You will write a brief review about an article you choose from the list below, or another article, report, web site, or book that you choose. Your review should be approximately 1500 words (two or more pages), and summarize the main findings or ideas. You should also write what you believe are the strengths and weaknesses, and cite other decision management references, web sites, or literature as needed. The review should begin with the title, author, publication date, publisher, and pages of the item you are reviewing.68
Get Closer to Your
Customers by
Understanding How
They Make Choices
Itamar Simonson
S
atisfying customers’ wants better than the competition is
widely recognized today as a key to success in the marketplace. In accordance with this principle, a major conclusion of In Search of Excellence was that America’s best-run
companies are those that stay close to their customers.’ In order
to get closer to their customers and satisfy customer needs, companies
should be able to identify what their customers want (e.g., on the basis of
surveys, focus groups, customers’ complaints) and use these wants to guide
the development of their strategies. Following this advice, many organizations have in recent years adopted the concept of Quality Function
Deployment (QFD), which is “a system for translating consumer requirements into appropriate company requirements at each stage from research
and product development to engineering and manufacturing to marketing.”^
QFD can be thought of as the act of taking the voice of the consumer from
product development to the factory and into the marketplace. Consistent
with QFD and the growing emphasis on total quality management, the first
key concept in the Baldridge Award criteria is that quality is “based on the
customer.”
Clearly, consumers’ wants have more impact on corporate and marketing
strategies today than ever before. But to what extent do consumers have
well-defined wants and preferences? And, can they be tmsted to provide
reliable information as to what they prefer and what they would buy? If
consumers do not have good insights into their own preferences or if their
preferences are unstable and easily influenced, then finding out what
The paper has benefited from the comments of David Aaker, Harold Schiffrin, Russeii Winer,
participants in the Berkeley-Stanford-Santa Clara Colloquium, and three CMR reviewers.
Get Closer to Your Customers by Understanding How They Make Choices
69
customers say they want and analyzing their past purchases provide only
part of the needed information. In that case, companies must try to gain a
better understanding of their customers by examining the various infiuences
on their purchase decisions and use that information to develop more effective marketing strategies.
This article suggests that consumers’ preferences are often fuzzy and
imprecise, and consequently, the choices they make are susceptible to a
variety of seemingly irrelevant influences. Some of the empirical evidence
supporting this proposition is reviewed here. It focuses on several key determinants of purchase decisions, including
the set of altematives under consideration,
the manner in which altematives are evaluated,
the description of altematives,
the timing and quantity of purchase, and
the features of altematives.
The proposition that purchase decisions are often susceptible to influence
should not be interpreted as implying that consumers in general do not
know what they want or that marketers do not have to bother asking them
what they want. However, it does suggest that consumers’ preferences
should not be taken as given and fixed. Thus, being close to the customer
requires an understanding of how buyers’ preferences are shaped and infiuenced, rather than merely revealing and serving existing preferences. The
managerial implications of this proposition and illustrations of how it could
be applied are presented at the conclusion of this article.
Influences on Consumers’ Choices: Empirical Evidence
In the past, it was assumed that consumers can estimate the utilities or
values of products based on their characteristics and that these estimates
guide the consumers’ purchase decisions. For example, given information
about the memory size, speed, monitor type, and other features of a personal computer, a consumer can assess the value of that product. If offered
more than one personal computer, the consumer can simply determine the
value of each altemative and then select the one with the highest value. The
underlying assumption is that consumers have well-defined preferences that
guide their purchase decisions.
Recent research on decision making, however, has revealed that people
often do not have clear and stable preferences, even when they have complete information about the characteristics of the altematives.’ These
findings are consistent with the idea that, in many situations, consumers
constmct their preferences when faced with a specific purchase decision,
rather than retrieve pre-formed evaluations of product features and
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altematives. Since preferences are constmcted for a specific choice task,
they depend on the particular characteristics of that task.
Most of the research reviewed below involves controlled experiments
that allow for unconfounded tests of several systematic effects on consumer
preferences. Companies and market research firms often employ such
experiments for predicting consumers’ choices in the marketplace. While
no single research technique can perfectly capture all of the factors that
determine market shares, such controlled experiments have been shown to
be rather accurate predictors of consumers’ actual choices.”
In the studies reported below, the researchers took great pains to make
the choice task and product altematives realistic and meaningful as well as
to provide respondents with the kinds of information typically available to
consumers. The participants in these experiments were consumers, students, and business executives.
The Effect of the Set of Alternatives under Consideration on Consumers’ Choices—Williams-Sonoma, a mail-order and retail business located
in San Francisco, used to offer one home bread bakery priced at $275.
Later they added a second home bread bakery, which was very similar
to the first except for its larger size. The new item was priced about 50%
higher than the original bread bakery. Williams-Sonoma did not sell many
units of the new (relatively unattractive) item, but the sales of the less
expensive bread bakery almost doubled.
