Focal versus background goals in consumer financial decision-making

Abstract

Purpose: This study aims to examine the interplay between focal and background goals in consumer financial decision-making and identify conditions that lead individuals to trade-off financial returns for background goals. Design/methodology/approach: The current research reviews the relevant literature on consumer financial decision-making and goal systems theory to develop a set of hypotheses that is tested using three experiments. Findings: The experiments show that individuals who have been subtly primed with self-expressive background goals, or experienced progress toward the focal goal of financial returns, accept lower financial returns for the opportunity to invest in stocks that allow for increased self-expression. Further, while subtly primed background goals exert a non-normative influence on investment decisions, explicit cues about an investment’s background goal-instrumentality create a backlash effect, and decrease individuals’ willingness to trade-off financial returns. Research limitations/implications: Future research could confirm the robustness of the findings of the present research by using different priming tasks and alternative ways of making the background goal explicit to individuals. Practical implications: To achieve greater attraction among individual investors, it helps to frame a financial product or stock in communications materials in a way that sends subtle signals with which investors can identify. Such signals could include stressing the product/company’s home country (addressing individuals’ patriotism) or a particular product domain (addressing individual investors’ desire for interesting/exciting current/future products). Originality/value: While previous research suggests that investment choices may be influenced by self-expressive motivations, to date, it remains unclear whether and when individual investors are actually willing to trade-off the focal goal of maximizing financial returns for the opportunity to satisfy alternative background goals.