TheÂ denominationÂ effect is the phenomenon whereby people spend coins faster than banknotes: it shows thatÂ we are more willing (there are fewer psychological barriers) to spend the same sum of money in coins than in ‘bills’.
It’s obvious, but I like having these things ‘confirmed’ and having a name to go with them.
Another experiment involved [NYU and Berkeley Professor of Marketing Priya Raghubir]Â standing outside a gas station in Omaha. She would have people fill in a survey about gas usage and then thanked them with either a $5 bill, five $1 bills or five $1 coins. People went into the store, and when they came out Raghubir asked them for their receipts. The ones with coins spent the most, people with dollar bills a little less. And people with one $5 bill kept that one in their pockets.
Raghubir wanted to see whether that effect was particular to American culture, so they ran the experiment overseas. Given a week’s salary in different denominations, housewives in China behaved the same way.
The article suggests that there may be a way to exploit this in order to “get consumers going again”–I wonder how this can be exploited online?