Electron Commerce Res (2007) 7: 367379 DOI 10.

1007/s10660-007-9011-8

Factors inuencing impulse buying during an online purchase

Scott A. Jeffrey Rebecca Hodge

Published online: 24 October 2007 Springer Science+Business Media, LLC 2007

Abstract Using actual purchasing behavior by visitors to a High School Reunion web store, this study examines the factors that lead to an increased willingness by online consumers to purchase impulse items. Consistent with mental accounting and the psychophysics of prices, we nd that peoples purchase of the impulse item increases with the total amount spent on other items. We also nd that linking a US $1 donation to the impulse item, thereby providing a reason to purchase, increases the frequency of the impulse purchase. Keywords Impulse buying E-commerce Reason based choice Mental accounting

Between 1945 and 1959 impulse purchases, those purchases which a shopper makes but did not plan in advance, rose from 38.2 percent to 50.9 percent of the total purchases in supermarkets [1]. In the late 1970s researchers found that impulse purchases accounted for between 27 and 62 percent of purchases in department stores [2]. More recently, Annie Seeley, a Food Commission nutritionist stated that seventy percent of confectionary is bought on impulse [3, p. 23]. A more extreme result was found by the POPAI (point of purchase industry body) which indicated that 75 percent of buying decisions are made in-store [4]. Since a large portion of spending can be categorized as unplanned or impulse, understanding the psychological drivers of this behavior is of critical importance.
S.A. Jeffrey ( ) Department of Management Sciences, University of Waterloo, 200 University Ave. West, Waterloo, ON N2L 3G1, Canada e-mail: sajeffre@engmail.uwaterloo.ca R. Hodge E-XYN Web Solutions, P.O. Box 1042, Guelph, ON N1H 6N1, Canada e-mail: becky@e-xyn.com

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Previous research on impulse purchasing has led to improvements in point-of-sale displays at the checkout, better location of products on shelves, and an increase in understanding of product packaging and bundling to appeal to the impulse drive. While there has been signicant research on impulse purchasing in traditional brick and mortar stores, very little research exists on impulse purchases in e-commerce. This is an important gap to address, because consumer expenditure on the world wide web (WWW) has grown from US $15B in 1999 to US $69B in 2004; a CAGR of over 40% [5, 6]. While the growth is expected to slow, the short term forecasts are for 20% to 25% increases over the next few years. This is far above the anticipated growth in overall retail gures [6]. If online retailers could gain a better understanding of the factors that encourage impulse purchases online, even a 1 percent increase in sales from impulse purchases would lead to an additional US $690 million in revenues. With such a lucrative opportunity available to online retailers it is difcult to understand why little rigorous research in this eld exists. We hope this study provides a rst step towards addressing this gap in the literature, and encourages other scholars to study this eld.

1 Impulse purchases Stern [1] wrote that impulse buying is synonymous with unplanned buying and dened it as any purchase which a shopper makes but has not planned in advance. This denition is fairly consistent among other impulse purchasing literature [7, 8]. More recently, researchers have extended this denition beyond a simple unplanned purchase to include an emotional element or an urge to make the purchase. Rook [9, p. 191] dened impulse buying as when a consumer experiences a sudden, often powerful and persistent urge to buy something immediately. Piron [10] conducted a thorough survey of impulse purchasing literature and proposed a more specic and comprehensive denition for impulse buying that includes four components: the purchase is unplanned, it is the result of an exposure to stimulus, it is decided onthe-spot, and it involves an emotional and/or cognitive reaction. This is the working denition that will be used for this study. In this paper, we will use the terms impulse buying and impulse purchase interchangeably. Previous research has classied impulse purchasing into four types: pure, suggestion, reminder, and planned [1, 4]. Pure impulse buying signies a situation where the purchase is outside of the normal purchase behavior and is initiated by emotional appeal. For example, a consumer who rarely buys magazines might see a People magazine at the checkout while waiting in line at the grocery store and want it based on the cover story or pictures. In this case, the purchase of the magazine would be considered pure impulse because it is outside of the normal purchase behavior and it satises an immediate desire initiated by an emotional appeal. Suggestion impulse buying occurs when the consumer sees the product, visualizes an application for it, and decides that they need it. This is not a pure impulse purchase because the user has determined a rational or functional purpose for the item, whereas during the pure impulse transaction the user is fullling an emotional desire. It is these two types of impulse buying we will consider in this study.

