BEHAVIOURAL PRINCIPLE SPOTLIGHT: DENOMINATION EFFECT

MORE THAN JUST SMALL CHANGE

We are less likely to spend using larger bills than their equivalent value in smaller denominations.

Researchers gifted students a dollar in either high ($1 bill) or low (four 25c coins) denominations. When given the choice to either save the money or spend it on lollies, 63% of coin-holders opted for the sugar, compared to only 26% of those given paper currency.

UNSEEN OPPORTUNITY: Want to curb impulse purchases on a day out? Carry $100’s. Want to encourage national spending? Increase the circulation of $1’s and $2’s.

References:

Raghubir, P., & Srivastava, J. (2009). The denomination effect. Journal of Consumer Research, 36(4), 701–713.