Choices make decisions easier?!

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From: Rohit Khare (
Date: Tue May 08 2001 - 15:59:06 PDT

> STANFORD BUSINESS SCHOOL ‹ Marketing professor Itamar Simonson has received
> the 2001 O'Dell Award for a research article judged to have had the greatest
> impact on the field of marketing during the five years following its
> publication. He was honored for his work: "The Effect of New Product Features
> on Brand Choice," published in 1996 in the Journal of Marketing Research.

Psyching out customer choice
Research by Itamar Simonson

ALTHOUGH satisfying customer needs is the name of the game in marketing,
identifying those needs is easier said than done. Study after study shows
that self-reported preferences do not match buying behavior. Instead,
seemingly irrational factors can influence consumer decision making.

In an effort to better understand how buyers make their decisions, Itamar
Simonson , associate professor of marketing, has been studying consumer
behavior since 1987. His conclusion: Consumers do not have well-established
preferences, so marketers need to find out not only what consumers want, but
what factors influence their decision-making processes.

In a series of studies on consumer behavior, Simonson has found that:

* Consumers are more likely to choose an alternative after a relatively
inferior option is added as a choice. For example, Simonson says,
participants in one study were given a choice between $6 and an elegant
Cross pen. A second group chose among $6, the same Cross pen, and a second
pen that was clearly less attractive than the Cross pen. As was predicted,
the addition of the unattractive pen increased the share of the Cross pen at
the expense of the $6.

* Consumers prefer alternatives that are compromise choices. Given a
choice between two alternatives, one priced lower than the other, the
addition of a third choice, priced higher than both, will increase the
market share of the more expensive of the original two. This finding
suggests that companies can increase their overall sales and shift purchases
to higher-margin items by carefully designing the sets of alternatives that
their customers consider.

* Buyers are averse to choosing the lowest-quality alternative in sets of
three or more choices. One of the implications of this finding is that
marketers of well-known, high-priced brands should encourage retailers to
organize floor displays by model type, whereas marketers of lesser-known,
lower-priced brands should prefer organization by brand.

* Consumers who think about the possibility that their purchase decisions
will be wrong are more likely to choose better-known brands. In a test case,
Simonson showed that consumers debating between a better-known, more
expensive brand and a lesser-known, less expensive brand expect to feel
greater regret if they err by choosing the cheaper option. Indeed, after
thinking about the possibility of regret, consumers were more likely to
select the better-known brand. Kodak film has capitalized on this finding
with an advertising campaign that asks consumers to consider how they would
feel if they bought cheap film and their pictures didn't turn out.

* The manner in which consumers compare alternatives can determine which
option they choose. For example, consumers who were asked how much more or
less they liked fruit salad compared with frozen yogurt were much more
likely to choose the fruit salad than consumers who were asked how much more
or less they liked frozen yogurt compared with fruit salad.

* Consumers tend to select variety when buying multiple products for
consumption at a later time. In each of three weeks, Simonson asked a group
of respondents to select one of six familiar snacks for immediate
consumption. A second group was asked to pick three snacks -- one for
immediate consumption and one for each of the next two weeks. Both groups
were told that they could pick the same snack as many times as they wished.
Those in the first group tended to select the same snack all three times,
whereas most in the second group selected three different snacks.

* Modifying a product with a feature or premium that is of little or no
value to the consumer, even without raising the price, may actually decrease
sales. When consumers are uncertain about their preferences, a product that
offers an unneeded add-on (such as an offer to purchase a Pillsbury Doughboy
collector's plate) provides them with a reason for rejecting it.

While marketing professionals can use these findings to influence consumer
decision making, consumers, too, can benefit by understanding their own
behavior. "One of the points of our research is to inform consumers about
some of the factors that influence their decisions," Simonson says. "With
such knowledge, they may be able to make better, more thoughtful decisions."

Susan Wolfe

"It's hard to play chess if you're one of the pieces" -- Anon.
Rohit Khare  *  Founder & Chairman  *  KnowNow Inc.

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