. You get the pleasure of having a new item without the associated pain of paying at the point of purchase. They are said to lack/decrease transparency, and this has been identified as a key reason as to why credit cards have contributed to significant personal debt that we see today. When you use credit cards to purchase points (eg the now-abandoned Microsoft/Nintendo points system), that system serves to further reduce transparency and further promotes overspending.

The research further details other problems associated with non-cash purchases. People are not only willing to spend more with non-cash options, but are often willing to pay more for the same product when using credit than when using cash. Again, this is the result of the temporal separation of pleasure and pain. A large line of credit may even make purchases seem more justifiable or inconsequential. For example, a $1 candy bar may seem less expensive when compared to $5,000 in available credit than when compared to the $5 bill in one’s wallet. From a gaming perspective, if I have $50 on my PSN account, I am more likely to spend $5 on a game than if I just have $10 in my account. It has prompted many to label scrip cards (eg a $20 PSN card) as “monopoly money”, where the user treats the scrip card with far less value that the equivalent real-world currency. This was supported by different experiments.

In one such experiment, two groups of consumers were given a dollar. One group was given cash and the other was given a coupon worth $1. Those with the cash were given the option to either keep the dollar or buy a candy bar. A large portion of them chose to keep the physical dollar. Those with the coupon could either exchange the coupon for a dollar or get a candy bar. A larger portion of these people chose to get the candy bar instead of exchanging it for a dollar. Even when the dollar and the candy bar were put side by side, more chose to get the candy bar than compared with the group that had the cash to begin with. This is by no means a perfectly designed experiment (very few of those exist) but the general consensus is that if you spend cash, you value your money more and you tend to spend less.

I now intentionally keep my PSN wallet low because of an attitude that I have noticed personally. If my wallet is empty, I spend a lot less time trying to search for deals every week. If my wallet has money in it, I comb though those sales with the care, intensity and acumen of an archeologist at a dig site. I look for ways to lose that credit. I check and double check. You see, the credit in my own account is already paid for and is non-tangible. Pain has exited the equation. Pleasure of purchase is the only consideration now and hence, I am much more willing to part with my digital currency. I have bought things that I now know that I will never play. I buy a LOT less now that I keep the wallet low/empty. The act of having to buy a card to complete the purchase places a very important hurdle in my path. I buy the $10 cards. I stay away from the $50-$100 cards.

Many people are also prone to emotional spending. Some overspend when happy and in a celebratory mood. We want to reward ourselves when we achieve a set goal – a reasonable desire. For others, it’s the exact opposite where we spend when sad or depressed. Compulsive buying has been shown to be problematic in both sexes, the difference lies in the nature of the products bought. Female compulsive buyers tend to buy clothes, make-up, articles for the home and jewelry while Male compulsive buyers tend to buy CDs, books, tools, gadgets, videogames, computer stuff and cameras. Sound familiar? Some people are also prone to nostalgia buys. If a game that they enjoyed in the past comes up, they tend to look at it with an unhealthy level of affection. How many games have you re-bought on a new platform and then never return to it? It is also worth noting that younger persons are more prone to be a compulsive buyer than older persons. The younger you are, the worse your impulse control is going to be. Ask anyone with a toddler if you don’t believe me. There have been times when I have made purchases and then experience buyer’s remorse. Times when I suddenly realize that I have better uses for the money I just spent (no, not the love pillow – I mean useless crap like food). At that point I can try to get a refund or sell the item.

Herein lays the problem unique to these games. Even if you discover the error of you ways after purchase, there is often no recourse. Digital distribution commonly does not come with a set return policy or a resell policy. Refunds do happen, but there is no set agreement nor is there any guarantee. It’s an issue that has been brought up in many other part of the world. Most recently, the Australian Competition and Consumer Commission has (rightly) taken issue with some of the policies attached to steam and changes are being demanded in the interest of their citizens. http://www.gamespot.com/art... To offer goods with no return or re-sell policy is wrong and it’s even worse when you consider that Gaming companies deal with a predominantly young demographic well a less developed sense of impulse control.

The lack of a physical product is also a factor in digital overspending. You see, I can’t stack the games that I buy and look at them. In previous times, when I was tempted to buy a game, I would look at the backlog next to my television and immediately realize that I had enough games to play. I would wait to complete the backlog and eventually get my games cheaper in the process. Digital distribution removes that negative feedback. I now have a printed list of my backlog next to my computer across all 7 platforms I use. I look at it every day and a few times when I decide to buy a game. I can comfortably survive the entire 8th generation without buying another game at this point. But who am I kidding? I’m never going to be able to resist that Yoshi Yarn game. I am far less likely to re-play that Rayman 3 game though. What was I thinking?

I love digital distribution for the sales they provide. I get games at prices that I would probably never get physically in the same given timeframe. But these cheap impulse buys really do add up. Add them up yourself if you don’t believe me. I am not advocating that you abandon digital goods nor do I have any intention of doing so myself. I have changed some of my attitudes and behaviors associated with my approach to it and I encourage you to do the same. It is also worth mentioning that I have never spent more than $15 on a digital game. NEVER. Without a return or resell policy, even my spendthrift brain knows that that is a recipe for disaster. There is a lot of information that is available on curbing spending habits, so I encourage you to read about them and come up with strategies of your own if you think some of this applies to you.

[rambi80]

oh boy, a lot of this sounds familiar.