Emotional Accounting!

To splurge or not to splurge, that is the question,

Whether 'tis nobler in the mind to spend

on fancy cars and a plasma;

Or to donate the cash to an Orphanage

And advance your Karma?!

Fortunately most of us have an answer to this. It depends upon where we got the money from. Strange isn’t it? But do think! Don’t you do that? What about your close friends and relatives? Bet they do the same.
It has been known for a while that Consumers have an ability to perform mental accounting in order to track their money. This is done by tagging the money according to its source. So if you won the money on a wager or whether you received a tax refund will determine how you tag the money. This also reflects in the way you spend it.
 The concept of Mental Accounting emerged in the 80s and was developed further into Income Accounting that determined the way the money was spend in a way that matched the source. Very recently Professors Jonathan Levav and Peter McGraw have propounded the concept of Emotional Accounting and they say that Money is categorized based on the feelings it evokes. This sounds very plausible to me when I think of myself as a consumer.
Levav and McGraw explain that consumers create “affective” tags for money as an emotional response. These affective tags then determine the coping up strategies in spending the money. For instance if someone were to receive money as a compensation for a wrongful death of a near and dear one, it is more than likely that the money will go for charity than for home improvement, unless of course you are plain evil like one of my ex-bosses. Even the scam artistes Indian politics produces by the dozen are known to donate to charities and temples in hope that the lord may not take notice of these teensy weensy improprieties. So the money can be Positive or Negative depending on the feelings it evokes! Post this, Levav builds on this theory on Mixed Emotions and the usage of this money becomes slightly more complex.
In the negative scenarios Consumers tend to adopt strategies on spending on virtuous things and activities and hence laundering the money. The positive scenarios lead to different spending patterns altogether. What is interesting is that in both scenarios the product purchased may be the same but its usage may vary.
It should be interesting to figure out a way to practically use the above information as Marketers? It should work wonders in high value personal selling. Combined with Professor Ram Charan’s Value Creation Selling concept it could be a potent weapon in any personal salesman’s arsenal. If the salesperson could deduce the spending motive and the attached affective tag from the consumer interaction, he would definitely hit pay dirt!