This example illustrates the impact of changing the set of altematives
under consideration (or the choice set) on consumers’ purchase decisions.
Specifically, the effect of the second, relatively less attractive bread bakery
on the sales of the existing one is consistent with experimental evidence
that adding an altemative, which is inferior compared to another altemative,
increases the market share of the (relatively) superior altemative.’ For
example, Simonson and Tversky gave one group of respondents a choice
between $6 and an elegant Cross pen.* A second group of respondents
chose between $6, the same Cross pen, and a second pen with a lesserknown brand name that was specifically included because it was less attractive than the Cross pen. It was expected that, in the presence of the less
attractive pen, the choice probability of the Cross pen would increase at the
expense of the $6 cash. This proved to be the case. When Cross was the
only pen altemative, 36% selected the pen and 64% preferred the $6. In
contrast, when there were two pens, 46% chose the Cross, 52% preferred
the $6, and 2% selected the less attractive pen.
The finding that the addition of a relatively less attractive product can
increase the share of a second product has been replicated many times. In
another study, Simonson and Tversky presented respondents with color
pictures and descriptions of microwave ovens taken from the Best catalog.
In one version, only two altematives were presented: an Emerson oven with
Get Closer to Your Customers by Understanding How They Make Choices
71
a regular price of $109.99, and a larger oven by Panasonic with a regular
price of $179.99. Both ovens were on sale for 35% off their regular price.
The other version of the questionnaire included, in addition to the Emerson
and Panasonic ovens, another Panasonic oven that was slightly larger and
cost $199.99. The added Panasonic oven was on “sale” for only 10% off the
regular price. Since the less expensive Panasonic offered a better value than
the added Panasonic, it was expected that proportionally more respondents
would choose the less expensive Panasonic in the version with the three
microwave ovens. As predicted, the share of the less expensive Panasonic
was significantly greater (60% vs. 43%) in the choice set with all three
altematives compared to the set with just the less expensive Panasonic and
the Emerson. It thus appears that the addition of the relatively inferior Panasonic caused some respondents, who would have otherwise preferred the
Emerson, to choose the less expensive Panasonic.
Other such effects of choice set manipulations have been demonstrated.
For example, consumers tend to prefer altematives that are compromise
choices in terms of their product characteristics in the particular choice set
under consideration. Thus, for instance, in a choice between two alternatives at two price levels (e.g., a low-priced camera and a moderately
priced camera), the relative share of the more expensive of the two can be
increased by adding a third altemative that is even more expensive (e.g.,
a high-priced camera model can make the camera with intermediate price
appear like a compromise). This effect has been observed in many product
categories such as mouthwash, personal computers, and portable grills.
Choice set configuration appears to affect preferences even when consumers can readily assess the quality and other relevant features of the
considered altematives. For example, several studies demonstrated that
consumers—who chose among actual samples of paper towels and were
asked to feel them to assess their quality—were highly susceptible to a
variety of seemingly irrational influences. Paper towels are a very familiar
product category with significant quality differences among brands, which
could be revealed by inspecting the samples. The fact that choice set effects
are observed in such product categories suggests that consumers often have
difficulty determining their preferences and the values of products to them
on the basis of the products’ (absolute) characteristics (e.g., the price, quality, color, and design of a paper towel). Instead, purchase decisions appear
to be based on both the absolute attribute values or characteristics of the
altematives and their relative positions within the particular choice sets
under consideration.
Another study examined the ability of consumers to report their own
tastes or importance weights accurately.^ Respondents first chose from sets
of altematives that were designed so that one altemative appeared more
attractive than the other. For example, in a choice among personal computers, most people choose the PC with the lowest price and least memory if
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Summer 1993
the tradeoff between price and memory is such that the cost of additional
memory is very high, and vice versa if the cost of memory is low. After
making a choice from a set in which the cost of memory was either very
high or very low, respondents were asked to indicate the importance to them
of PC memory and price. As was predicted, the choices that respondents
made had a systematic effect on their evaluations of the importance of
memory and price. Respondents who chose the PC with the most memory
(because the cost of memory was low in the choice set they were given)
tended to believe that memory was more important for them than low price,
and vice versa for those who chose the cheapest PC. This finding suggests
that consumers sometimes infer their values from observed products, and
they thus lack the insights needed for reporting their own tastes.
Since consumers are uncertain about their preferences and use the
choices presented to them for determining the values of product altematives, companies can increase overall sales and shift purchases to higher
margin items by carefully designing the sets of altematives that their customers consider. Direct marketers, advertisers, sales people, and retailers
can often influence the particular choice sets that their customers evaluate.
Thus, for example, a company can increase the sales of a new, improved
model of a product by presenting it to customers alongside the old model
and pricing the two similarly (i.e., make the new model appear like a
bargain).
