How the Use of Tokens at Festivals and Other Events Influences Spending Behavior
Introduction
At a recent music festival, attendees encountered an unusual payment system: neither cards nor cash were accepted, only "tokens" that had to be purchased in advance. For example, 15 tokens cost 60 euros, and each food or drink item was sold for 3-4 tokens, which seemed affordable until you calculated that it equated to 12-16 euros. Additionally, buying larger token packages offered a better price per token, encouraging a higher initial spend. It is worth mentioning that the ticket price was 70 euros. Interestingly, despite the substantial upfront payment, the "pain" of spending seemed to fade almost immediately once inside the festival. This phenomenon is no accident; it is carefully designed using psychological principles that influence consumer behavior.
In this article, we will explore how the token system leverages the peak-end rule, mental accounting, and the disconnection between payment and consumption. We will also analyze how these strategies can be applied in other marketing and business contexts.
The Peak-End Rule: Shaping Positive Memories
The peak-end rule, proposed by psychologist and Nobel laureate Daniel Kahneman, states that people evaluate experiences based on two key moments: the most intense point (the "peak") and the end, rather than the total sum of the experience.
Upon arriving at the festival, attendees face a negative "peak": the initial expenditure of 30, 45, 60, or 100 euros for tokens. This first impression can feel like a significant barrier, and indeed, many attendees were surprised by token prices. However, once the event begins, positive moments such as enjoying a memorable artist or sharing a meal with friends become the positive "peak." If the festival ends with a stellar performance or an emotional experience, this positive ending dominates the overall perception, making the initial cost fade or seem secondary.
A parallel example is found in the restaurant industry. Restaurants often charge quickly, so customers do not dwell on the payment, ensuring the experience ends with enjoyment of the food or atmosphere rather than the pain of spending. At the festival, the token system acts similarly by distancing the moment of payment from enjoyment.
In Nudge, Thaler and Sunstein describe how "choice architecture" can guide decisions without restricting freedom. The token system is a perfect example: by structuring payment upfront, organizers ensure attendees focus on the experience, not the cost. Similarly, Ariely in Predictably Irrational explores how context influences value perception, explaining why tokens seem cheaper when used at the festival.
A study by Kahneman on colonoscopies showed patients remembered the procedure based on peak pain and the end, not total discomfort duration. Festival organizers leverage this principle by placing token machines at the entrance, nudging attendees toward initial spending and separating it from the rest of the experience. Good music and atmosphere ensure the remaining moments are memorable and the closing positive, minimizing the spending’s impact on event perception.
Mental Accounting: Tokens as "Festival Money"
Mental accounting, a concept developed by Thaler, describes how people categorize money by source or purpose, leading to irrational spending decisions. At the festival, tokens are perceived as a distinct currency, altering how attendees evaluate their spending. People tend to spend money perceived as "extra," such as tax refunds, more freely than money earned through effort. Tokens act as this "extra money" while also being a "different money," encouraging more relaxed spending.
When attendees purchase tokens, they mentally separate them from their everyday money. Tokens become "festival money," a category perceived as less valuable than real money. This reduces the feeling of loss when spending, as attendees do not feel they are spending their salary or savings. For example, paying 2 tokens for a 0.5L bottle of water (equivalent to 8 euros) feels more acceptable than paying 8 euros directly because tokens are not seen as real money.
Moreover, the pricing structure encourages buying larger packages (more tokens at a lower unit cost), leading attendees to spend more than initially planned. This tactic exploits the tendency to treat money as non-fungible, like spending a bonus on luxuries instead of saving it.
This also relates to another concept in Predictably Irrational, where Ariely explains how context and payment presentation influence decisions. For example, people spend more with credit cards because payment feels less immediate. Tokens work similarly, making spending feel less real.
Disconnection Between Payment and Consumption: Encouraging Spending
Thaler and Sunstein highlight how structured choices influence behavior, and the token system is a clear example. The disconnection between payment and consumption occurs when paying is temporally or psychologically separated from consuming, reducing the "pain" of paying and encouraging higher spending.
At the festival, attendees pay for tokens upfront and use them throughout the event. Each individual purchase, such as a 3-token meal, does not feel like a direct expense since payment was already made. This reduces psychological friction with each transaction, leading attendees to spend more than planned.
This strategy is common in other contexts like casinos, where chips replace real money, or amusement parks, where tickets function similarly. By disconnecting payment from consumption, perceived cost is minimized, increasing spending.
Small changes in option presentation, including timing and order, can significantly impact consumer behavior. The token system exemplifies this "choice architecture" (Nudge).
A study on credit card use showed people spend more when payment is delayed because the cost feels less immediate. Although tokens must be paid for in advance, this mechanism acts as deferred payment since the upfront outlay happens before consumption and, importantly, before the festival experience begins. This facilitates freer, less considered spending.
Another implication is that tokens are non-refundable, which may create a sense of obligation to spend all tokens.
Conclusion and Other Possible Applications
The strategies used at the festival and discussed here have broader implications for marketing and business. These tactics can apply across sectors. For example, online stores might offer reward points perceived as "extra money," or hotels could design experiences ending with memorable touches like farewell gifts.
The token system at the music festival clearly shows how psychological principles influence consumer behavior. By leveraging the peak-end rule, mental accounting, and payment-consumption disconnection, organizers maximize revenue while creating a memorable experience.
These strategies, supported by books like Predictably Irrational, Nudge, and Influence, offer valuable lessons for all types of businesses. Understanding how people categorize money and remember experiences allows companies to design environments that subtly but effectively guide decisions, ensuring both customer satisfaction and commercial success.
Sources
