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Posts Tagged ‘Consumer behaviour’

It is hard to ignore the increased frequency at which men can be seen with a beard of some form or style on their faces in recent years. Beards have become popular especially among young men towards or in their early twenties. The renewed fashion of growing beards is making troubles for 115+ years old Gillette, once an independent company and since 2005 a division and brand of consumer packaged goods giant Procter & Gamble (P&G). The difficulties for the famed brand of razors and blades caused by changes in shaving habits of male consumers have been further exacerbated by increased competition and the growing shift to e-commerce. Yet above and beyond, Gillette faces a key challenge to defend and sustain its brand equity, arising from its reputation and position of leadership for many years.

Indeed ‘beards’ are far from being uniform. Beards, and facial hair in general, can be thick or thin, with or without a moustache, covering the cheeks or leaving them clear (see for example the  top 15 beard styles described by Gillette). Often enough the beard is not much more than stubble kept growing for a few days. But beards should be more than a matter of avoiding a shave everyday. As said above, there are different shapes and styles of them, and to keep the beard in form and in good appearance, one has to cultivate and nurture his beard on a regular basis.

  • From the late 19th century and through the first half of the 20th century the moustache was the epicentre of facial hair for men. It was a fashionable sign of manhood, and there were some creative and artistic designs of them.

According to figures from 2013, it was estimated that 17% of American men grew a beard of some form in that year, up from 14% in 2009. Beards are particularly frequent among young US men age 18-24: 35% in 2013 compared with 31% in 2009 (Experian Marketing Services, 14 March 2014; the estimate of ‘bearded men’ is based on a definition of men not using any shaving products or men who use electric shavers or shaving cream (foam) fewer than two times per week [to be distinguished from watching men and counting those bearded]).

The problem of Gillette seems to be aggravated, however, by a reduced frequency at which men shave per week. It is increasingly popular to grow a 2-day, 3-day or 5-day beard. If to judge by the frequency of using shaving cream, US men used it 4.5 times per week in 2009 versus 4.3 times in 2013 (mean 3.5-3.6 among 18-24 years old). Therefore, this is not simply a question of whether an individual uses shaving products, particularly disposable razors and blades, but how much one uses them (and thereof pays to buy them). It should be noted that just 15% of young men age 18-24 in the US have had a thick beard (using no shaving products) in 2013 (2009 13%);  among those in the next age group of 25-34 years old this proportion was a minor 5%.

  • In other data (by Mintel) for 2015, 41% of men using shaving products in the US do not shave daily (50% of  18-24 years old, 51% among 45-54 years old). Nonetheless, among those who do not shave daily not all is lost, probably far from it.

Hence, there is a different way, more optimistic, to look at the situation. Many of the men who grow some form of a beard do have to continue to shave regularly enough. First, it can be noticed that many of the young men grow a rather thin and light beard. Second, many grow a beard on part of their faces (e.g., around the mouth) and hence have to keep shaving the remaining areas where facial hair grows. Therefore, instead of looking at how men do not shave or shave less frequently, one should look at the frequency they do shave, when and how. Additionally, men who grow thin and partial beards can be encouraged and advised on nurturing their beards, keeping them in line and aesthetically appearing. In fact, Gillette demonstrates in videos on its country-websites how to do so with their manual shaving products, a step in the right direction (note: similar instructive videos are available from other sources as well). Nevertheless, more emphasis may have to be given to trimmers for cutting off more dense facial hair to offer customers a more complete solution.

Shaving manually with razor blades is a ritual that demands time, patience and care. It involves three main stages and requires the use of supplementary products (e.g., pre-shave lotion, shaving cream or foam). Part of the market of manual razors and blades has been captured years ago, especially in developed countries, by electric shavers for the greater simplicity of shaving with them and also for being safer. In the US, the ratio between shaving methods stands (2013) at about 3:2 — 6 users of disposable razors and blades to 4 users of electric shavers (Experian). Younger men (18-24) tend somewhat more to prefer manual shaving over electric shavers. If it gives any consolation, only 27% of American users of electric shavers apply the machine daily (i.e., 7+ times per week). In addition, users of electric shavers seem to have lowered their frequency of shaving (mean uses per week): 4 in 2009 versus 3.7 in 2013 (18-24 years old use them less frequently to start with, 2.5-2.6). A possible lesson from those revealed figures might be that men in developed countries should not be expected nowadays to shave daily, perhaps only half as frequently, using either manual or electric devices.