The Effect of the Manner in which Alternatives Are Evaluated on
Consumers’ Choices—Several studies have investigated the effect of the
manner in which altematives are evaluated and compared on consumers’
preferences. Dhar and Simonson demonstrated that shifting the focus of
attention to one of two considered altematives tends to enhance the perceived attractiveness and choice probability of that altemative.’ As an
example, respondents were asked to assume that they were offered two
desserts at the end of a meal: frozen yogurt and fmit salad. Before indicating their choice, half the respondents answered the question, “How much
more or less attractive to you is frozen yogurt?”, and the other half were
asked, “How much more or less attractive to you is fmit salad?”. The
results indicated that those who focused on frozen yogurt rated it, on average, as slightly more attractive than fmit salad. On the other hand, those
who focused on fmit salad rated it as much more attractive than frozen
yogurt. All respondents were then asked which of the two desserts they
would choose. Of those who initially focused on frozen yogurt, 52%
selected frozen yogurt and 48% chose fmit salad, whereas among those
who initially focused on fmit salad, only 25% selected frozen yogurt and
75% chose fmit salad. This result, which was replicated in several other
product categories, suggests that by simply focusing the consumers’ attention on one of the altematives being considered (e.g., on the brand that a
Get Closer to Your Customers by Understanding How They Make Choices
73
sales person is trying to sell), one can increase the perceived attractiveness
and choice probability of that altemative.
Other manipulations of the manner in which altematives are compared
can influence purchase decisions. One of the most common decisions consumers have to make is whether to pay a certain price premium for additional features or a better-known brand. Simonson, Nowlis, and Lemon
demonstrated several ways in which marketers can influence buyers’ willingness to pay a higher price for higher quality.’ One such effect relates to
product categories where manufacturers offer different models of a product
with different feature levels. For example, VCRs may be divided into lowprice, basic 2-head models, 4-head models with slow motion and freeze
frame, and high-price, top-of-the-line models with hi-fi stereo, “VCRPlus,” and other enhanced features. In these product categories, retailers
can organize products by brand (i.e., each display presents all models of
one brand) or by model (i.e., each display presents similar models by different brands), or some combination of the two display formats. Building
on an earlier finding by Simonson and Tversky,’° which indicated that
buyers are averse to choosing the lowest quality altemative in sets of three
or more altematives, Simonson et al.” showed that consumers are less likely
to choose the cheapest brand when the products are displayed by model
rather than by brand. This result suggests that marketers of high-equity,
high-price brands should encourage retailers to organize products at the
store by model (or feature level), whereas marketers of low-equity, lowprice brands should prefer product displays that are organized by brand.
Another study examined the effect of the manner in which altematives
are evaluated, focusing on the influence on purchase decisions of anticipating the possibility of making the wrong choice. In this study, respondents were asked to choose between a well-known brand and a lesser-known
brand (e.g., Panasonic and SounDesign VCRs).’^ The two brands had the
same features except that the better-known brand was higher priced, and it
was emphasized that the reliability of the brands was unknown. Respondents in one condition were asked to consider two possible scenarios. If
they chose the better-known and more expensive brand, they might find out
later (e.g., from Consumer Reports) that it was actually not better in any
way than the lesser-known brand. Conversely, if the lesser-known brand
was selected, they might discover later that it was less reliable and durable
than the better-known brand. Respondents were asked to anticipate how
they would feel in these two scenarios. The majority indicated that they
would be more upset with themselves and feel more responsible if they
erred by choosing the lesser-known brand. A second group of respondents
chose between the two brands, without considering the possibility of
making the wrong decision. As was predicted, the group that first evaluated
how they would feel if they made the wrong choice were significantly more
likely (a difference of 17%) to choose the better-known and more expensive
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brand. In another part of this research, it was shown that respondents who
consider the possibility of making the wrong decision are more likely to
purchase a currently available item on sale rather than wait for a better sale.
These findings are consistent with the notion that people expect to be less
upset and feel less responsibility if they choose the safer, default option
(e.g., a well-known brand).
Thus, merely asking consumers to consider how they would feel if they
made the wrong purchase decision can have a systematic effect on their
choices. In particular, sellers of high-price, high-equity brands can increase
their market share relative to a cheaper brand by encouraging buyers to
anticipate how they would feel if they found out later they made the wrong
choice. For example, a recent ad by Kodak asks buyers to anticipate how
they would feel if they bought a non-Kodak brand and the pictures did not
tum out well.
Together, the findings of these studies suggest that consumers’ purchase
decisions can be influenced by a variety of seemingly irrelevant manipulations of the manner in which altematives are evaluated.
The Effect of Alternatives’ Descriptions on Consumers’ Choices—
Minor changes in the way altematives are described, referred to as “framing,” can have a large effect on consumers’ preferences. For example.
Levin and Gaeth asked different groups of respondents to evaluate ground
beef that was labeled as either “75% lean” or “25% fat.””‘ They found that,
even after tasting the beef, respondents perceived the beef labeled as “75%
lean” as superior to that labeled “25% fat.”
