Business Psychology - Latest Findings

Article No. 313
Customer Psychology Findings, by James Larsen, Ph.D.

Present at the Birth

New research reveals the origin of strong preferences.

Letís begin with an experiment. Pretend youíre going to make a large purchase. Youíre going to buy a flat screen TV. The Flat Screen TV Association has tested all the available brands and has a formula for comparing models that factors in all the important qualities of flat screen TVís, even the asking price, and this information is prominently displayed on each screen. Ratings vary from 1 to 100. Your local furniture store has three models, and their ratings are 80, 77, and 40. Based on this information, what are your thoughts about the three models?

For the record, this is called an asymmetrical dominance choice set.

Next, letís change the available models just a little. Instead of 80,77, and 40, letís make them 80, 60, and 40. Once again, consider this selection and record your thoughts.

For the record, this is called a compromise choice set.

In the first group, most people dismiss the TV with a 40 rating as obviously inferior, and this leaves them with two choices, 77 and 80. Most people select the 80 reasoning that the alternatives are close, and they might as well go with the best. The focus of interest is on the absolute qualities of the TV, and youíre expecting to get the best model available to you.

In the second group, the 40 and the 80 serve a different function. Both seem reasonable, but unnecessarily extreme. The 40 is too cheap, and the 80 is too loaded down with unnecessary features you probably wonít use. The 60 seems to be a good compromise, and most people choose this alternative. However, the focus in this decision is on the place of the chosen TV relative to the others, and this is a crucial difference, as Song-Oh Yoon, from Korea University recently found in a series of experiments.

Yoon is interested in preferences, particularly in strong preferences, and he conducted a series of experiments to explore a possible connection between the initial choice task customers face and the formation of strong preferences. Such a connection had been the subject of speculation in the past, but he found it and measured it. It exists, and hereís how it works:

Armed with an expectation that their selection is the best choice available, consumers fulfill their expectations with their experience of their chosen product. Your experience with your new flat screen TV, for example, wonít be informed by experience with other TVís. It will only be influenced by the expectations you brought to your experience of your new TV, and these expectations are driven by the second-place alternative. The 77 in this example serves to enhance the attractiveness of the 80 model. Other options are dismissed without a trial, and you develop a strong preference for this brand, one that will persist as long as the TV continues to provide good service, maybe even longer. Some preferences are so strong that parents pass them on to their children. Businesses depend up strong preferences to survive and prosper.

Another view of this research is also important, and should not be missed. Yoon not only found one way that strong preferences are created, he also found a way that weak preferences are created: through compromise choice sets.

When consumers recognize a compromise choice set and select the center, compromise option, their reasoning includes the other options. Since alternatives can be expected to evolve over time, consumersí preferences can be expected to change as well. They know it, and theyíre ready to abandon their preferences at their next opportunity, depending upon the other choices. Thatís not a very sturdy preference, and business owners who have positioned their products, services, or their businesses as compromise choices must be continually on their guard. A good customer today is lost tomorrow.

Finally, one of Yoonís experiments tested whether or not consumers recognized the influence of the other options in the choice set on their decisions. Consumers facing compromise choice sets (80, 60, and 40) did recognize this influence, so Yoon labeled it a cognitive (thinking) process. But consumers facing an asymmetrical dominance choice set (80, 77, and 40) did not recognize it, so Yoon labeled this a perceptional (non-thinking) process. The second alternative, 77, enhanced the attractiveness of the dominating alternative, the 80, but consumers had no awareness of this influence.

Yoonís findings have obvious implications for pricing and product positioning, but they also inform our advertising, promotions, and customer communications. Advertising for products positioned to dominate other alternatives, for example the 80 TV, should focus on information about their features. There is no need to mention competing, inferior options, and doing so will confuse customersí perception of a productís dominating position. Conversely, products positioned as compromise choices need to repeat the compromise message frequently so at least for today, they can retain their compromise position.

Reference: Yoon, Song-Oh, and Itamar Simonson (2008) Choice Set Configuration as a Determinant of Preference and Strength. Journal of Consumer Research, 35(August), 324-336.

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