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Deciding
CHAPTER OBJECTIVES When you finish reading this chapter, you should be able to:
7-1 Identify the two primary ways in which consumers make decisions. 7-2 Outline the steps of the rational (slow) decision making process. 7-3 Summarize the ways in which we engage in fast thinking and rules of thumb to make decisions.
7-4 Describe how context effects can influence the decision making of a consumer, even when the consumer is unaware of the influence. 7-5 Discuss how online shopping and purchasing platforms can influence consumer decision making.
C
han has had it! There’s only so much longer he can go on watching TV on his tiny, antiquated set. It was bad enough trying to squint at Stranger Things. The final straw was when he couldn’t tell the Titans from the Jaguars during an NFL football game. When he went next door to watch the second half on Jamie’s home theater setup, he finally realized what he was missing. Budget or not, it was time to act: A person must have their priorities. Where to start looking? The web, naturally. Chan checks out a few comparison-shopping websites, including pricegrabber.com and bizrate .com. After he narrows down his options, he ventures out to check on a few sets in person. He figures he’ll probably get a decent selection (and an affordable price) at one of those huge “big-box” stores. Arriving at Zany Zack’s Appliance Emporium, Chan heads straight for the Video Zone in the back; he barely notices the rows of toasters, microwave ovens, and stereos on his way. Within minutes, a smiling salesperson in a cheap suit accosts him. Even though he could use some help, Chan tells the salesperson he’s only browsing. He figures these guys don’t know what they’re talking about, and they’re simply out to make a sale no matter what. Chan examines some of the features on the 60-inch flatscreens. He knew his friend Cara had a set by Prime Wave that she really liked, and his sister Mi-Sun warned him to stay away from the Kamashita. Although Chan finds a Prime Wave model loaded to the max with features including surround sound, he chooses the less expensive Precision 2000X because it has one feature that really catches his fancy: synchronized backlighting for game playing to play Minecraft the way it was intended. Later that day, Chan is a happy man as he sits in his easy chair and watches Sheldon match wits with Leonard, Howard, and the others on The Big Bang Theory. If he’s going to be a couch potato, he’s going in style.
Source: Edwin Tan/E+/Getty Images.
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Fast or Slow Thinking?
Chan’s decision represented his response to a problem. In fact, every consumer decision we make is a response to a problem. Of course, the type and scope of these problems varies enormously. As discussed in Chapter 5, our needs range from simple physiological priorities, such as quenching thirst, to whether we will spend our hard-earned money on a television to abstract intellectual or aesthetic quandaries such as choosing a college major—or perhaps what to wear to that upcoming Drake concert. We make some decisions thoughtfully and rationally as we carefully weigh the pros and cons of different choices. In other cases, we let our emotions guide us to one choice over another as we react to a problem with enthusiasm, joy, or even disgust. Decision-making researchers refer to these two distinct ways of deciding as slow thinking and fast thinking. This distinction should remind you of the two routes to persuasion we discussed in Chapter 6. Just as attitudes may develop and change due to high versus low levels of involvement and elaboration, decision making also can be a high or a low effort process. When purchase decisions are important, we might put a lot of effort into it. Decision making in those cases might even resemble a full-time job. A person may literally spend days or weeks agonizing over an important purchase, such as a new home, a car, or even an iPhone versus a Samsung Galaxy. But often the decision-making process is almost automatic; we seem to make snap judgments based on little information or develop habits to ease the process of making decisions or to be more efficient. Imagine if you had to carefully consider every product decision you make before putting an item in your grocery cart! When the task requires a well-thought-out, rational approach, we’ll invest the brainpower to do it. Otherwise, we look for shortcuts such as “just do what I usually do,” or perhaps we make “gut” decisions based on our emotional reactions. In some cases, we create a mental budget that helps us to estimate what we will consume over time so that we can regulate what we do in the present. If the dieter knows they will be chowing down at a big BBQ tomorrow, they may decide to skip that tempting candy bar today.^1
Figure 7.1 The Two Primary Consumer Decision-Making Systems: Fast and Slow OR System 1 and System 2 Processing
Fast
System 1 System 2
Unconscious
Automatic
Everyday Decisions
Error-prone
Slow
Conscious
Effortful
Complex Decisions
Reliable
Part of what we’re going to discuss in this chapter already is familiar ground to you:
- In Chapter 4, we reviewed approaches to learning that link options to outcomes, where over time we come to link certain choices to good or bad results, and this can help us make faster decisions. - In Chapter 5, we talked about how needs activation motivates us to look for ways to fill those needs and also how low versus high levels of involvement activate very different types of thinking about the available choices. - And in Chapter 6, we distinguished between the cognitive and affective processes that underpin persuasion. These ideas really relate to types of decision making because they remind us that depending on the situation and the importance of what we’re dealing with, our choices can be dominated by “hot” emotions or “cold” information processing.