Kahneman and Tversky provide another illustration of the impact of
altemative description on preferences.'” One group of respondents received
the following problem: “Imagine that you have decided to see a play and
paid the admission price of $10 per ticket. As you enter the theater, you
discover that you have lost the ticket. The seat was not marked, and the
ticket cannot be recovered. Would you pay $10 for an additional ticket?” In
this version, 46% of the respondents said “yes” and 54% said “no.” In the
other version of the problem, respondents were asked to assume that as
they entered the theater, before buying a ticket, they discovered that they
lost a $10 bill. With this version, 88% of the respondents said they would
buy the ticket and 12% said they would not. Note that in both versions the
consequence is the same (a loss of $10), except that in one case the loss is
in the form of a ticket whereas in the other version it is a $10 bill. However,
if a ticket is lost, respondents are likely to consider whether seeing the play
is worth $20, whereas in the other case the loss of a $10 bill and the purchase of a ticket are mentally separated.
In a related study. Thaler examined the effect of descriptions of altematives that consist of multiple components and proposed several principles.”
If an altemative has only positive components (e.g., Christmas gifts).
Get Closer to Your Customers by Understanding How They Make Choices
75
consumers are happier when the components are described separately (e.g.,
gifts are individually wrapped). On the other hand, if the components are
negative (e.g., credit card charges), then consumers prefer that they are all
lumped together (in one bill). Also, an altemative with a large negative
component (e.g., a product after a large price increase) and a small positive
component (e.g., a rebate or a coupon) tends to be perceived as more
attractive than the same altemative with a moderately negative component
(e.g., a moderate price increase). These principles have important implications for marketers communications strategies.
In sum, consumers’ evaluations of altematives and purchase decisions
can be systematically influenced by seemingly inconsequential changes of
product descriptions.
The Effect of Purchase Timing and Quantity on Consumers’ Choices—
Most purchase decisions involve products that are consumed at a later period. For example, most supermarket food items are purchased for consumption in the days or weeks that follow. Thus, when making purchase decisions, consumers should be able to predict their preferences at later periods.
A question that naturally arises is how good consumers are at predicting
their preferences.
This question was investigated in a study in which participants were
given a choice of snacks.” One group of respondents were presented with
six snacks (e.g., Snickers bar, a bag of chips) and asked to indicate which
one they wished to receive. The participants selected one item and received
it. In each of the following two weeks, the same procedure was repeated,
with the respondents selecting and receiving one of the six snacks for
immediate consumption. A second group of respondents were presented
with the same six snacks, informed that they would receive one snack
immediately and one in each of the following two weeks, and asked to indicate which item they wanted for each week. It was emphasized that there
was sufficient supply of all snacks and respondents could choose the same
snack more than once.
As was predicted, respondents in the second group who made snack
choices for three weeks at the same time were much more likely to select
three different snacks (64% of the participants) than those who made one
choice each week for immediate consumption (9%). If we assume that the
choices for immediate consumption are the “correct” decisions (i.e., they
are the best indicators of what respondents actually wanted at that time),
then it can be concluded that consumers who make purchases for later consumption and need to predict their future preferences are susceptible to
systematic errors and may often make sub-optimal decisions.
The tendency to select variety when making multiple choices simultaneously can be explained in at least two ways. First, people generally have a
preference for variety (“Variety is the spice of life”), which is more likely
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to infiuence actual decisions when consumers make choices for later periods
and are thus less certain which specific products they would want. And
second, if buyers have difficulty deciding which of the available altematives
to choose, they can resolve this conflict when purchasing multiple items by
choosing a bundle of their most preferred altematives.
In a related study, Simonson and Winer showed that the number of items
consumers purchase in a product category on a shopping occasion can influence what they purchase.” The data for this study consisted of scanner
panel data of actual yogurt purchases by households over a two-year period.
The results indicated that, as the number of yogurt cartons purchased on
a specific shopping occasion increased, consumers were more likely to
choose yogurt flavors that they did not usually buy. Single-member
households were analyzed separately and the same pattem of results was
observed. This finding has several managerial implications. It suggests, for
example, that the number of items consumers typically purchase in a category (e.g., the number of yogurt cartons per shopping occasion) can influence the market shares of product types and brands. It further proposes that
marketers of bundles of items in a category (e.g., bags of dry soup) may
increase sales by offering mixed bundles (e.g., different flavors of soup in
one box).
The Effect of Adding Features and Promotions With Limited Perceived
Value on Brand Choice—The research findings reviewed so far suggest
that consumers often have difficulty assessing the values of product altematives. One way that a consumer can choose between altematives without
being certain about their exact values is by eliminating all altematives that
have features which the consumer clearly does not need or finds irrelevant.
Thus, enhancing a product with a feature or premium that is of little or no
value to many consumers, even without raising the price, may actually
decrease the popularity of that product.
