Sep 19, 2007

Are You a Tightwad or a Spendthrift? And What Does This Mean for Retailers?By Knowledge.Wharton.UPenn.edu

Men are bigger tightwads than women; younger people are more likely to be spendthrifts than older people; and the more educated a person is, the more likely he or she is to be a tightwad.

While “tightwad” and “spendthrift” are not exactly labels that most people would welcome in a discussion of their spending habits, they are valuable as predictors of consumer behavior. Indeed, three researchers recently came up with a scale to determine the extent to which people are tightwads or spendthrifts — and what the implications are for retailers trying to more accurately target potential buyers in their stores and on their websites.

Scott I. Rick, a visiting professor of operations and information management at Wharton — along with Cynthia E. Cryder, a doctoral student, and George Loewenstein, a professor of economics and psychology, both at Carnegie Mellon University — have developed a spendthrift-tightwad (ST-TW) scale that measures “individual differences in the pain of paying.” The researchers do this indirectly: Rather than asking respondents to comment on “the emotion they experience while shopping,” which they may only have limited conscious awareness of, the respondents are asked to “indicate the extent to which their typical spending habits diverge from their desired spending habits.” The results of this research are in a paper titled, “Tightwads and Spendthrifts,” which will appear in a forthcoming issue of the Journal of Consumer Research.

According to the researchers, tightwads are defined as people “who feel intense pain at the prospect of spending money, and therefore tend to spend less than they would ideally like to spend.” Spendthrifts “feel insufficient amounts of pain at the prospect of spending and therefore tend to spend more than they would ideally like to spend.”

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