Figure 7.1 summarizes the two systems of consumer decision making: They are sometimes called fast versus slow , intuitive versus analytic , or System 1 versus System 2.
OBJECTIVE 7- Identify the two primary ways in which consumers make decisions.
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of his car, even though there is nothing mechanically wrong with it. Although the quality of Chan’s TV had not changed, he altered his standard of comparison , and as a result he had a new problem to solve: how to improve his viewing experience. This is the “starting gun” that initiates the problem-solving process.
Step 2: Information Search
Once a consumer recognizes a problem, they need to identify options to solve it. Information search is the process by which we survey the environment for appropriate data to make a reasonable decision. As we saw in Chapter 5, we might recognize a need and then search the marketplace for specific information (a process we call prepurchase search ). However, many of us, especially veteran shoppers, enjoy browsing just for the fun of it or because we like to stay up to date on what’s happening in the marketplace. Those shopaholics engage in ongoing search. 5 As a general rule, we search more when the purchase is important, when we have more of a need to learn more about the purchase, or when it’s easy to obtain the relevant information. 6 Does knowing something about the product make it more or less likely that we will engage in research? The answer to this question isn’t as obvious as it first appears: Product experts and novices use different strategies when they make decisions. “Newbies” who know little about a product should be the most motivated to find out more about it. However, experts are more familiar with the product category, and thus they should be better able to understand the meaning of any new product information they might acquire. So, who searches more? The answer is neither: Search tends to be greatest among those consumers who are moderately knowledgeable about the product. Typically, we find an inverted-U relationship Figure 7.2 Stages in Consumer Decision Making between knowledge and search effort, as Figure 7.3 shows. People
Problem Recognition
Chan is fed up with his old TV that has bad sound reproduction.
Information Search
Chan surfs the Web to learn about TVs.
Evaluation of Alternatives
Chan compares several models in the store in terms of reputation and available features.
Product Choice
Chan chooses one model because it has a feature that really appeals to him.
Outcomes
Chan brings home the TV and enjoys his purchase.
After weathering some negative headlines in recent years, Peloton launched an advertising campaign called “Love Every Journey” that featured testimonials from customers who were initially skeptical of the connected fitness brand—and who perhaps threw shade about the brand on social media—but have since become loyal converts.^4 Source: Edwin Tan/E+/Getty Images.
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with limited expertise may not feel they are competent to search extensively. In fact, they may not even know where to start. Chan, who did not spend a lot of time researching his purchase, is typical. He visited one store, and he looked only at brands with which he was already familiar. In addition, he focused on only a small number of product features.^7 Because experts have a better sense of what information is relevant to the deci- sion, they engage in selective search , which means their efforts are more focused and efficient. In contrast, novices are more likely to rely on the opinions of others and on “nonfunctional” attributes, such as brand name and price, to distinguish among alter - natives. Finally, novice consumers may process information in a “top-down” rather than a “bottom-up” manner; they focus less on details than on the big picture. For instance, they may be more impressed by the sheer amount of technical information an ad presents than by the actual significance of the claims it makes.^8 Any trial lawyer will tell you never to ask a question of a witness unless you already know what they will answer. Consumers too like to consult reliable sources that tend to tell them what they want to hear. We can see that the search process isn’t perfect, so there’s always some bias in terms of what we get when we cast our nets. This is true whether we’re asking people we know for advice or we’re simply browsing online. The internet puts an almost limitless supply of information at our fingertips—at least in theory. The reality often is quite different. Rather than taking advantage of many sources that may provide us with a range of opinions or options when we want to make a decision, sophisticated algorithms ensure that we access only content that reinforces what we already think we know. A filter bubble occurs when the broadcast media, websites, and social media plat- forms we consult serve up answers based upon what they “think” we want to see. For example, we get personalized Google search results and a Facebook news stream that’s based upon sites we’ve clicked on in the past, our browsing history, and our physical location. This means we’re far less likely to be exposed to conflicting viewpoints, so we each live in a “bubble” of our own making. Conservatives who watch Fox News
Figure 7.3 The Relationship between Amount of Information Search and Product Knowledge
AMOUNT OF SEARCH
PRODUCT KNOWLEDGE
