Article: Monday, 1 June 2015
Customers are accustomed to comparing products before choosing which one to buy – they might compare the megapixels, megabytes or size of a tablet computer, for example. However, the influence of these attributes can become either more or less important according to the size of the product range – or when the customer’s consideration set changes. New research by PhD candidate Ioannis Evangelidis from Rotterdam School of Management, Erasmus University (RSM) reveals that adding a markedly worse or better alternative to the list of available products makes consumers less likely to think about the importance of the attributes when they are making their choices. Similarly, consumers are likely to care less about each of these attributes when new and extreme alternatives (with even greater performance on one attribute but worse performance on another dimension) are added to the set of options under consideration.
Customers are presumed to prefer products that have the best performance of the product’s most important attribute. However, in his dissertation Preference Construction under Prominence, Ioannis Evangelidis shows that when a new product with a higher score on a less important attribute is included in the mix, consumers tend to choose a more similar intermediate option. And the addition of a new extreme option that scores higher on a more important attribute will decrease consumers’ tendency to choose the more similar intermediate option.
Ioannis also finds that adding an alternative that’s clearly worse – or better – than two existing options makes consumers less likely to differentiate between the two original options.
For example, even though a customer might originally prefer a tablet computer with 32 GB of memory costing €500 over a second tablet with 16 GB of memory but costing €400, she will be less likely to prefer the former over the latter when a third (and poorer performing) tablet with 16 GB of memory costing €500 is added to the selection list. Ioannis observes a similar effect when rather than a new inferior option, a tablet with 8 GB of memory costing €300 (a new cheap option), or a tablet with 64 GB of memory costing €600 (a new high quality option) are added next to the two original options.
In general, Ioannis argues that consumers are more likely to think about how much they care for the product’s various attributes and choose according to the one they care about the most when they choose from sets that do not include clearly worse or better options, as well as intermediate options. Additional options make people forgo their real preferences because they provide a shortcut to their decision-making. He explains that people may choose an option simply because it is better than another option in the set, or because it is a middle alternative – without thinking about how good or bad it is according to the performance attribute that they care about. This means that additional options can push consumers to choose alternatives that they wouldn’t otherwise prefer.
Ioannis’ dissertation has implications for managers of product lines and choice architecture. It significantly expands understanding of how people make decisions. For instance, product line managers can boost the sales of relatively weak products by bringing to market adding new alternatives that make consumers forgo their original preferences. It’s possible that sales of unattractive products can be boosted by adding a new option that is clearly worse than all other options in the set, or by adding an option that performs well on an unimportant attribute.
Prior academic research and common sense assume that differences in attribute importance weights should determine choice. All else being equal, consumers are presumed to prefer products that in their view are superior along the products’ most important – or ‘prominent’ – dimensions. This dissertation examines to what extent people use prominence (i.e., the relative importance of attributes) when constructing their preference and shows that the decision process exerts an influence on choice that is not captured by the classic theories.
First, we argue that the use of prominence in choice depends on the perceived reliability of the prominent attribute. When values associated with the prominent attribute are not perceived to be as reliable as values associated with the non-prominent attribute, decision-makers are more likely to make choices that are inconsistent with their attribute preferences. Second, we argue that the use of prominence in choice depends on the presence of relational properties between the considered alternatives. We found that decision-makers are less likely to employ prominence when expressing their preference about alternatives from a choice set in which dominance or compromise relationships are present. This dissertation holds implications for product line management and choice architecture.
Evangelidis has defended his dissertation in the Senaatszaal at Erasmus University Rotterdam on Friday, 12 June 2015. His promotor is Prof. Stijn van Osselaer (Cornell), and his co-promotors are Dr. Jonathan Levav (Stanford) and Dr. Bram Van den Bergh (RSM). Other members of the Doctoral Committee are Prof. Gal Zauberman (Wharton), Prof. Benedict Dellaert (ESE), and Prof. Stefano Puntoni (RSM).
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Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top-ranked business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become to become critical, creative, caring and collaborative thinkers and doers.