To test this proposition, Simonson, Carmon, and O’Curry examined the
effect of adding premiums and product features that are designed to attract
a specific market segment, but which are perceived as having little or no
value to most consumers.’* One choice problem was based on a sales promotion used by Pillsbury in the fall of 1991. In a choice between two
brands of brownie cake mix (Pillsbury and the Lady Lee store brand), the
unneeded premium was a Collector’s Plate that could be purchased for
$6.19. There were three versions of the choice problem, each evaluated by a
third of the respondents. In one version, the option to buy the Collector’s
Plate was offered to buyers of the Pillsbury brand; in a second version, a
Collector’s Plate was offered to buyers of the Lady Lee brand; and the third
version did not mention the Collector’s Plate promotion. In a second problem, involving a choice between two brands of 35mm film, the unattractive
premium was an offer to purchase a golf umbrella for $8.29 (based on an
Get Closer to Your Customers by Understanding How They Make Choices
77
actual promotion by Fuji). Note that in both the cake mix and film examples, the promotion involved an option to purchase an item for a significant
price, and consumers could simply ignore these promotions.
As predicted, the market shares of the brands that offered the (unattractive) promotion were smaller (by an average of 13%) than their shares when
they did not offer the promotion. Similar findings were obtained when new
product features (rather than premiums) were offered, which were designed
for a small target segment but had no negative effect on the product’s value
for other segments (e.g., a watch that can display two time-zones, a free
subscription to a magazine with a limited appeal). These results are consistent with the notion that, when consumers are uncertain about their preferences, a product that offers an unneeded premium or feature provides
consumers with a reason for rejecting it. It appears that consumers often
automatically avoid altematives with unneeded features, without thinking
whether these features actually impact the product value in any way. Thus,
companies should carefully evaluate the positive effect of new product features and promotions against the potentially negative effect associated with
buyers’ aversion to selecting products with features that they consider
useless.
A related study investigated situations in which the choices of one consumer are influenced by knowing the choices and the reasons for these
choices of another consumer.” It was predicted that consumers would be
less likely to choose an altemative that was chosen by another consumer for
a reason that is irrelevant to them. Participants in this study were told that,
in an effort to save paper and reduce duplicating costs, each questionnaire
was designed for use by two respondents. Thus, when a participant had to
enter a choice, he or she could see the choice of the “previous respondent”
and the reason given for the decision. The answers and reasons of the “previous respondent” were systematically manipulated to influence the (real)
respondents. For example, one problem involved a choice between the
MBA programs at Northwestem and UCLA. In one version of the questionnaire, the “previous respondent” selected Northwestem, and the reason
given was “I have many relatives in the Chicago area.” It was expected that
this reason would not apply to most respondents and thus reduce the likelihood of choosing Northwestem. In a second version, no reason was given
for the choice of Northwestem. As expected, respondents who saw a reason
that was irrelevant to them were less likely to choose Northwestem than
respondents who did not see the other respondent’s reason.
Discussion
It is widely recognized today that the development of effective marketing
strategies requires companies to stay close to their customers. It is less
clear, however, exactly how a company should stay close to its customers.
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The common wisdom is that companies should find what their customers
want, sometimes referred to as identifying and deploying throughout the
organization the “voice of the customer,”^” and use that information as a
guide to deliver superior quality. Experts and books on customer-driven
strategies have emphasized the importance of giving customers exactly
what they ask for. If a company can meet customers’ wants better than the
competition, success in the marketplace is seen as inevitable and selling
becomes superfluous.
Using the “voice of the customer” as the guide for strategy is most effective when the voice of the customer is based on well-formed and stable preferences. Thus, if consumers’ wants are perfectly established and stable
over time, then success in the marketplace will depend on the ability to
measure the voice of the customer as accurately as possible and meet these
wants better than the competition. However, suppose that buyers do not
have clear preferences, even though they readily provide answers when
asked by market researchers about their preferences, or that their preferences are so unstable that what they say at one time has a very low correlation with their actual purchases at a later time. Assume further that purchase decisions are based to a large extent on characteristics of the choice
set that buyers evaluate (e.g., which altemative is seen as the compromise
choice) and on characteristics of the purchase task (e.g., the number of
items purchased, the manner in which altematives are compared). Under
this hypothetical scenario, it would make less sense to spend great efforts
on ultra-accurate measures of the voice of the customer and to use that
information as a main guide for marketing strategy. Instead, companies
would have to invest more effort in gaining a better understanding of the
various influences on actual purchase decisions and try to use that knowledge for increasing revenues and profits.
While the latter scenario may be extreme and unrealistic, since measures
of consumers’ preferences are often useful (though inaccurate) predictors
of later purchase decisions, the research reviewed in this article suggests
that the former scenario is also quite unrealistic. Indeed, the findings indicate that consumers are often uncertain about what they want and about the
values of products to them, and their purchase decisions are therefore susceptible to influence by a variety of seemingly irrelevant factors.
