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10 Questions: Suzanne Shu on how gift cards trick your psyche

What do wine and gift cards have in common? People like to save them too long waiting for the perfect occasion, according to UCLA marketing Professor Suzanne Shu.
What do wine and gift cards have in common? People like to save them too long waiting for the perfect occasion, according to UCLA marketing Professor Suzanne Shu. Photo by Alison Hewitt.
If you haven’t gotten around to using all the gift cards you received last year at this time, you aren’t alone. While most people have more trouble saving than spending money, gift cards play a funny trick on your shopping psyche. UCLA marketing Professor Suzanne Shu says Americans leave billions of dollars on the table each year in the form of unused and forgotten gift cards. Studies have found that 5-10 percent of these plastic presents go unspent, and the 2010 Consumer Reports Holiday Shopping Poll found about 27 percent of people still hadn't spent their cards from the previous year. Shu, who studies consumers’ long-term decision-making skills at the Anderson School of Management, explained what’s going on in a conversation with writer Alison Hewitt.

Normally people need help saving money, not spending it. What’s so different about gift cards?

People create this ideal about when they want to use a gift card or what they want to use it for. Then they go looking for that ideal. It’s similar to the problem people have with using frequent flier miles or vacation days: The numbers of leftover days or miles are huge. People think, “I’d better use those on something really special.” They’re so focused on finding the ideal match that they wait and then forget or lose them.

You usually explore issues such as how consumers make decisions about mortgages, personal savings or investments. How did you end up studying gift cards?

Gift cards fit right in because they have this now-versus-later component. You have a long period of time to take advantage of it: Should I use it now? Or save it? People think about when they can get the best use out of it. That kind of thinking can get them in a little trouble, which is what makes it fun to study. When Borders closed, it reported something like $156 million in unused gift cards. Given a bigger gift card with more money at stake, people are even more likely to save it up.

Do you have any strategies for overcoming this strange instinct?

I recommend setting a deadline for yourself. Put it on your calendar, or say, “I’m going to use this on my birthday without a doubt.” Another trick is to make the gift the occasion. There’s a great scene in the movie “Sideways,” where the main character explains he’s been saving up a great bottle of wine for a special occasion, and another character basically says that something that great is its own special occasion.

So are you a pro at using gift cards?

Oh no, I’m terrible. That’s why I have to set deadlines. I have a great gift that my mom gave me for Christmas last year — to visit a vineyard whose wine I love. I gave myself a one-year deadline, and I’m getting pretty close to the wire with that one. Actually, this same effect happens a lot with wine.

People save the bottle until it’s too late?

Right, they sit on it, and the danger is it goes bad. The Wall Street Journal has a great event because of this, called “Open That Bottle Night.” Their wine critics were getting letters from people asking when they should open their really great bottles of wine, so they began designating a night in February. People send in their stories, and some of them are heartbreaking when people waited too long. One man sent in a story about a bottle he and his wife had saved, planning and forgetting to open it when their first child was born, when the child graduated, when the first grandchild was born. The wife died before the man opened it.

How can people miscalculate so drastically when to treat themselves?

They worry that once a gift card or bottle of wine is gone, they’ll regret that they don’t have it anymore. That almost never happens. Instead, now they have a nice memory of using it. As part of my research, I did a study in a lab setting of how people use frequent flier miles. I found that people overestimate how much regret they’ll feel for using it up, and forget to consider how much they’ll regret never using it. The regret from missing the opportunity is much worse.

Should people stop giving gift cards to avoid this problem?

No, when giving gift cards, my recommendation is to say, “I’m giving you this gift card with the intention that you’ll use it by this certain time.” You say that you’ll follow up. “I want to know how you enjoy it.” That keeps them from postponing it.

That sounds a bit naggy!

Well, you want to do it in a friendly way. Maybe, “I really want you to use this for your birthday,” or “I look forward to hearing how it goes.” Just set a goal or convey a mental picture. Of course you don’t want to nag! But I liked it when I had this deadline trick used on me.

What happened?

I spoke to an alumni group at a vineyard and told them how important it is to set a deadline. After the talk, they gave me a lovely bottle of wine and said, “We want you to take advantage of it in the next two weeks.” If they hadn’t said that, my husband and I would probably still be saving it.

And your research shows you won’t regret using it up?

Right! Another problem is, if I’d saved it for, say, a wedding anniversary, well, that’s already a special occasion. With all the other excitement, the memory of the wine blends in and gets lost. Why not treat yourself on a day that isn’t already an event? That way, you get multiple days of enjoyment. Just set aside a Saturday, for no other reason than that you can, to use a gift card or drink that bottle.

That works really well — and has the benefit of spreading out the fun.
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