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Evaluative Criteria When Chan looked at different television sets, he focused on one or two product features and completely ignored several others. He narrowed down his choices as he only considered two specific brand names, and from the Prime Wave and Precision models, he chose one that featured synchronized backlighting. Table 7. summarizes the attributes of the TV sets that Chan considered. Now, let’s see how a comparison of these attributes can alter Chan’s choice of a specific brand depending on the rules he uses to consider them. Evaluative criteria are the dimensions we use to judge the merits of competing options. When he compared alternative products, Chan could have chosen from among many criteria that ranged from functional attributes (“Does this TV offer synchronized backlighting?”) to experiential ones (“Does this TV’s sound reproduction make me imagine I’m in a concert hall?”). Another important point is that criteria on which products differ from one another carry more weight in the decision process than do those where the alternatives are similar. If all brands a person considers rate equally well on one attribute (e.g., if all TVs come with surround sound), Chan needs to find other reasons to choose one over another. Determinant attributes are the features we use to differentiate among our choices. Marketers often educate consumers about which criteria they should use as determinant attributes. For example, consumer research from Church & Dwight indicated that many consumers view the use of natural ingredients as a determinant attribute. As a result, the company promoted its toothpaste made from baking soda, which the company already manufactured for Church & Dwight’s Arm & Hammer brand. 14
Decision Rules In the slow-thinking Type 2 system, people tend to think carefully about the pros and cons of various options, almost like a computer that follows a somewhat complicated formula to decide. Not so much for Type 1 thinking, where one attribute that may not even be central to the choice drives our decision (the package color or the celebrity endorser, for example). To choose between options, consumers may use compensatory and noncompensa- tory rules. Let’s take a quick look at some important ones.
Compensatory Rules A compensatory rule allows a product to make up for its shortcomings on one dimension by excelling on another. This rule is more likely to
Brand Ratings Attribute Importance Ranking Prime Wave Precision Kamashita Synchronized backlighting
1 Excellent Good Good
Size of screen 1 Excellent Excellent Excellent Stereo surround sound
2 Good Excellent Good
Brand reputation 3 Excellent Excellent Poor Onscreen programming 4 Excellent Good Poor Sleep timer 6 Excellent Poor Good
TABLE 7.1 Hypothetical Alternatives for a TV Set
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apply during Type 1 thinking, where we’re motivated enough to weigh the pros and cons of a set of choices. There are two basic types of compensatory rules:
1. The simple additive rule leads to the option that has the largest number of posi- tive attributes. A person may use this process when it’s difficult to get more information. It’s not the best solution, because some of the attributes may not be meaningful to the customer. Even so, we may be impressed by a brand that boasts a laundry list of features, though most of them are not determinant attributes. 2. A weighted additive rule allows the consumer to consider the relative impor- tance of the attributes by weighing each one.If this sounds familiar, it should: The calculation process strongly resembles the multiattribute attitude model we discussed in Chapter 6.
Noncompensatory Rules Compensatory rules require the decision maker to care- fully consider the attributes of competing options, but we all know that we don’t necessarily do that—especially when we’re thinking fast! When we make habitual or emotional decisions, we typically use a noncompensatory rule.^15 This means that if an option doesn’t suit us on one dimension, we just reject it out of hand and move on to something else rather than think about how it might meet our needs in other ways: “I’ve never heard of that brand,” or maybe “That color is gross.” Here are some specific ways we do that:
- The^ lexicographic rule^ says, “Select the brand that is the best on the most impor - tant attribute.” If a decision maker feels that two or more brands are equally good on that attribute, they then compare the brands on the second-most important attribute. This selection process goes on until the tie is broken. In Chan’s case, because both the Prime Wave and Precision models were tied on his most impor- tant attribute (a 60-inch screen), he chose the Precision because of its rating on his second-most important attribute: its stereo capability. - The^ elimination-by-aspects rule^ is like the lexicographic rule because the buyer also evaluates brands on the most important attribute. In this case, though, they impose specific cut-offs. For example, if Chan had been more interested in having a sleep timer on his TV (i.e., if it had a higher importance ranking), he might have stipulated that his choice “must have a sleep timer.” Because the Prime Wave model had one and the Precision did not, he would have chosen the Prime Wave. - Whereas the two former rules involve processing by attribute, the conjunctive rule entails processing by brand. As with the elimination-by-aspects procedure, the decision maker establishes cut-offs for each attribute. He chooses a brand if it meets all the cutoffs but rejects a brand that fails to meet any one cut-off. If none of the brands meet all the cutoffs, he may delay the choice, change the decision rule, or modify the cutoffs he chooses to apply.