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We will not consider reminder impulse buying which occurs when a purchase is made based upon something reminding the consumer to make the purchase. In contrast to a pure impulse purchase, the item is something that the user normally purchases but is not necessarily on their current shopping list. For example, a shopper might walk down the cereal isle and realize that they are almost out of Cheerios. If this consumer chose to purchase cheerios, it would technically be an impulse purchase as it was unplanned, but it something that is generally purchased by the shopper. We will also not consider planned impulse buying which occurs when the consumer buys a product based on price and/or product specials. For example, someone who consumes a great deal of orange juice may see a special price on it and buy them, even if it was not an intended purchase for that trip to the market. As mentioned earlier, most existing research on impulse buying has focused on brick-and-mortar stores [7, 8, 1115] and television infomercials [16]. Previous research on e-commerce has traditionally focused on improving the user experience [17], advertising [18, 19], and identifying factors that lead to an initial purchase on a web site [20]. Only limited work has been done on impulse purchases in an online environment and any results with respect to impulse purchases were inconclusive [21, 22]. In addition, most of the previously studied antecedents to impulse purchases have been emotional. In this paper we take a more cognitive approach by analyzing how the concept of purchase justication plays a role in impulse decision. Before discussing our contribution to this literature, we analyze the other antecedents to impulse purchases. Previous research has mostly discussed emotional antecedents to impulse purchases, in particular, the effect of mood and positive vs. negative affect. Rook and Gardener [23] looked at moods and found that they drove overt behavior. Pleasure, arousal, and dominance are all associated with the encouraging or suppression of impulse purchases. Positive affect can encourage increase browsing behavior which was also found to lead to higher levels of impulse purchases [23, 24]. Exploratory research by Madhavaram and Laverie [22] showed a number of selfreported stimuli that led their subjects to purchase impulse items on the Internet. Consistent with research on brick and mortar purchases, many of the same visceral inuences led to impulse purchases such as appeal of the product, advertisements, and compelling presentation. In addition, their participants also conrmed that those people in a good mood were more likely to purchase impulse items and doing recreational browsing. Rather than examine the more emotional antecedents, we want to explore a more cognitive process that might lead people to purchase impulse items; that of ease of justication of the purchase. While we are not discounting the fact that the creation of an impulse to buy is generally emotional, we believe that only if cognitive forces impinge on the decision, will the actual purchase be made. In this paper, we will analyze how mental accounting [2527] and providing a reason to purchase increase the likelihood that someone will make an impulse purchase.

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2 Cognitive factors leading to impulse purchases As has been shown in previous research [28], people like to have reasons to do things. This is particularly true for the purchase of items viewed as more frivolous [29]. In this section, we will propose two potential justications for purchasing an impulse item on the web. Specically, we will look at the role mental accounting plays in diminishing peoples sensitivity to additional purchases as well as the provision of a specic reason to purchase. 2.1 Mental accounting and impulse purchases Rather than treating money as a fungible commodity, consumers often segregate different sources and uses of cash into various mental accounts [2527, 30, 31]. These accounts generally have relative rm barriers between them, making it a non-trivial process to reassign expenses to a different account. Rather than choosing the items that maximize overall expected utility, people often base their consumption decisions on the total amount budgeted and the amount remaining in these mental accounts. This implies that someone may buy clothing rather than tickets to a movie even if the movie would be more enjoyable, simply because there is some budget left for clothing but no more money left to spend in the entertainment account. Beyond the categorization system, mental accounting has its own specic arithmetic system for tabulating the accounts. This arithmetic is based on the Prospect Theory value function [32]. Rather than looking at overall wealth states, people evaluate income and expenditures as gains and losses from a neutral reference point. This neutral reference point is often current wealth, but can be a target amount, or any other salient basis of comparison. Next, income and expenditures are affected by diminishing sensitivity to these changes. For example, the 100th dollar spent in a store, feels like less of an expenditure than the 10th dollar spent. To illustrate, consider a situation where a consumer is making a US $39,000 vehicle purchase and wants to add a new stereo to this vehicle. When the consumer is already spending US $39,000, an additional US $500 for the stereo relative to the total purchase seems insignicant. If the consumer purchases the car stereo with the US $39,000 car, then the US $500 is added to the car account which already contains the US $39,000 the car purchase amount. Spending just another $500.00 or 1.3% seems like a small purchase due to diminishing sensitivity. If however, the consumer purchased the car stereo by itself at an electronics store, the spending of this $500 would feel quite different; it would feel like a bigger amount of money than when it was paired with the purchase of the vehicle. If the car stereo were purchased on its own, it would be the rst $500 the consumer spent and in terms of mental accounting, the US $500 would be allocated to a stereo account rather than the car account. As a result, upon making this purchase, the value of this category starts at $0 and moves to $500 instead of moving from $39,000 to $39,500. When consumers aggregate spending, diminishing sensitivity makes it much less painful to spend additional funds in the presence of a more expensive item. We believe that consumers aggregate all purchases in a single online purchasing event, very similar to a visit to a brick and mortar store. Thus, the more someone is

