For marketers used to persuading consumers to choose their brands by using small increments of emotion and sleights of hand, the jig has been up for years now. Between sites solely devoted to organizing user reviews (like Yelp) or brands themselves incorporating consumer opinions into their models, consumers are so informed that they have become increasingly resistant to marketing’s manipulation. Less clear, however, is which mix now does have the most influence on these empowered consumers. Itamar Simonson, the Sebastian S. Kresge professor of marketing at the Graduate School of Business, Stanford University, tells Marketing Daily what he’s learned so far.
Q: In your new book, Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information (HarperBusiness), you and co-author Emanuel Rosen say marketing needs a total overhaul. Can you explain?
A: For the first time in history, people can assess the absolute value of things they buy. User reviews, price comparison apps and other digital tools mean we can buy things based on almost perfect information, instead of irrational perception. So marketers need to understand what influences this shift in decision making.
Q: Tell us more about your research.
A: Back in the 1980s, when I was finishing my Ph.D., I had done research that found when given two cameras, people mostly chose the cheaper one. But when given three, they generally selected the middle one, regardless of features. We called it “the compromise effect,” and chalked it up to irrational consumer behavior — marketers could manipulate consumers into choosing even a poor middle-of-the-road choice by adding more expensive goods to the mix. But when we repeated this recently, giving subjects access to Amazon reviews as they made their choices, that vanished. Most chose the cheaper camera, or the more expensive (and better) one. They based their choice on real information, not perception.
Q: So offering more choices, long a favorite way to overwhelm shoppers, is less effective?
A: Yes, option paralysis doesn't work as well, nor do assumptions about loyalty, the importance of brand, and customer irrationality. That calls into question much of the thinking behind brand positioning. In 1999, if you were buying a computer, you might have made that decision based on brand name, or where it was made; these are inaccurate proxies. Now you would use reviews, and the old rules don't apply.
Q: But by the same token, are not these empowered consumers also more suspicious of reviews, as more and more marketers have tried to control that process?
A: Absolutely, so that creates challenges for companies like Amazon, Yelp, and Zagat, who now have to work harder to maintain credibility. We are going to see them working harder to spot fake reviews, and dealing with those, and an increase in technology that can spot and eliminate fake reviews.
Q: You could argue that companies should stop conventional marketing completely, and put that money into developing better products. Could that happen — will marketers be out of work?
A: Certainly, in categories where people are basing assessments largely on the influence of others, building loyalty and brand positioning will become less important. But tracking what others are saying about your product in real time will become much more important, as will responding quickly. So the role of marketers will change. Technology that provides feedback on what consumers are actually doing will become even more important than it is now.
Q: Are brands going to die?
A: No, they will continue to have other functions. If you are someone who enjoys the status of walking around with a Louis Vuitton handbag, that's real. You like to be that kind of consumer.
Q: So for big marketers, what is the major shift?
A: Well, for one, it's to be more aware of smaller marketers, who also have the ability to create transparency through user reviews. It's also important to acknowledge the degree to which customers trust each other, not marketers.