If Chan stipulated that all attributes had to be rated “good” or better, he would not have been able to choose any of the available options. He might then have modified his decision rule, conceding that it was not possible to attain these high standards in his price range. In this case, perhaps Chan could decide that he could live without synchronized backlighting, so he would reconsider the Precision model. If we’re willing to allow good and bad product qualities to cancel each other out, we arrive at a different choice. For example, if Chan were not concerned about having stereo reception, he might have chosen the Prime Wave model. But because this brand doesn’t feature this highly ranked attribute, it doesn’t stand a chance when he uses a noncompensatory rule.
Buying, Having, Being
How Low Is “Low Calorie” Depends on Surrounding Menu Options The way we make decisions depends on our comparison set, which echoes the categori- zations we studied in Chapter 4. A recent study that examined how consumers use calorie information demonstrates why the categories we use to define products are important. When people saw menus that listed the calorie count of individual items, they chose more dietetic items. However, when the lower calorie items were grouped into a single “low-calorie” category on the menu, diners selected them less frequently. The researchers explain that consumers have negative associations with low- calorie labels, so they’re more likely to dismiss these options in the early stages of the decision process. As a result, individual items are less likely to make the cut into diners’ consideration sets, so ironically this menu information results in fewer healthier choices overall.^16
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Consumers tend to want more options, but when there are too many options, they tend to make poorer decisions or just give up in frustration. A review of all the studies to date (a meta-analysis ) on this paradox of choice suggests that companies can have it both ways: Provide options, but make the decision itself less difficult, and try to educate consumers about how best to make their decision between those options. 20
Step 5: Postpurchase Evaluation
Another old saying goes, “The proof of the pudding is in the eating.” In other words, the true test of our decision- making process is whether we are happy with the choice we made after we undergo all these stages. Postpurchase evaluation closes the loop; it occurs when we experience the product or service we selected and decide whether it meets (or maybe even exceeds) our expectations. That may involve soliciting feedback from others to determine whether we’ve done the right thing or (perhaps) committed a serious fashion gaffe. We’ll take a closer look at that in Chapter 8.
Social Scoring When all is said and done with the trans- action, is the customer always right? Not anymore. Today, postpurchase evaluation is just starting to work both ways. In the process called social scoring , both customers and service providers increasingly rate one another’s performance. Have you ever written a negative review of your Uber driver or a server at a restaurant? A heads up: While we’re busily documenting our interactions with salespeople and other service providers, they’re returning the favor. People who work in small businesses have always been aware of problem customers who drop in periodically to torment them. But now, at least in theory, a salesperson or other service provider at any kind of organization large or small can grade your behavior. And the icing on the cake is that they can share these scores with others. It’s no longer only Santa who knows if you’ve been naughty or nice. At platforms like Airbnb and Uber, users get a rating each time they patronize the service. It’s no surprise that according to Lyft and Uber drivers, failure to leave a tip is a sure-fire road to a dismal evaluation. For your future reference, these are some other behaviors that will make or break a five-star rating straight from the mouths of operators: 22
- “Don’t puke in or ruin the car.” - “The most common reason for a lower passenger rating is making us wait after we arrive to pick you up. If you’re ready to go at the curb when we arrive, it means a lot.” - “Rude passengers immediately get four stars. Depending on the level of rudeness, their rating can go down to one star.” - “Passengers get a one-star ding for everything they mess up, like not being ready, slamming doors, or being impolite.” - “I will deduct points for rude behavior or illegal activities. I will also deduct points for passengers who leave garbage in my car.”
That’s not just FYI stuff; a bad rating can prevent you from booking rooms or rides down the road. Uber and Lyft share rider ratings with other drivers, who may
A common feedback loop we increasingly see on highways comes from those “dynamic speed displays” that use a radar sensor to flash “Your Speed” when you pass one. This isn’t new information; all you have to do is look at your speedometer to know the same thing. Yet on average, these displays result in a 10 percent reduction in driving speed among motorists for several miles following exposure to the feedback loop.^21 Source: Iaarts/Stockimo/Alamy Stock Photo.
