'Spaving' discounts can derail your finances
What is the definition of 'spaving' as described in the article?
The definition of 'spaving' as described in the article is a combination of the words "spending" and "saving". It refers to the act of spending more money to trigger savings, such as buying two items to get a third for half off or adding extra items to an online order to qualify for free shipping2. The concept behind spaving is that a merchant entices a customer to spend more by offering a discount as a reward, but experts warn that it often leads to overspending on items that the consumer may not need or use.
Who is Jeff Galak and what has he said about the concept of spaving?
Jeff Galak is an associate professor of marketing at the Tepper School of Business at Carnegie Mellon University in Pittsburgh4. He has commented on the concept of "spaving," which is a combination of spending and saving. Galak states that while the term "spaving" may seem new, the concept behind it is not. He explains that the promotions associated with spaving, such as buy one, get one free or discounts for spending a certain amount, have been around for a long time. He also highlights that spaving is primarily about spending more, and the savings aspect can often be misleading for consumers.
How has inflation influenced consumer and retailer behavior according to the article?
Inflation has had a significant impact on both consumer and retailer behavior, as detailed in the article. Consumers are adapting their shopping habits in response to rising prices, while retailers are adjusting their strategies to maintain customer loyalty and profitability1.
Consumers are responding to inflation in several ways:
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Consumption smoothing: People are adjusting their spending patterns to make ends meet. This includes cutting back on discretionary purchases, focusing on necessities, postponing purchases of durable goods, buying cheaper goods within the same category, and looking for cheaper sources of products.
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Shifting to private-label products: As prices of branded products increase, consumers are opting for store-brand or private-label products, which tend to be cheaper.
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Redeeming loyalty program rewards: Consumers are increasingly using loyalty program rewards to offset the higher costs of products.
Retailers are also adapting their strategies in response to inflation:
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Cost-control actions: Retailers are trying to cut costs internally or pass on the increases to their customers or suppliers to maintain their profitability.
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Customer-focused support actions: Some retailers are offering promotions, revamping loyalty programs, and providing discounts to help customers cope with inflation.
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Shrinkflation, skimpflation, and greedflation: Some retailers are employing less noble strategies by reducing package sizes, lowering the quality of goods, or raising prices more than their costs to achieve excess profit margins.
Overall, both consumers and retailers are navigating the challenges posed by inflation by adapting their behaviors and strategies in various ways.