Specifically, the empirical evidence presented in this article suggests that:
• consumers are more likely to choose an altemative (e.g., a home bread
bakery) after a relatively inferior option (e.g., a slightly better bread
bakery that is significantly more expensive) is added to the choice set;
• consumers are more likely to choose an altemative that appears to be
a compromise in the particular choice set under consideration;
• the choices that consumers make infiuence their assessment of their own
tastes;
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79
• shifting attention to one of two considered altematives tends to enhance
the perceived attractiveness and choice probability of that altemative;
• the manner in which consumers compare products that vary in terms
of price and perceived quality (e.g., features, brand name) and the
product display format at the store (by brand or by model type) affect
their willingness to pay more for additional features or a better-known
brand;
• consumers who think about the possibility that their purchase decisions will tum out to be wrong are more likely to choose better-known
brands;
• consumers’ choices are influenced by subtle (and theoretically inconsequential) changes in the way altematives are described;
• consumers who make purchases for later consumption appear to make
systematic errors in predicting their future preferences;
• consumers are less likely to choose altematives that are offered with
product features or promotional premiums that have little or no value,
even when these features and premiums (e.g., an opportunity to purchase
a Collector’s Plate) are optional and do not reduce the actual value of the
product in any way; and
• consumers are less likely to choose products that were selected by other
consumers for reasons that they find irrelevant, even when these reasons
are noninformative with respect to the products’ values.
These findings are wide-ranged, systematic, and represent very common
influences on purchase decisions. In fact, these influences are likely to play
a role in many choices outside the domain of consumer decision making.
For example, Glazer and Simonson extended the findings regarding choice
set effects to the domain of managerial decision making.^’ The respondents
in this study were executives and MBA students, who evaluated several
brief case studies and were asked to make strategic recommendations for
the companies described in these cases. They worked in either four member
groups or as individuals. In a case study involving a company that introduced a new circuit board product, one version of the problem presented a
choice between a skimming strategy (high price, narrow target market) and
a penetration strategy (lower price, broader target market). A second version of the problem presented a choice among three possible strategies,
including the same skimming and penetration strategies presented in the
first version, and a second skimming strategy that was clearly inferior to
the first skimming option. Consistent with the findings described earlier
(e.g., the microwave oven example), the addition of the inferior skimming
option significantly increased the share of the superior skimming strategy
at the expense of the penetration strategy. This effect was observed both
with groups and with individuals. On the other hand, Glazer and Simonson
found that the bias favoring compromise (or middle) options does not
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appear to hold in managerial decision making. In general, it is expected
that most of the factors that influence consumer purchase decisions also
impact other types of decisions, such as (nonroutine) industrial buying
decisions and managerial decision making.
It needs to be emphasized that, despite the many influences on consumers’ purchase decisions, one should not conclude that consumers in general
do not know what they want and cannot be relied upon in the development
of marketing strategies. In some situations, consumers do have clear and
strong preferences for particular product or service characteristics. In such
cases, none of the manipulations previously described are expected to affect
purchase decisions. Furthermore, while consumers’ choices can be influenced when two or more altematives are perceived as about equally attractive (or if the buyer has limited information about the altematives), a clearly
unattractive product will not be seriously considered. Thus, to be among
the considered altematives, companies need to know their customers’ preferences (e.g., regarding product features, price sensitivity, distribution),
even when these preferences are fuzzy and imprecise.
Managerial Implications—The findings reviewed in this article suggest
that staying close to the customer is more complex than simply measuring
consumers’ wants and deploying their voice throughout the organization.
Actual purchase decisions depend to a large extent on the specific characteristics of the choice set being considered and the manner in which altematives are evaluated, and these influences cannot be identified by standard
surveys of consumers’ preferences. Furthermore, if consumers are susceptible to influence and have difficulty determining their preferences for such
common products as pens and paper towels (as described earlier), they are
likely to be even less reliable in predicting their future choices of totally
new products and new technologies.
Thus, companies can increase their sales significantly by supplementing
the voice of the customer with a better understanding of the various “irrational” influences on purchase decisions^^ and translating that knowledge
into specific sales, positioning, pricing, and communications tactics. A
difficulty that may arise in implementing such a strategy is that “irrational”
effects on buying decisions are unfamiliar to most marketers and these
effects tend to be qualitative and imprecise. In contrast, quantitative measurement of preferences and perceptions is the most common (and familiar)
task today of marketing researchers, and the findings of such studies appear
to be precise and scientific.
However, just as buyers’ preferences and perceptions are routinely measured, marketing managers and researchers can systematically study the
various other influences on customers’ purchase decisions and use the
findings to develop appropriate marketing tactics. The following are a few
examples:
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81
A computer printer manufacturer is introducing a new model with
improved features. The common practice is to drop the old model from
the product line and promote the new model exclusively. However, the
previously presented findings suggest that sales of the new model may
benefit from keeping the old, inferior model, while emphasizing the
advantages of the new model and minimizing the price difference between the two (thus making the new model appear like a bargain). To
test the effect of keeping the old model, marketing researchers can select
two random samples of potential buyers (e.g., from a list of current
printer owners). One group will receive a mailing with a description of
the new model alone, whereas the other group will receive the descriptions of both models (with a minimal or no price difference between
them). Both groups will be invited to call for further information. The
test will examine whether the group that was offered both models is more
likely to inquire about the new model.