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choose not to pick up a passenger with an unsavory record. Open Table bans people from using its service if they have missed too many reservations. At Airbnb, you sometimes must make the case for your worthiness to stay at a guest- house. The application process feels a bit like getting a sur- prise inspection visit from a social worker when you’re trying to adopt a child. This new transparency may disrupt not only the service economy—it also can obliterate the traditional power disparity between buyer and seller. Suddenly, the user must play nice and think about how today’s nasty behavior will influence tomorrow’s reputation. So far it doesn’t seem that service businesses have thought much about the potential impact of this reverse rating process, but it could be just a matter of time before overly demanding patients need to locate doctors who will agree to put up with them, customers who like to yell at repairmen have no one to fix their leaking toilets, and perhaps even students who email their professor at 2:00 a.m. with urgent questions about assignments that were due two weeks ago get banned from registering for classes (okay, that last one is a fantasy of ours that we just threw in there).^23
Regret and How to Avoid It When we do not select a certain option and this foregone option now seems better than the option that we chose, we may end up experiencing regret. 24 The more we know about the foregone option, the more likely we are to wish we had decided differently. In addition, regret is likelier when (1) the decision consumers made created a lot of change from how things were prior to this decision (think: moving houses!), (2) the decision cannot be undone, and (3) the outcome of a choice is negative. In cases when the eventually chosen product leads to a negative outcome, people are more motivated to think of other alternatives that can undo it (e.g., returning the product) or that they can do better in the future. Regret makes people less likely to repurchase the chosen products, but it does not make people more likely to complain to the maker of that product. With online shopping and meal delivery services continuing to take up a larger share of consumer purchases, the potential for consumer regret is likely much higher today than it used to be. Thus, companies should take note of how they can anticipate regret and try to address it, so the customer feels better about their purchase.
“Deer in the Headlights”: Decision Paralysis Although consumers tend to like to make their own choices, having to choose sometimes leads to anxiety and deci- sion paralysis. Interestingly, a solution to this is to delegate our decision to others, especially when we are afraid to make decisions we may regret.^25 Researchers found evidence of this in a series of lab experiments in which they gave participants the choice between two options.^26 They made the choice either difficult or easy by having participants choose between two cheap options (more difficult) or a cheap and expensive option (less difficult), and they told the participants they could either choose for themselves or ask the experimenter to choose. No matter what the product context was (they conducted the same experiments with headphones, jellybeans, and a hypothetical decision of whether to undergo surgery after an accident), they found that consumers consistently prefer to delegate choices to someone else when the choice is difficult.
As social scoring catches on, both customers and service providers need to be aware that others rate their performance. Source: lovro77/iStock/Getty Images Plus.
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emotional and more light-hearted aspects of consumption that result in joy, fantasy, and creativity. System 1 processing, because it is a lot faster and less rational, can lead to behav- ioral biases , when our preferences deviate from the standard economic model that views people as rational decision makers who calmly and carefully weigh their choices to be sure they make the best possible decision. 34 A common example to demonstrate the two systems is the following puzzle: A bat and a ball together cost $1.10. The bat costs $1 more than the ball. How much does the ball cost?^35 The majority of people quickly guess 10 cents (did you?). The correct answer, however, is five cents—which, again, most people can work out after spending more time thinking about the question. As this example demonstrates, System 1 thinking is faster—but often marred by biases and false assumptions. The research discipline at the intersection of psychology and economics, known as behavioral economics , focuses upon these biases that take the form of nonstan- dard beliefs. For example, we tend to be overconfident in our own knowledge or abili- ties, or we tend to ignore base rates and sample sizes when we estimate probabilities (a bias known as the law of small numbers ).