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spending on a website, the less painful additional spending will be. Thus, higher spending in advance of seeing the impulse item will lead to a higher likelihood of purchasing the impulse item. 2.2 Specic reason to purchase Research on reason based choice has shown that people like to have good reasons for their purchase decisions. For example, researchers asked people to either choose which of two options to receive or which of two options to reject. They found that an enriched option, the item with more extreme attribute values, was more likely to be chosen and rejected than an option with less extreme attribute values [28]. They claimed that this phenomenon occurred because when deciding which option to accept, people were seeking reasons to choose but when deciding which option to reject, decision makers were seeking reasons to reject. Other marketing research has shown that the existence of a compromise choice will lead consumers to be more willing to make a choice rather than wait for more information [33]. The existence of a compromise item provides a reason to choose the middle option. Research on asymmetric dominance is another example of having a reason to purchase [34]. These researchers provided a choice between product X (lower price, lower quality) and product Y (higher price, higher quality). Participants were then told about a 3rd product (the decoy) that would be dominated by one of the two products but not the other. The research showed that the market share of the target (the item which dominated the decoy) rose depending on which item the decoy targeted. These researchers claimed that the provision of a dominated alternative gave a reason to purchase the item that was better on both attributes, since the non-targeted option still required trade-offs. Recent research by Strahilevitz and Myers [35] showed another way to provide people a reason to purchase items and to encourage shoppers to visit a store. In their research, they tied the purchase of specic items to a donation to charity. They proposed that the donation provided a reason to purchase an item that would otherwise not be purchased due to justication concerns. In line with this research, we believe that the provision of a reason to purchase an impulse item during an online purchasing transaction will increase the likelihood that item will be purchased. 3 Data We tested our hypotheses by offering real consumers the opportunity to purchase an impulse item during the checkout process of a real on-line purchasing transaction. Visitors to the ofcial website of the Huntsville High School (HHS) 100th reunion used this site to get information about the reunion, purchase their passes to the reunion, and purchase souvenirs. Items available were clothing, household, and sporting goods items which ranged between US $6 for a glass coffee mug and US $45 for a hooded sweatshirt. All items were marked with the Huntsville High School reunion logo. We believe that consumers making purchases on the HHS Reunion website were placing these purchases in a single Reunion expense category and therefore all purchases each person makes on this website would be evaluated in an aggregate manner.

