There’s Power in All Those User Reviews; A wealth of online product information is making it harder to influence consumers with traditional marketing methods

December 7, 2013

There’s Power in All Those User Reviews

By MATT RICHTEL

You are no longer the sucker you used to be.

So suggests continuing research from the Stanford Graduate School of Business into the challenges marketers face in reaching consumers in the digital age. As you might suspect, the research shows that a wealth of online product information and user reviews is causing a fundamental shift in how consumers make decisions.As consumers rely more on one another, the power of marketers is being undermined, said Itamar Simonson, a Stanford marketing professor and the lead researcher.

In the study, participants were asked which of three Canon cameras they’d like to buy. Before deciding, they were allowed to spend a few minutes reading user reviews and other information about these and other cameras on Amazon.com.

To get the full impact of the findings, you first have to know the conclusions of a similar experiment decades ago by Dr. Simonson, then at Duke. In it, some subjects chose among three Minolta cameras: an inexpensive one, a midprice one and an expensive one. Another group was given a choice of just two of the Minoltas: the midprice one and the less expensive one.

The researchers found that when study subjects had only two choices, most chose the less expensive camera with fewer features. But when given three choices, most chose the middle one. Dr. Simonson called it “the compromise effect” — the idea that consumers will gravitate to the middle of the options presented to them.

The study showed how marketers could manipulate consumers. Just by presenting three differently priced options, they could get consumers to gravitate to a midprice one from a less expensive one. This finding further led Dr. Simonson and other scholars to describe widespread “irrational” behavior by consumers who made decisions not based on a product’s actual value but on how the item was presented relative to other products.

Flash forward to the new experiment. It was similar to the first, except that consumers could have a glimpse at Amazon. That made a huge difference. When given three camera options, consumers didn’t gravitate en masse to the midprice version. Rather, the least expensive one kept its share and the middle one lost more to the most expensive one.

“The compromise effect was gone,” said Dr. Simonson, or, rather, he nearly exclaimed the absence of the effect, underscoring his surprise at the findings. They are to be published next month in “Absolute Value,” a book by Dr. Simonson and Emanuel Rosen.

Today, products are being evaluated more on their “absolute value, their quality,” Dr. Simonson said. Brand names mean less. The results suggest that companies should spend less money trying to shape consumer opinions in traditional ads, he said, and more on understanding what and who are shaping those opinions.

Ran Kivetz, a marketing professor at Columbia who did his dissertation at Stanford under Dr. Simonson, calls the new findings “very significant,” but sees a catch: Digital tools can change the compromise effect but strengthen companies in other ways, letting them gather consumer data and gain instant feedback on what marketing ideas work. In theory, it could lead to more powerful, if subtler, manipulation.

“If I’m a marketer and I want to manipulate choices using the compromise effect, it will be harder,” Dr. Kivetz said. “But there’s another side, which is that it’s easier for the marketer to present information in different ways and to rapidly learn what people respond to.”