Heuristics and Mental Accounting: Take the Shortcut
Let’s face it—people can be lazy sometimes! Especially when we’re overwhelmed by so many things calling for our attention, it’s often tempting to find shortcuts so that we don’t have to sweat the details for some decisions. That’s a good strategy in many cases, because these shortcuts allow our poor overworked brains to pay more attention to important decisions. And the reality is that many purchase decisions fall into this category. If you’re the brand manager for, say, a company that sells paper towels, you think a lot about this product, and you probably believe your brand outshines the rest. But the hard truth is that your customers aren’t very invested in mastering the intricacies of the paper towel market. They simply want a brand that absorbs liquids and doesn’t disintegrate when they touch it. That means you can shower them with detailed technical informa - tion all day long, but they’re probably not going to “absorb” that. Instead, they may choose a familiar brand name with a lively, easy-to-remember tagline like, “Bounty is the quicker picker-upper.” This example illustrates that rather than trying to arrive at the best possible result—a maximizing solution —we, in fact, often are quite content to exert less mental effort and settle for an adequate outcome—a satisficing solution. This “good enough” perspective on decision making is called bounded rationality. It recognizes that many decisions aren’t worth agonizing over, so long as the end result is adequate. This distinction is hugely important to marketers, because if consumers look to merely satisfice rather than maximize their choice, it’s a game-changer in terms of the types of information they will look for and how they will use this information.
Mental Accounting
In addition, many habitual spending decisions we make are subject to mental accounting biases: Imagine that you’re working at a job that pays $1,000 per week. You spend your income carefully, and you even try to put some of your paycheck into an investment account for your future. One day, you learn that a distant relative has died, and they left you $1,000 in their will. This totally unexpected windfall makes you do the happy dance— and to celebrate you take 20 of your closest friends out to dinner at a nice restaurant.
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Just like that, the inheritance is gone—but at least you have the glowing social media posts to show for it. Is this $1,000 that came and went very quickly the “same” money as the amount you see in your weekly paycheck? Obviously not, because you treated it very differ- ently. Mental accounting reminds us that the way we think and use money depends on all kinds of subjective factors: for instance, how we earned it (from a job versus inheritance) or what form it is (cash versus credit versus gift card; home versus foreign currency). These biases can make us spend more money on useless things or spend it faster (for example, inherited money is spent faster than earned money, and we spend more when we use credit cards because a charge isn’t “real money”).^36 None of that is very rational since in the end, it is all the same money!
Heuristics
Chan made certain assumptions instead of conducting an extensive information search. In particular, he took it for granted that the selection at Zany Zack’s was more than suf - ficient, so he didn’t even bother to shop at any other stores. We refer to these shortcuts as heuristics. These “mental rules of thumb” range from the general (“higher-priced products are higher-quality products” or “buy the same brand I bought last time”) to the specific (“buy Domino, the brand of sugar my mother always bought”).^37 So much for that “rational” view of decision making! These rules of thumb save us a lot of time and effort, and in most cases, a hastily made bad choice doesn’t come back to haunt us. But sometimes these shortcuts may not be in our best interest. A car shopper who personally knows one or two people who have had problems with a par - ticular vehicle, for example, might assume that he would have similar trouble with it rather than taking the time to find out that it has an excellent repair record. 38 Table 7. summarizes a few of the most prevalent heuristics we commonly use.
Heuristic Name Definition Availability Selecting an option based on the information most easily available to our mind Representativeness Selecting an option that is closest to the most representative example in the category Price Selecting an option solely based on its price: for instance, many people assume that a higher-priced option is of better quality than a lower-priced option Anchoring Heuristic Using the first information received about an option to decide about it (that prior judgment hence becoming an anchor) Variety-Seeking Selecting an option that is different from previous choices, for the sake of variety Risk Aversion Selecting the safest option in a set Familiarity Selecting the most familiar option in a set
TABLE 7.2 Examples of Heuristics
The Unseen Power of Context
Effects: Framing, Priming,
and Nudging
Remember that in earlier chapters we talked about how p hysical cues “prime” us to react—even when we’re not aware of this impact. The sensations we experience are context effects
OBJECTIVE 7- Describe how context effects can influence the decision making of a consumer, even when the consumer is unaware of the influence.