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3.1 Procedure Visitors to the site initiated a transaction by placing the products they wanted in a virtual shopping cart by clicking the Buy Now button. If a chosen product had attributes (e.g. color and size for a T-shirt), the users had to specify their choices. When done shopping, the visitors proceeded to the checkout by clicking the Checkout button. The system then asked the customers to either sign in to an existing account or create a new account by entering contact information on a single page. Once signed in, the checkout page showed a summary of contact information, shopping cart contents and the total amount owed. When the users viewed the checkout page they were offered the opportunity to purchase one of three add-on impulse items all costing US $5.00: a mouse pad, eyeglass clips, or a box of chocolate trufes. This price point allowed for the exibility to offer quality products at an amount high enough to have different impacts on the expected sales amounts of US $30, $60 and $110. The US $5 price for our impulse items represented a 16.7 percent increase in amount spent for a consumer who bought the US $30 blue pass, an 8.3 percent increase in the amount spent for a consumer who bought the US $60 gold pass and a 4.5 percent increase in amount spent for a consumer who bought the US $110 principles pass. These items were not offered in the souvenirs section of the website, therefore this item should not have been part of the initial mental budget, making it a true additional impulse buy. The consumer conrmed the content of the shopping cart and accuracy of the contact information by clicking on the Checkout button again and proceeded to pay for the order. Following payment the user was asked to answer demographic questions. To encourage participants to enter their demographic information, we offered them an entry into a lottery for HHS Reunion souvenirs. To test for the effect of providing a reason to purchase, a randomization script assigned participants to either a donation condition or a control condition (no donation). Those in the donation condition a saw that a US $1.00 donation to the stepping stone foundation1 would accompany the purchase of the impulse item, while the other group of participants saw only the items for sale. Note that price of the item was still US $5.00, in the donation condition. If the customer purchased the impulse offer, it was added to the shopping cart, the checkout page was refreshed, and the same donation condition was generated again. While it could be argued that people purchased the item just so that they could make a donation, we ruled out this alternative explanation by providing a separate place on the website to make a donation without an attached purchase. 3.2 Measures The dependent variable for this experiment was whether or not visitors to the website purchased an impulse item. To test this, we collected information regarding how much was spent prior to seeing the impulse item, as well as whether or not a donation
1 The stepping stone foundation was organized by Huntsville High School to give university scholarships

to needy and deserving HHS students, making it a highly salient donation for alumni of the school.

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was linked to the purchase. Because other factors might affect the willingness to purchase an impulse item, we also gathered information regarding household income, age, and gender information. We believed that higher income visitors would be more likely to purchase an impulse item because of the additional disposable income they have available. We expected no effect for age or gender.

4 Results Data were collected on actual purchase transactions on the HHS Reunion website from March 13, 2004 to May 19, 2004. During this period 60,413 pages were viewed, 3,488 unique visitors attended the site and 771 transactions were approved and processed. Of these, 349 orders were submitted in person or by mail and processed using a separate interface and therefore were not exposed to the impulse item. Of the 422 remaining purchase transactions, two of these transactions were test transactions that were performed to conrm that the data collection and online payment processing were functioning properly. As a result, these two records were removed from the data set leaving 420 records. To test for the effect of money spent, we required demographic information, particularly regarding income. One hundred and eight consumers visiting the site did not reply to the demographic questions which reduced the number of usable data points to 312.2 Upon further inspection of the demographic responses, one visitor indicated that he was age 18 or less with 47 children under the age of 12 and 74 people living in the household on an income of under US $20,000. This record was eliminated from the data set for the rst hypothesis leaving 311 purchase transactions which were used in the nal data analysis. Table 1 shows the mean, standard deviation, and correlations of the control variables for the nal data set.
Table 1 Descriptive statistics and correlations of independent variables Variable Mean Standard deviation Amount spent Age Household income Gender 90.8 48.4 77.0 Male n = 128 Female n = 183 p < 0.05
p < 0.01 p < 0.001

Amount spent

Age

Household income

48.36 9.80 21.17 0.282 0.164 0.210 0.075 0.111 0.236

2 There was no difference in the frequency of impulse purchase between those who responded to the de-

mographic questions and those who did not, t (420) = 0.93, p = 0.35.

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4.1 Responsiveness to money spent We used a logistic regression to test the effects of prior spending on the likelihood of impulse purchase. The empirical model shown as (1) is log p 1p = + 1 amount spent + T control variables + , (1)

where p represents the probability of purchasing the impulse item, amount spent is the amount of money spent on purchases prior to being exposed to the impulse item, and the control variables are age, income, and gender as outlined above. The initial model reported in Table 2 is the full model with all of the variables included while the nal model retains only the coefcients signicant at p < 0.05. In the nal model, the amount spent prior to seeing the impulse item had a signicant and a positive effect on the likelihood to purchase, = 0.0114, t (308) = 2.79, p < 0.01. This coefcient translates into a 1% increase in purchase likelihood for each US $10 increase in prior spending. Household income also had a signicant effect on the likelihood to purchase, = 0.0253, t (308) = 2.28, p < 0.05. Estimates based on nal model shown in Table 2: log p(impulsebuy) 1 p(impulsebuy)

= 2.202 + 0.013 amount spent 0.027 household income.

