Wednesday, December 25, 2013

Review the Relevance of Reviews

In the latest issue of Harvard Business Review, Stanford University’s Itamar Simonson and his colleague Emanuel Rosen recount a 1992 experiment about pricing and item selection: A group of consumers were asked to choose between two cameras, one costing $169 and the other costing $239, as a preferred purchase. Then another group was shown those two cameras plus another, priced at $469, and asked to choose. With the third camera in the mix, there was a substantial shift in preference toward the $239 item, now considered as a compromise choice.
     The effect has been seen outside the laboratory in real retail settings. Some years ago, Williams-Sonoma found that after they added a $429 bread-making machine to their merchandise line, sales of the $279 unit doubled. When a higher-priced alternative is added to a list of choices, alternatives which cost less become more appealing to the shopper.
     Last year, Prof. Simonson and another Stanford researcher, Taly Reich, dusted off the 1992 experiment protocol and added an angle: Consumers were shown user reviews from Amazon along with the cameras. The result? No more compromise effect. People turned to the reviews for primary guidance.
     Encouraging positive reviews of your store and the items you carry is useful. But the research finds that the importance of reviews depends on the nature of the store and the items:
  • Items which incorporate state-of-the-art technologies and stores selling primarily those items will be selected largely on user reviews. 
  • For luxury goods and others purchased largely for emotional satisfaction, user reviews of product performance count for less, although what people say does play into the status image of the items and the stores carrying those items. 
  • With low-involvement habitual purchases, such as milk and facial tissue, user reviews are only a minor influence. 
     More generally, research at University of Alabama and Brigham Young University identified five major sources that shoppers use to gather information to help them make purchase decisions. The list is time-tested. Still, you'll want to update it by learning what is true for your shoppers. In knowing where your shoppers are getting their information, you'll be better able to allocate advertising and publicity resources.
     Have your sales staff ask customers how they determine purchase preferences. Also, if you conduct consumer attitude surveys, regularly include items asking about these five sources.
  • Visiting stores and retailers' websites 
  • Advertisements 
  • Sampling the items 
  • Friends and family 
  • Independent reviews 
Click below for more: 
Encourage Shoppers to Post Trustworthy Reviews 
Indulge Splurging HENRYs 
Ask Customers Where They Get Pre-Purchase Info

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