In some ways, as suggested below, the management of Gillette can draw back users of electric shavers to using the brand’s razors and blades. First, users of electric shavers may be convinced of a greater accuracy in which Gillette razor blades can be used to keep, for instance, a beard within its intended  border lines. Second, while men may not find the time and patience to shave manually during the week, they may see the benefits of doing so, instead of using the electric shaver, on weekends and holidays when they have more time to groom themselves. It may be possible to widen an already small overlap that appears to exist between the use of electric shavers and the use of disposable razors and blades.

  • P&G also markets the Braun brand of electric shavers (foil covering a straight-line blade). Philips, a leader in electric shavers (round rotary heads), is offering models with or without a pop-up trimmer on back of the handset shavers; a trimmer is also available as a separate device, as may fit the need to separately treat more dense hair. (Royal Philips has been re-aligning its business in the past few years, but it seems to have found a place for its shaving products in the personal care category for men as an extension to health-care technologies).

Gillette looks as an autonomous division of P&G, almost independent from it. It may get even more freedom than other brands in the house of brands of P&G. Indeed, Gillette has been an independent strong brand for many years and is still capable of being a driver of consumer choice without the help of the corporate name of P&G. Moreover, Gillette has been and remains the endorser of product brands such as Sensor (since 1990), Mach 3 (since 1998) and Fusion (since 2006; Fusion has two premium sub-brands ProGlide and ProShield). The three product brands may be strong enough each to share a driving power equally with the endorsing Gillette name. Some consumers may know that Gillette is owned by P&G and they may value the solid backing it can give Gillette, but it seems the P&G name has no more than a role of shadow endorser [1]. The root (US) website of Gillette and its various country-websites make no reference to P&G in their content; the only mention given is a title at the top left corner saying “Part of the P&G family”. This approach thus helps in instilling the notion that Gillette acts as a stand-alone brand (or brand tree).

The cost of replacing the disposable razors (‘handles’) and blades of Gillette has become a key issue for the brand in the last ten years. The ‘heads’ that contain the blades (e.g., Sensor with 2 blades, Mach has 3 blades and Fusion has 5) seem to cause the greater burden for users, especially as they have to be replaced more frequently than the razor on which the ‘head’ is mounted. Gillette has embarked on a major effort in the US to lower their cost and bring back customers — the US website includes a ‘Pricing’ page introducing a special Lower Prices offer on razors and blades (these are recommended retail prices that Gillette is careful to stress it cannot guarantee for every retailer). A similar ‘Pricing’ page appears on the Canadian website but without details of prices, while no such page appears on websites of other countries (e.g., Australia, UK, Germany, Argentina, South Africa). Additionally, Gillette publishes on its American website a ‘Letter to Consumers’ from its employees as part of its effort: showing how they listen to consumers, and expressing gratitude to those who have already returned after trying razors and blades of competitors (attributed to Gillette’s quality advantage and their lower price offering). It begs one to wonder why this effort is limited to North America.

A threat to Gillette has come primarily from online retailers such as Dollar Shave Club (now owned by Unilever) and uprising Harry’s. At first, men reacted to increasing costs of blades by growing beards and shaving less frequently, but then also by turning to online suppliers. Dollar Shave Club was estimated to have an online market share in 2016 of 52.4% on razors and blades, and Harry’s obtaining 9.4%. However, Gillette has also entered into selling its razors and blades online and launched a customer Club in 2014; in 2016 its share online was estimated at 21.2% (CNBC, 7 August 2016, estimate figures provided by Slice [Ratuken] Intelligence). An increasing interest in subscription plans was further noted by Mintel (5 Nov. 2015) — such plans offer razors and blades at lower prices with the advantage of providing also supplementary shaving products; all can be ordered together in convenient packages. Gillette had to adapt to the new conditions, including the shift in consumer behaviour and new market rules (i.e., e-tailing). The subscription scheme of Gillette Club is available mostly in Western countries of North America and Western Europe (notes: in some countries it is labeled ‘On Demand’, and in the scheme described online, orders are set to be fulfilled via retail stores).