A mail-order company currently offers two brands of binoculars, with
the more expensive of the two having a higher profit margin. In order to
increase the share of the more expensive brand, the company is contemplating the addition of a third brand, which is much more expensive
than the existing brands. The third brand is designed to make the previously more expensive altemative appear like a reasonably priced compromise. The sales and profit impact of the third brand of binoculars can
be tested by preparing two versions of the catalog, with and without the
additional altemative (also taking into consideration the lost revenue
associated with the catalog space taken by the additional altemative).
> A retail electronics chain carries several camcorder brands, with each
brand offering different models (with different feature levels). Assuming
the retailer eams a higher margin on the more expensive brands, the
results reviewed earlier suggest that organizing the camcorder display by
model (i.e., each display presenting similar models by different brands)
rather than by brand (i.e., each display presenting all models of one
brand) will tend to increase the share of the more expensive brands relative to the cheapest brand. The retailer can test this prediction in two
similar stores, using a by-model camcorder display format in one store
and a by-brand display in the other.
• A soup manufacturer wants to maintain its share of the supermarket shelf
space, even though some of its soup types generate only limited volume.
The findings reviewed earlier indicate that consumers who purchase multiple items in a category on a shopping occasion (e.g., several cans of
soup as opposed to just one or two each time) are more likely to choose
a variety of items, including types that they do not usually consume.
These findings suggest that the soup manufacturer can (disproportionally) increase sales of slower selling soup types by offering a promotion
in which buyers receive a discount if they purchase multiple cans at one
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CALIFORNIA MANAGEMENT REVIEW
Summer 1993
time. This promotion can be tested by examining whether, as expected,
it increases the share of less popular varieties more than the popular
ones.
• Manufacturers of cars, computers, and other products often need to
determine which options to include in the standard package. In some
cases, manufacturers include options or features as part of the “standard
package” because it is more economical to standardize, even though the
options appeal to a minority of the target market. The findings reviewed
above suggest that such a strategy may significantly decrease the attractiveness of the product to potential buyers who are not interested in the
additional options, even when the manufacturer does not charge for these
options. Manufacturers should thus experiment with altemative pricing
schemes (e.g., buyers could receive the option as a standard feature, or
the option could be priced separately, or buyers could receive a discount
if they did not want the option) to identify the one that generates the most
favorable results.
The findings of such studies could later be used to develop specific
product positioning, sales, and communications tactics. Successful
implementation of this approach will require companies to educate their
marketing personnel, including product managers, sales people, marketing
researchers, and advertisers about the various influences on buyers’ choices
and how these influences can be employed to gain a competitive advantage.
The argument that companies should take advantage of the various influences on consumers’ choices might raise at least two concems. First, it
might be argued that leading consumers to purchase products and services
that they would not have otherwise selected can increase sales in the short
mn but will hurt the company in the long mn, because consumers will not
be satisfied with their choices. This argument, which should apply equally
to many other marketing practices (e.g., many types of advertising),
assumes that without these infiuences on their choices consumers would
make the purchase decisions that would give them the most value. However,
consumers often do not know exactly what they want and what the values
of products are for them, which is why they are so susceptible to influence
in the first place. Thus, if consumers are uncertain about their preferences,
it is not at all clear that the products they would have purchased without
being subjected to the influences discussed here would lead to greater satisfaction than the products that would have been purchased with such influences. Furthermore, marketing tactics based on knowledge of the various
influences on consumers’ choices are intended to supplement rather than
substitute for the underlying principles of delivering quality in all aspects
and building long-term relationships with the customer.
A second concem that arises is whether the proposed tactics are deceptive or unfair. Consider the following illustration of this question. Dental
Get Closer to Your Customers by Understanding How They Make Choices
83
patients often need to decide whether to accept their dentists’ recommendations regarding (costly) treatments that would be beneficial but are not
essential, even though they have no way of evaluating the merit of the
suggested treatments. To help patients decide, some dentists present two
treatment options, with one being clearly less attractive than the other.
Thus, to convince a patient to undergo a comprehensive gum treatment
(“scaling”), some dentists present a second altemative, namely, to go to a
periodontist to have a very painful gum surgery that offers uncertain success prospects. Apparently some dentists discovered that patients are more
receptive to scaling after considering surgery. The question, then, is
whether such tactics are unfair and/or deceptive.
