The Daily Item, Sunbury, PA


June 30, 2014

Spending Smart: Avoid fear factor in financial decisions

Fear is a powerful motivator for consumers, and it underlies more of our spending decisions than we’d care to admit.

We’re afraid of identity theft, so we buy credit monitoring. We fear our new iPhone will break, so we buy an extended warranty. We fear pesticides and hormones in our food, so we buy organic. We fear bad breath and “ring around the collar,“ so we buy products offering solutions.

Facebook walls and Twitter feeds can be full of well-meaning posters warning friends and followers against the latest dastardly health scare, money scam or tale of woe - many of which have a consumer product or service to alleviate the fear. Marketers have long known they can scare consumers into buying.

Fear - caused by a real or anticipated danger or threat - can be a good thing.

If we worry about our loved ones suffering financially if we die, we buy life insurance, usually viewed as a prudent personal finance component.

Public health ads can use fear to warn us against the hazards of smoking tobacco or driving drunk and encourage us to participate in pre-cancer screening.

About half of women fear one day ending up a “bag lady“ - losing all their money and becoming homeless, according to a 2013 study by Allianz Life Insurance Co. of North America.

If that means adding a few extra dollars to a retirement plan, that might be a positive.

Other times, however, consumers are targets of fear-based marketing, which may not be a good thing for their wallets.

For example, many consumer advocates recommend against buying extended warranties, and many don’t see the value in buying identity theft protection.

Anti-bacterial soap has been shown to be of dubious value. Yet all can be sold with fear, suggesting the purchase will protect against some threat.

So our fears and purchases are tightly linked. One recent academic study even found that when consumers are fearful and alone, they might turn to brands for comfort, much as they would toward a human being.

“Since people cope with fear through affiliation with others, in the absence of other individuals, consumers may seek affiliation with an available brand. This, in turn, will enhance emotional attachment to that brand,“ said the academic study published this year in the Journal of Consumer Research by Lea Dunn, a professor at the University of Washington, and JoAndrea Hoegg of the University of British Columbia.

It’s similar to a child’s attachment to a teddy bear or blanket when things go bump in the night. Only this study showed that consumers who go through a fearful experience actually bond with not only an object, but its brand. (An experiment by Dunn showed that consumers in a “fear condition“ didn’t develop an attachment with no-name jelly beans but did with branded ones.)

So sitting through a horror movie with a Diet Coke might mean you feel more attached to the Coke brand afterward, Dunn said in an interview.

“Brands have the ability to provide human qualities that allow us to feel better in situations,“ she said.

Dunn said the relationships are not just metaphorical but literal - that frightened people can make psychological, personal connections to brands.

That’s important for marketers, because consumers who feel a strong attachment to a brand will be more loyal and pay more, according to the study.

So what can we do to limit fear’s role in purchasing decisions that are bad for us?

BE AWARE: Acknowledge that fear makes us feel risk-averse and out of control, Dunn said. So we’re more open - perhaps vulnerable - to anything that allows us to feel more certain.

That’s what fear-appeal marketing exploits. It presents a dangerous or threatening situation and offers a solution to allay fear.

If you fear a burglar in your home, you’re probably more receptive to ads about home-security systems and monitoring.

Other times, it’s not fear for your physical safety, but a social fear of looking foolish, unattractive or suffering an embarrassment. Thus, the bad-breath appeals.

Or we fear we might be missing out on a great deal. That’s why limited-time sale offers can be effective.

Some online retailers go as far as putting countdown clocks next to discounted merchandise to heighten anxiety.

“Be aware they’re trying to do something emotional here,“ Dunn said.

CALM DOWN: Fear can be fleeting. Put time between the moment you feel threatened and when you make the purchase.

That way, you can make a cool-headed decision.

Don’t be pressured into a hasty choices, especially for a major purchase. “Cognitive decision-making comes later,“ Dunn said.

SEEK FACTS ABOUT THE RISK: When considering a purchase to ease a fear, try to evaluate objectively if the risk is really that high.

For example, you might read that identity theft is the top complaint to the Federal Trade Commission, which makes it seem like a serious problem that might need a commercial solution. But relatively few people lose any money as a result, and many cases are for credit card theft, which is relatively low hassle to fix. “Ask, ’Is this something that will actually impact me? And is this a solution that I need?’ “ Dunn said.

Fear of food pesticides is surely legitimate for some fruits and vegetables, namely those the Environmental Working Group calls the Dirty Dozen, such as apples and strawberries.

So avoiding them or paying extra for organics makes sense. The same group also lists the Clean Fifteen, such as avocados and sweet corn, which aren’t prone to pesticide contamination and might not be worth buying as organics. Full lists are at

WILL IT WORK? Does the product or service really solve the problem that creates the fear?

Take the example of identity theft. If your credit card information was stolen in one of the many retailer data breaches, your credit or debit card number might be compromised - but pricey credit monitoring will not help.

Fraudulent purchases do not show up on credit reports. You should monitor your card account statements for unfamiliar purchases, which is free.

And identity theft insurance sounds like a product that will refund your stolen money. It’s not. It usually reimburses you for incidental expenses you incur while cleaning up an identity-theft incident - expenses like postage and phone calls.

So when fear encourages you to reach for your wallet, take a moment to remember we’re all vulnerable and make sure you’re spending smart.

Gregory Karp, the author of “Living Rich by Spending Smart,“ writes for the Chicago Tribune. Readers may send him email at



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