Magazine article CRM Magazine

Influencing Customers in the Age of Information a Stanford Professor Shares Insights on the Shift from Relative to Absolute Consumer Decision-Making

Magazine article CRM Magazine

Influencing Customers in the Age of Information a Stanford Professor Shares Insights on the Shift from Relative to Absolute Consumer Decision-Making

Article excerpt

In mathematics, the absolute value of a negative number is always positive, but when it comes to customer satisfaction, a negative review is, well, just that. Price comparison apps, online reviews, and feedback from social media empower consumers and enable them to make decisions based on a wealth of information, leaving marketers with a much more demanding customer base. In the book Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information, coauthors Itamar Simonson and Emanuel Rosen explain how businesses can approach the challenges presented by the Age of Information and evolve alongside consumers. Simonson, a professor of marketing at Stanford's Graduate School of Business, shared the pair's insights with Associate Editor Maria Minsker.

CRM: How has the Age of Information transformed the way consumers make decisions?

Itamar Simonson: In the past, consumers had to rely on quality proxies, such as brand names and prior experiences, or succumb to the compromise effect. The compromise effect suggests that when given a set of options, such as three cameras that have different sets of features and are priced differently, consumers tend to choose the "middle-priced" one. In other words, if you wanted to shift their choices and preference, you could play with the set, knowing that many would go to the middle one no matter what they see. Now this effect is gone, and consumers rely on absolute value. With the Internet and social media, it's easy to get access to expert reviews as well as the opinions of regular users. There's so much information out there--and a lot of it is reliable--that consumers are less susceptible to irrational decisions.

CRM: How do you see companies responding to this change?

Simonson: For a long time, brand names were important indicators of the quality of the product, but they are much less important now. Sure, there are some folks out there that have, for example, an emotional attachment to Apple, but most consumers now evaluate purchases on a case-by-case basis. This creates an opportunity for lesser-known companies that understand this shift to get noticed for delivering better products. One example is Asus, a computer company that came out of nowhere. They used to just be an equipment manufacturer for other brands, but eventually they said, "You know what? …

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