Posted on: Monday 6th of October 2014
Consider two alternative scenarios.
- Scenario 1, would-be camera buyers are presented with just two cameras, one at £150 and the other at £230.
- Scenario 2, they are presented with three cameras this time: the first two plus one at a much higher price.
How do you think consumers respond to these two scenarios? The same finding has been repeated again and again.
In scenario 1, people opt for the cheaper camera. But in scenario 2, they tend to opt for what is now the middle priced one.. Nothing has changed about the cameras themselves. Only the way information about them is presented.
One of the first pieces of research of this sort was conducted in 1992 by consumer decision-making researcher Itamar Simonson with Amos Tversky (now recognised as one of the founding fathers of behavioural economics).
Since then, findings like this have been cited as evidence that consumers are ‘irrational’ in their decision making and very much under the sway of marketers have who can control the ways in which information about products and services is presented – what behavioural economists call ‘the choice architecture’.
More recently, Simonson did something researchers rarely do. Twenty years after his first research, he repeated it in the laboratory, where the original findings were replicated. Then he did something else. He tested them in a more real context – an Amazon page where a shopper is shopping online.
In this context, consumers were first faced with many different options and consumer reviews, and then taken back to the three options. What was the outcome? As Simonson writes in his book Absolute Value (with co-author Emanuel Rosen), “The compromise effect was gone. It completely disappeared. It vanished.”
This is important because, as Simonson notes in his book, the practice of twentieth century marketing was built around marketers’ ability to pretty much control the information consumers received about their products. Marketers were the ‘choice architects’. But now they are losing that privileged position. We’re in the midst of “a fundamental shift in our information environment is under way, with far-reaching implications for consumer decision making,” writes Simonson.
Thanks to digital price and product comparisons, peer and expert reviews and the like, consumers have access to tools and services that cancel out the informational advantages once held by marketers, argues Simonson. The cumulative effects of these new tools and services is resulting in “dramatic effects on how consumers make decisions and posing a major challenge to established ideas about marketing”.
Brands as information services
Of course, Ctrl-Shift has been saying as much for some time. Two and a half years ago our report Decisions Decisions argued that the emerging market for decision support services would become a “market that changes how all other markets work”. Earlier this year we started putting some numbers of the potential size of the decision-support market – a first estimate being around £5bn in the UK. But it’s good to see academic researchers with a long track record of research into consumer decision-making coming round to the same conclusions.
The big question, of course, is what should companies that are reliant on traditional marketing do about it? One answer is to intensify attempts to influence consumer decision-making processes and outcomes, or find new ways of doing so, perhaps by social media.
But there is another answer. If information is increasingly a tool in the hands of the citizen/consumer, then it follows that added consumer value comes from aligning with this trend: from providing the information consumers need to make better decisions (and earning recognition as a trusted source of such information), and providing the information services consumers can use to make decision-making both reliable and easy.
Building brands as information services is a new way to achieve old marketing objectives – consumer trust, engagement, brand preference – in new conditions. It is different in many practical details to traditional marketing: it changes marketing priorities and activities. But in one respect it’s exactly the same. It’s still all about identifying and meeting customer needs.