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direction of its growth (against the flow), while others went with the direction of growth. In a later (seemingly unrelated) part of the study, lo and behold, these people were more likely to choose products that were less popular or desirable. The earlier session appar- ently encouraged people to think about “marching to the beat of a different drummer,” and this orientation led them to alter their choices (without being aware of the connection!). 45 Welcome to the power of priming : including cues in the environment that make us more likely to react in a certain way even though we’re unaware of these influences. A prime is a stimulus that encourages people to focus on some specific aspect of their lives, such as their financial well-being, the environment, or “going against the flow.” Here are some examples:
- A group of undergraduates was primed to think about money; they saw phrases like “she spends money liberally” or pictures that would make them think of money. Then this group and a control group that wasn’t focused on money answered ques- tions about moral choices they would make. Those students who had been primed to think of money consistently exhibited weaker ethics. They were more likely to say they would steal a ream of paper from the university’s copying room and more likely to say they would lie for financial gain.^46 - When people see pictures of “cute” products, they are more likely to engage in indulgent behavior, such as eating larger portions of ice cream.^47
Figure 7.4 The Impact of Temporal Framing To manipulate temporal framing to shift people’s attention, researchers framed the timing of a sale as either “Start of September Sale” or “End of August Sale.” They then had people try to find a specific brand of margarine in the sale ad. They either placed the mar- garine on the left or the right. Those in the “End of August” condition took a lot less time to find the margarine when it was on the right. And vice versa for those in the “Start of September” and “margarine on the left” conditions. Source: Sheng Bi, Andrew Perkins, and David Sprott, (2021), “The Effect of Start/End Temporal Landmarks on Consumers’ Visual Attention and Judgments,” International Journal of Research in Marketing 38, no. 1 (2021): 136–54.
Start temporal landmark and product on the left side
Start temporal landmark and product on the right side
End temporal landmark and product on the left side
End temporal landmark and product on the right side
Start of September Sale
Start of September Sale
End of August Sale
End of August Sale
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Amazon often employs an urgency nudge, or a nudge for consumers to act immediately, to tell interested customers that an offer is a limited-time deal. Source: Amazon.
- In a field study in a wine store, researchers played either stereotypically French or German music on alternate days. On the days when French music was in the background, people bought more French versus German wine, and the reverse happened on German music days. Follow-up questionnaires indicated customers were not aware of the impact of the music on their choices.^48 - Temporal framing^ also makes a difference: Framing something in a message as coming at the end of a time period (end of summer sale!) shifts our attention to the right, while framing something as coming at the beginning of a time period (start of the semester sale!) shifts our attention to the left. This in turn makes us like products on that side more, makes products that are oriented in that direction more appealing, etc.^49
Nudging
Much of the current work in behavioral economics demonstrates how a nudge —a deliberate change by an organization that intends to modify behavior—can result in dramatic effects. 50 One popular nudge is to set the “optimal” option as a default, because most of us typically believe that when defaults exist, we should just stick with those options. We can apply this default bias —where we are more likely to comply with a requirement than to make the effort not to comply—to numerous choice situ- ations. For example, people are more likely to save for retirement if their employers automatically deduct a set amount from their paychecks than if they must set up this process themselves. We see another simple “nudge” based upon the default bias in programs that ask people to “opt out” of a program if they don’t want to participate, rather than asking them to “opt in.” In Europe, countries that ask drivers to indicate if they want to be an organ donor convince less than 20 percent of drivers to do so. In contrast, those that require drivers to opt out if they don’t want to be donors get more than 95 percent participation! 51
Chapter 7 • Deciding 211
The Power of Customer Reviews
Can you imagine choosing a restaurant before you check it out online? Increasingly many of us rely on online reviews to steer us toward and away from specific restau- rants, hotels, movies, garments, music, and just about everything else. A survey of 28,000 respondents in 56 countries reported that online user ratings are the second- most trusted source of brand information (after recommendations from family and friends). We usually put a lot of stock in what members of our social networks recom- mend. Unfortunately, user ratings don’t link strongly to actual product quality that objective evaluation services like Consumer Reports provide. And there’s evidence that mobile reviews may be less helpful than desktop reviews, even when the same reviewer writes both. Comments posted via mobile devices are more emotional and more negative. 55
How Accurate Are Customer Reviews?
As the old saying goes, “If it sounds too good to be true, it probably is.” When we check out online reviews of a product and they’re all glowing, we tend to be a bit suspi- cious. It’s more effective for a review to include some negative reviews— especially if shoppers think they’re irrelevant. Why? We usually assign a lot of weight to negative information because we expect it to be more diagnostic than sugar-coated comments. So, when we encounter bad stuff, but we don’t feel it’s very helpful, we still feel that we have more complete information about the product, and thus we’re comfortable that we can make a wise choice.^56 Researchers also have recently documented what they call the binary bias : People tend to easily distinguish between positive ratings (e.g., 4s and 5s) and nega- tive ratings (e.g., 1s and 2s), but they are not sensitive to distinctions between more extreme and less extreme (5 vs. 4 or 1 vs. 2 values).^57 As a result, when we see sev- eral reviews that are aggregated, we pay more attention to the proportion of positive to negative reviews, rather than the distribution of different review values. Another piece of evidence of how easily we can be swayed by the way reviews and ratings are presented!