  • Gillette was acquired by P&G in 2005 for $57Bn. In May 2018 the Gillette brand was ranked #32 on the List of Most Valued Brands of Forbes, valued at $17.1Bn. Market share of razors in the US has been sliding down during six consecutive years, from 70% in 2010 to 54% in 2016. Since 2012 the sales of Gillette have declined from a peak of $8.3bn to $6.8bn in 2016, and dropped another 3% in 2017 to $6.6Bn. There is an anticipation now that the Club would help to halt the decline in 2018.

The slogan of Gillette, sustained for several decades already, is “The Best a Man Can Get”. Gillette has been thriving for excellence in the area of shaving as a cornerstone of its brand equity. It has won its recognition as a leader based on high perceived quality of its shaving products, especially its razors and blades (as a ‘power brand’, it achieved a central category benefit [‘the closest shave’], and has been continually improving [2a]). An association that resonates with consumers is significant for brand-building; it has to be meaningful and relevant to them. David Aaker and Erich Joachimsthaler noted in their book ‘Brand Leadership’ that Gillette was among the brands “that have high customer resonance because their customer value proposition is highly relevant” [2b]. This could be the prime challenge of Gillette as a brand for the coming years: The high quality of its products is undeniable, but can it uphold its relevance to consumers?

 


In its struggle to bring customers back, a national advertising campaign to persuade men to shave again has missed its target. An Israeli advertising agency (ACW) created a campaign titled ‘The Dad Test’ featuring a ruler for measuring how much a beard or stubble hurts babies by scratching the baby’s face (2017). The campaign stirred protest and anger for being insensitive and aiming low (Mako-Keshet TV, 7 June 2017 [Hebrew]). First, the ‘problem’ the ad caught onto is hardly new. Second, the campaign took an offensive stand by raising a conflict, alienating customers, and thus was shooting in the wrong direction. (ACW is affiliated with international advertising agency Grey; this campaign does not seem to have appeared outside Israel).

The US-based advertising agency Grey New-York launched in the past three years ad campaigns, for American Father’s Day, that seem to adopt a more positive and constructive approach to father and son relations: (1) In 2016, ‘Go Ask Dad’ instead of turning to the Internet (The Drum, 19 June 2016); (2) In 2017, ‘Handle with Care’ featuring a son helping his elderly father shave (AdWeek, 22 June 2017); (3) In 2018, ‘Your Best Never Comes Easy’, meant to redefine or re-establish the brand’s slogan (AdAge, 11 September 2018). A leading theme in these ad campaigns is connecting fathers and sons with a razor product of Gillette as the pivotal mediator. They may also be noted for enhancing a functional benefit of Gillette with an emotional benefit.


 

An approach that may help Gillette paving its way forward is looking through the lens of The Theory of Jobs to Be Done developed by Clayton Christensen [3]. In order to attract customers and keep them, a company has to understand the goal or task the consumers wish to accomplish and focus on how its designated product will help them in making progress towards achieving their goal (i.e., ‘getting the job done’). Furthermore, jobs are context-dependent, that is, in different circumstances or conditions the consumer may need the same product to do differing jobs. In the case of shaving razors and blades, we may posit ‘jobs’ such as: (1) What type of look men wish to display with their beards — does the consumer want to foster a ‘neat and elegant’ look or is he interested in appearing ‘rough and tough’? — from here a company may derive the extent to which razors have to provide a close shave and accuracy; (2) The main concern of male users may be that shaving will be easy and convenient, and without taking too much time (say 10 minutes). An additional goal for shaving may require that it is more economically affordable. Taking these options into consideration, it may prompt Gillette to examine whether consumers can easily distinguish between the different razors it offers and trace which model of razor and blades is most appropriate for the job one wants to accomplish.

The challenges Gillette has to resolve may be divided into two levels. In the short to medium term the brand may be more engaged in tackling the contemporary fashionable trends in growing beards and thereby the shifts in shaving behaviour of male consumers. There is little point in speculating how long this period may last — the brand just has go through it and adjust its product offerings and marketing. In the longer term, more crucially, Gillette will have to be concerned with sustaining the relevance of the brand (e.g., fit for a job) to men, younger and older, and ensuring that associations they hold of the brand remain valid and meaningful. On that depends the future of Gillette.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1] Based on the model of brand architecture in: Brand Leadership; David A. Aaker and Erich Joachimsthaler, 2009/2000; London, UK: Pocket Books (paperback edition, originally published in 2000 by Simon & Schuster UK)