Table 2 Logistic regression results Dependent variable: Log odds of buying impulse item (Standard Error in parentheses) Variable Amount spent Age Household income Gender Constant Initial model 0.014 (0.004) 0.176 (0.245) 0.025 (0.012) 0.465 (0.583) 4.072 (2.035) 2 (4, N = 312) = 13.7 R 2 = 0.12 p < 0.05
p < 0.01 p < 0.001

Final model 0.013 (0.004)

0.027 (0.011)

2.202 (0.820) 2 (2, N = 312) = 12.6 R 2 = 0.11

Factors inuencing impulse buying during an online purchase Fig. 1 Estimated likelihood of purchase for specic household income levels (35 K, 65 K, 95 K)

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To illustrate the effect of income and prior expenditures, we estimated the likelihood of impulse purchase based on the nal model shown in Table 2. These estimates are shown in Fig. 1. By looking at this gure, the positive impact of amount spent can be seen at all levels of income. This table also shows the negative inuence of household income, as the intercept of the estimate is dropping with income at all expenditure levels. 4.2 Reasons to purchase In our initial experimental design, we wanted to test the effects of presenting the impulse item in a pop-up window vs. presenting the impulse offer embedded in the checkout page. We found no effect for this manipulation and so these conditions were dropped from further analysis. This left 221 observations which presented the impulse item embedded in the checkout page, 105 with the donation, and 116 without the donation. We used these observations to test whether linking the purchase to a donation increased the likelihood of an impulse purchase. When no donation was linked to the purchase, 2 people (1.7%) offered the impulse item purchased it. As hypothesized, this rose to 9 people (8.6%) when a donation was linked, t (220) = 2.33, p < 0.05.

5 Discussion This experiment found that as the amount spent on other purchases during an on-line transaction increases, consumers are more likely to purchase an additional item that they did not intend to purchase when they rst visited the site. While this is certainly consistent with many experiments on mental accounting, this has additional external validity as it was performed on visitors to an active e-commerce site, spending their own funds. Since the impulse item was offered after all purchases were made, these results provide evidence that impulse purchases can incrementally increase online sales without cannibalizing other products. As a result, impulse buying in the online environment is an important issue that should be studied further. It also suggests

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another important reason why website designers should try to maximize consumer purchases while on the web site. As web site visitors spend more money, they are less resistant to spending even more. We believed that those with higher incomes would be more likely to buy impulse items, since their discretionary income would be higher. However, we found that income actually had a negative effect on impulse purchases; as incomes rose, people became less likely to buy on impulse. One theory that could potentially explain why this occurred is that higher income consumers do not buy junky US $5 items, they may be more likely to buy a higher priced, higher quality souvenirs. High income consumers may also see limited value in a mouse pad, eyeglass clip, or chocolate trufes. While this is speculation, we believe it is important for future research to examine the impact of income on impulse purchases. This nding is consistent however with the speculation that wealthy individuals achieved their nancial status by living within their means and avoiding impulse purchases such as the one we offered [36]. This study also shows that offering a reason to purchase is an effective way to increase impulse purchases. Linking a US $1 donation to the impulse item, thereby providing a reason to purchase, increased the frequency of the impulse purchase from around 2% to almost 9%. It may seem that the baseline impulse purchase of 2% seems quite low, especially considering work by Stern [1] that showed that almost 50% of purchases are done on impulse. We believe this is a reasonable number for two reasons. First, we are only studying pure and suggestion impulse purchases [1, 4]. Other types of impulse purchases, notably reminder and planned might account for a large number of impulse purchases. In addition, other research has shown that less impulse purchases are made online due to the absence of a sales person to pressure the sale [22]. While the increase from 2% to 9% may appear small, this is a potential increase of US $5B in total revenue, given the US $69 Billion spent online in 2004 [6]. Although we studied this phenomenon in an online environment, we see no compelling reason why we would not see the exact same results in a traditional retail environment. The diminishing sensitivity to additional expenditures may even be more pronounced, since a trip to a store may be more clearly segregated in a consumers mind. We also believe linking a donation to impulse items displayed at the register should also inspire increased purchase of those items in brick and mortar retail locations. In fact, this is probably why donation boxes are generally located at the checkout. 5.1 Important differences in the online environment There are some important differences between purchasing online and purchasing in a brick and mortar environment. Store layouts are quite different than a websites design. The site must be easily navigable and the online retailer must be trustworthy [37, 38]. In addition to these basic differences, online retailers differ from their brick and mortar counterparts when it comes to impulse buying. For example, in the brickand-mortar environment, heavy or awkward items are not typically used as impulse items because of the difculty consumers may envision in getting it home. Heavy or awkward items may be more effective as online impulse items because all online purchases are delivered to the user and therefore, the consumer would not have to worry

