Marketers Improve ROI by Targeting Paycheck Dates

Who knew consumers are more open to spending money on newly launched products right after they get paid?  Professors Himanshu and Mishra (Utah) and Nayakankuppam (Iowa) call this behavior promotion-focused.  At the end of a pay cycle, when funds are tight, consumers exhibit prevention-focused behavior in the stores. A soon-to-be-published study on this topic contains important insights for marketers who want to know the best time to promote new products.

The researchers explained behavioral differences by analyzing consumer decisions when purchasing toothpaste. For example, consumers with a recent paycheck will buy whitening toothpaste in the hopes that they’ll become upwardly mobile. By the end of the pay cycle, when cash is tight, consumers purchase cavity-prevention toothpaste. By avoiding cavities, consumers can preserve money and the lifestyle they’ve already attained. Similarly, consumers  might be more apt to purchase laundry detergent that makes clothes smell nice right after they get paid. When they are out of money, consumers want to purchase detergent that extends the life of the items.

Based on these differences in consumer attitudes, the researchers say, “it would be more effective to launch new products at the beginning of the month (presumably, when people are near their paycheck and promotion-focused) rather than at the end of the month, when people are prevention-focused.” Of course, the study does include that giant presumption regarding exactly when people get paid. In many cases, payroll occurs twice a month and timing promotions to these payroll cycles could be tricky.

But the findings contrast what many had believed was a strong consumer loyalty to a specific product and indicate that a well-timed and positioned advertisement can effect sales.  The authors conclude “[t]he findings suggest to managers that the best time to promote products or messages with a promotion appeal is the near-salary condition and those with a prevention appeal is the far-from-salary condition.” Although the size of the sample,  61 consumers in the first phase and 152 consumers in the second phase was small, and the age range (21–45) limited, the findings are important to consider when promoting products during recessionary times.

[Source: How Salary Receipt Affects Consumers’ Regulatory Motivations and Product Preferences. SSRN​.com 2010. Web. 1 Sept. 2010]
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-owner of several small businesses in the health care services sector.