The Long Tail
One advantage these reviews provide is that consumers learn about other, less popu- lar options they may like as well, and at the same time products such as movies, books, and CDs that aren’t “blockbusters” are more likely to sell. At the online entertainment company Netflix, for example, fellow subscribers recommend about two-thirds of the films that people order. In fact, between 70 and 80 percent of Netflix rentals come from the company’s back catalog of 38,000 films rather than recent releases. 58 This aspect of online customer review is one significant factor that’s fueling an important business model called the long tail.^59 The basic idea is that we no longer need to rely solely on big hits (such as blockbuster movies or best-selling books) to find profits. Companies can also make money if they sell small amounts of items that only a few people want— if they sell enough different items. For example, Amazon. com maintains an inventory of 3.7 million books, compared to the 100,000 or so you’ll find in a large retail store like Barnes & Noble. Most of these stores will sell only a few thousand copies (if that), but the 3.6 million books that Barnes & Noble doesn’t carry make up a quarter of Amazon’s revenues! Other examples of the long tail include successful microbreweries and TV networks that make money on reruns of old shows on channels like the Game Show Network.
212 Section 3 • Buying and Having: Choosing and Using Products
Cybermediaries
With the tremendous number of websites and apps available and the huge number of people who spend big chunks of their day online, how can people organize infor- mation and decide where to click? A cybermediary often is the answer. This term describes a website or app that helps to filter and organize online market information so that customers can identify and evaluate alternatives more efficiently. Many consumers regularly link to comparison-shopping sites, such as Bizrate. com or Pricegrabber.com, for example, that list online retailers that sell a given item along with the price each charges.^60 Directories and portals , such as Yahoo! or The Knot, are general services that tie together a large variety of different sites. Forums , fan clubs , and user groups offer product-related discussions to help customers sift through options. We will revisit these types of social influences in Chapter 12. Intel- ligent agents are sophisticated software programs that use collaborative filtering technologies to learn from past user behavior to recommend new purchases. 61 When you let Amazon.com suggest a new book, the site uses an intelligent agent to propose novels based on what you and others like you have bought in the past. Our homes are the last frontier for digital selling assistants. Over 100 million consumers in the U.S. alone now use AI assistants like Amazon’s Alexa or Google’s Home in their home.^62 These devices do a lot more than turn on your lights or play your favorite music. They also are sales platforms that can interact with consumers in a natural, humanlike manner and that can connect our requests with our browsing history to guide our purchases. Artificial intelligence increasingly powers search engines, digital assistants, and chatbots. Research shows that conversational robo advisors elicit greater trust than nonconversational ones, because the conversing allows a more natural interface for consumers to engage with the robo advisor. 63 These conversational robots can be very influential: Recent research found that we tend to follow financial investment advice from a conversational robo advisor even if this investment advice is inconsistent with our actual risk profile or if the fees associated with the investment are large. Physical robots are all the more influential if their designers give them human characteristics. A recent review of a large dataset of over 10,000 individuals who inter - acted with service robots that assist humans with various tasks found that the more effective ones exhibit such traits as intelligence, likability, safety, and social skills.^64 Just like with the people we meet!
Buying, Having, Being
AI: Who’s Calling the Shots? Whether or not you think we’re about to be enslaved by robots, there’s no doubt that AI applications will revolutionize how consumers interact with products—and very soon. Innovative companies are already experimenting with AI per- sonal shoppers that can help their customers to decide what to buy:
- Outdoor brand The North Face partnered with IBM’s Watson AI platform to use natural con- versation and a dialogue-based recommendation engine to help users of the brand’s site pick out the jacket that best fits their needs. A customer simply tells the platform when and where they’d like to use the jacket, and then answers additional ques- tions to refine the results.^65
- KFC China teamed up with the huge Chinese search engine Baidu to develop AI-enabled facial recognition checkout. It predicts what menu items customers will order based upon their age, gender, and mood. Over time, the AI will recognize repeat custom- ers and offer them what they ordered on prior visits. Thus, a younger male might get a recommendation for a crispy chicken hamburger, while the AI will suggest porridge and soybean milk to a woman in her 50s (wow, automated gender stereotyping?).^66
- West Elm uses an AI application to generate recommendations for specific furnishing products it sells based upon what a shopper pins to a Pinterest Board. The company also can upsell, or encourage customers to buy additional items, due to the suggestions.^67