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about the weight or awkward nature of items. As a result, the online environment may reduce restrictions in the types of products that can be offered for impulse. However, transportation costs such as these are a double edged sword. Online consumers need to worry about shipping and handling costs which could signicantly raise the cost of these goods, reducing their effectiveness as an impulse item. An additional drawback to online impulse purchases is the fact that there are no clerks to suggest impulse items. As a result, inuencing the impulse purchase maybe a more difcult task online [22]. In addition, the delay of receiving the purchase may dissuade shoppers from making impulse purchases online, particularly since impulse purchases are generally designed to satisfy immediate desires. For example, when a consumer is standing in line waiting to pay for their groceries, the sight of gum at the checkout may make their mouth water, increasing the visceral desire for the item and inducing them to buy the item on impulse [39, 40]. This is also a two-edged sword, since even though there is no immediate reduction in the drive to consume the impulse item, some items may increase utility through the act of savoring it prior to its arrival [41]. 5.2 Limitations & future research One limitation of this experiment was that the participants represented a restricted sample of the population. This was a not-for-prot website for a high school reunion where the donation was targeted to a school-oriented fund. Because of this, it is likely that this charity was more meaningful to the participants, increasing the likelihood of impulse purchase more than a less relevant donation would have done. Finding such a salient charity for a larger audience would be more difcult, making the provision of a reason such as this more difcult. Furthermore, this research was not conducted on a traditional retail website and this may limit the generalizability of the ndings. To resolve this, similar manipulations should be attempted on a more permanent, e-commerce website. This research is also limited in the types of impulse purchases studied. We studied pure and suggestion impulse purchasing, future research should examine the factors that lead to reminder and planned impulse purchases. Finally, we only examined mental accounting and reason to purchase reasons for impulse purchases, and there are undoubtedly many other causes. We also believe that future research should consider the process by which retail web sites select the products to use as impulse items. Large on-line retailers such as Amazon.com use past transaction history to pair up books frequently bought together, thus creating opportunities for suggestion impulse purchases. Future research should examine existing work on the characteristics of impulse items in brick and mortar stores [1] and attempt to apply them to the online environment.

6 Conclusion This paper examined impulse purchasing during online transactions with respect to the amount spent on the site and the provision of a reason to purchase. Consistent

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with mental accounting and the psychophysics of pricing, the results indicate that the likelihood of an impulse purchase is positively correlated with the amount spent on the website prior to seeing an impulse item. The more someone spends on a website prior to seeing an impulse item, the more likely they are to make an impulse purchase. In addition, the study reported here found that by linking the impulse purchase to a relevant charitable donation increased the frequency of that impulse purchase. We hypothesize that this is because the link to a charity provided an easy to justify reason to purchase the item, even if the item was not needed. With spending on the web at US $69B and growing at 20% a year, we feel that impulse purchases in e-commerce is an area that deserves more scholarly study. With an understanding of the factors that inuence impulse purchases in the online environment and minimal additional investment, online retailers can capitalize on this lucrative opportunity.
Acknowledgements The authors wish to thank the Huntsville High School 100th Anniversary organizing committee for their support.

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Scott A. Jeffrey is an assistant professor in the Department of Management Sciences at the University of Waterloo, Canada. He has a Ph.D. in Managerial and Organizational Behavior from the University of Chicago Graduate School of Business. Dr. Jeffrey conducts research on individual decision making and employee performance. Rebecca Hodge MASc., received her Masters of Applied Science in 2005 from the Department of Management Sciences at the University of Waterloo. She is currently a partner in the web design rm of E-XYN Web Solutions. E-XYN assists clients by implementing more effective ways to manage business and customers through the efcient use of technology and the web.