While a detailed analysis of this question is beyond the scope of the present article, it should be noted that the Federal Trade Commission (FTC) is
unlikely to consider these tactics to be unfair or deceptive. First, the consumer “injury” (associated with the influence on choice) caused by these
tactics is not expected to be significant, because such tactics most often
affect purchase decisions when the differences in the values of the considered altematives are relatively small (although, as the dental example illustrates, the “injury” could be significant if buyers are unable to evaluate the
options). Second, it might be argued that, in most cases, consumers acting
“reasonably” can avoid these influences. Third, the proposed tactics are not
different from many commonly employed marketing practices (e.g., using
popular background music in an advertisement to increase sales), which
involve influences on purchase decisions without changing the underlying
value of the promoted products. And fourth, it will be difficult, in most
cases, to determine whether the primary motivation of the seller is to
manipulate the buyer or merely to present relevant information. For example, a dentist may feel a professional obligation to present both of the available options for treating gum disease, in which case the fact that one of the
presented options happens to be perceived by patients as less attractive than
the other clearly cannot be regarded a deception or an unfair practice.
Still, the use of such tactics that capitalize on people’s limitations does
raise ethical concems. The current trend of using consumers’ wants as a
guide for marketing strategies, rather than trying to manipulate them, is
consistent with the growing emphasis on the ethical quality of business
decisions. Conversely, a focus on influencing consumers’ preferences may
appear immoral and inconsistent with the goal of building tmst between
corporations and consumers. Thus, the ethical concems raised by buyers’
vulnerability and suceptibility to influence need to be addressed.
References
1. Thomas J. Peters and Robert H. Waterman, Jr., In Search of Excellence: Lessons from
America’s Best Run Companies, (New York, NY: Harper & Row, 1982).
2. American Supplier Institute, Quality Function Deployment, Version 2.1, Dearborn, MI.
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CALIFORNIA MANAGEMENT REVIEW
Summer 1993
3. John W. Payne, James R. Bettman, and Eric J. Johnson, “Behavioral Decision
Research: A Constructive Processing Perspective,” Annual Review of Psychology, 43
(1992): 87-131.
4. See, e.g., Paul E. Green and V. Srinivasan, “Conjoint Analysis in Marketing Research:
New Developments and Directions,” Journal of Marketing, 54 (October 1990): 3-19.
5. Joel Huber, John W Payne, and Christopher Puto, “Adding Asymmetrically Dominated
Altematives: Violations of Regularity and the Similarity Hypothesis,” Journal of Consumer Research, 9 (June 1982): 90-98.
6. Itamar Simonson and Amos Tversky, “Choice in Context: Tradeoff Contrast and
Extremeness Aversion,” Journal of Marketing Research, 29 (August 1992): 281-295.
7. Itamar Simonson, “The Effect of Buying Decisions on Consumers’ Assessments of
Their Tastes,” Marketing Letters, 111 (1991): 5-14.
8. Ravi Dhar and Itamar Simonson, “The Effect of the Focus of Comparison on Consumer
Preferences,” Journal of Marketing Research, 29 (November 1992): 430-440.
9. Itamar Simonson, Stephen Nowlis, and Kay Lemon, “The Effect of Local Consideration
Sets on Global Choice Between Lower Price and Higher Quality,” Marketing Science
(in press).
10. Simonson and Tversky, op. cit.
11. Simonson, Nowlis, and Lemon, op. cit.
12. Itamar Simonson, “The Influence of Anticipating Regret and Responsibility on Purchase
Decisions,” Journal of Consumer Research, 19/1 (1992): 105-118.
13. Irwin P. Levin and Gary J. Gaeth, “How Consumers are Affected by the Framing of
Attribute Information Before and After Consuming the Product,” Journal of Consumer
Research, 15/3 (1988): 374-378.
14. Daniel Kahneman and Amos Tversky, “Choices, Values, and Frames,” American Psychologist, 39/4 (1984): 341-350.
15. Richard H. Thaler, “Mental Accounting and Consumer Choice,” Marketing Science, A
(1985): 199-214.
16. Itamar Simonson, “The Effect of Purchase Quantity and Timing on Variety-Seeking
Behavior,” Journal of Marketing Research, 17 (May 1990): 150-162.
17. Itamar Simonson and Russell S. Winer, “The Influence of Purchase Quantity and Display Format on Consumer Preference for Variety,” Journal of Consumer Research, 19/1
(1992): 133-138.
18. Itamar Simonson, Ziv Carmon, and Suzanne O’Curry, “Experimental Evidence on the
Negative Effect of Product Features and Sales Promotions on Brand Choice,” Marketing
Science (in press).
19. Itamar Simonson, Stephen Nowlis, and Yael Simonson, “The Effect of Irrelevant Preference Arguments on Consumer Choice,” Journal of Consumer Psychology (in press).
20. Abbie Griffln and John R. Hauser, “The Voice of the Customer,” Marketing Science,
12/1 (1993): 1-27.
21. Rashi Glazer and Itamar Simonson, “Context Effects in Group and Individual Managerial Decision Making,” working paper, Haas School of Business, University of California, Berkeley, CA (1992).
22. “Irrational” influences can be loosely deflned as influences that appear inconsistent with
the assumption that consumers know what they want and choose the altematives that
offer them the highest values.
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