Amanda Gabriela Beltran
An Tran, assistant professor of marketing, lectured on how consumers overspend on goods related to budgeting categories Tuesday in the President’s Dining Room.
Her talk, “Consequences and Causes of Use of Broad or Narrow Categories in Budgeting and Planning,” was sponsored by the La Verne Academy Faculty Lecture Series.
Tran showed two studies in which she predicted that customers would overspend on groceries if they were given a narrow category to shop within.
She said that when she says narrower or broader categories, she means that these concepts are relative to something else.
“In my research I tried to limit the kind of product that people deal with to very mundane and ordinary products,” Tran said.
Tran used groceries in her study so she could limit the emotional factor people may have as much as possible.
“One example of a relatively broad category within grocery is beverage,” Tran said. “While a more narrow subcategory of beverage is alcoholic beverages.”
She related her hypothesis to other marketing research related to helping various types of victims.
“If you mention victims that need help in large quantity like ‘hundreds of children are dying because of starvation’ and things like that it is less effective in making people donate, compared to if you just describe one child that is dying of starvation,” Tran said.
Tran conducted two experiments to test her hypotheses using 350 participants from Amazon Mechanical Turk, a platform where one can post tasks for large groups of people to complete in exchange for small payments.
“This experiment is a simulated online shopping experience, so in this experiment, people budget and shop online for grocery product for enough consumption for one week,” Tran said.
Tran manipulated the category sizes for food and beverages across three “conditions”: broader categories, narrow categories, and very narrow categories.
She said participants in the broader categories split their budgeting into two categories within another, food and beverage.
“Participants in the narrow condition made up a budget that had 10 narrow categories,” Tran said. “Same thing for the very narrow conditions, participants broke their total budget into 20 subcategories.”
Tran concluded that there is a big difference in overspending and underspending.
“I found that participants spend significantly less than what they budgeted, meaning that they underspend in the broad condition and spend significantly more than they budgeted in the narrow condition,” Tran said.
Tran compared her experiment to one with Starbucks and Visa gift cards. People were more inclined to spend a $50 Visa gift card than a $50 Starbucks gift card.
Professor of Humanities Al Clark asked how budget constraints and category types correspond with each other.
The example of the Starbucks gift card, which is a narrow category, would give people budget constraints and, according to Tran’s research, make them spend more.
“So you’ve got these two things in my mind seen to be countervailing and yet in your experiment they tend to spend more and in the gift card experiment they tend to spend less,” Clark said.
Tran said during her experiment, she measured overspending using two different components, the spending and the budget.
“So what we observe on these overspendings is how these different factors affect spending and budget,” Tran said. “We are seeing that they affect spending and budget differently.”
Professor of Management and Leadership Louise Kelly said the way the presentation relates to strategy interested her.
“I’m thinking about applying it to organizations from a strategic point of view and it is interesting, the idea that a broader category leads to less overspending because strategy is ultimately translated into a budget,” Kelly said.
Kelly said the concreteness was another thing that stuck with her from the presentation.
“When you talk about strategy to employees or stakeholders it tends to be quite abstract,” Kelly said. “So, making that effort to making it more concrete would probably get people more engaged.”
Amanda Gabriela Beltran can be reached at firstname.lastname@example.org.