[2] Ibid. 1: [a] (p. 67) and [b]  (p. 89)

[3] Competing Against Luck; Clayton M. Christensen with Taddy Hall, Karen Dillon, & David A. Duncan, 2016; Harper Business (HarperCollins Publishers)

 

 

 

 

 

 

 

 

 

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Marketing and consumer researchers have long been interested in revealing and describing differences in the behaviour of consumers that arise from differences in culture between societies, nations and communities. Ignoring such differences can lead companies to making embarrassing and costly mistakes in international marketing. Culture sets ideas, values, norms, symbols and customs that influence and shape the thoughts, beliefs and actions of the people adhering to it; in particular, responses to marketing-oriented stimuli — products, advertising messages, websites, stores etc. — can vary specifically due to cross-cultural differences.

Kastanakis and Voyer (2014 [1]) propose that investigation of the effects of cross-cultural differences on consumer behaviour should look deeper into pre-behavioural processes, namely perception and cognition. Culture conditions perception and cognition, thus affecting how consumers perceive and understand stimuli, which consequently drive behaviour. Consumers develop perceptions and thoughts from the input of stimuli they attend to, but top-down processes set by pre-defined mind-sets, goals and beliefs (e.g., guided by culture) may inversely shape how consumers perceive, interpret and think of the information received from their environment. The researchers review ways in which culture influences perception and cognition in different functions or contexts. Similar to the greater part of research on cross-cultural differences, Kastanakis and Voyer concentrate on differences between Western cultures (individualist, espousing independence) and Eastern [Asian] cultures (collectivist, espousing interdependence).

Western cultures encourage people to see themselves by themselves, that is, developing an independent construal of one’s self-image; Eastern cultures on the other hand encourage people to see themselves as part of a group, that is, developing an interdependent self-construal. Thus, Easterners are predisposed to construe their self-image based on their relations with and similarities to others in a group of affiliation, compared with Westerners who view themselves as individuals independent from others, emphasising their unique traits. The tendency of Easterners to perceive and judge an individual person relative to surrounding others is demonstrated in this example cited by Kastanakis and Voyer: American and Japanese research participants were asked to judge the emotion of a central figure based on his or her facial expression when surrounded by other person figures showing the same or different expressions — “The findings indicate that the surrounding people’s emotions influenced Japanese perceptions but not Americans’ perceptions of the central person’s feelings.” [Based on research by Masuda, Ellsworth and others, 2008.] Contextual information (e.g., feelings of others) seems to matter for judgements in the East more than in the West.

In another implication of the independent-interdependent cleavage, whereas Westerners are mainly focused on achieving their personal goals, Easterners are looking more to help advance goals of the group they belong to, catering to others’ needs or wishes.  The authors suggest as a possible consequence that “Westerners perhaps tend to join groups to serve their own needs, whereas in collectivist societies, people serve the groups to which they belong”. This difference in approach may affect, for example, the way users of social media in North America and Europe participate and interact in these networks, differently from users in Asia (e.g., South Korea, Japan, China). It has been repeatedly argued that social media networks have not helped people in the West to socialise any better, perhaps even to the opposite, and that users engaged in social media may still feel in solitary. A similar discussion may concern also the use of digital platforms in the rising ‘sharing economy’ (e.g., Airbnb, Uber, LendingClub). Gaining true benefits from socialising and sharing platforms is based on collaboration, contributing to others or at least reciprocating helpful actions by others, not quite in line with values and norms taught by the individualist culture of the West (e.g., promoting competition and personal achievement).

The contrast between independence and interdependence further finds an expression in a respective distinction between thinking styles: analytic vs. holistic. Analytic thinking, associated with an individualist culture, is more focused on single objects and the attributes of each; holistic thinking, associated with a collectivist culture, is more attentive to the context or field in which any object is found. Thereby, Westerners following an analytic perspective would be more inclined to observe and judge objects in isolation, whereas Easterners (Asians) following a holistic perspective tend to consider the relations between objects observed and make judgements based on the context of a whole scene. This distinction can have important implications for the perception and evaluation of visual scenes. For instance, a Westerner would focus on a particular exhibit or display of products in a store (e.g., a dressed mannequin) while an Easterner would see the same display against the background of other in-store displays and interior decorations of the store. In front of a shelf display, an Easterner viewing it holistically would be more attentive to the collection of products on display compared with an ‘analytic’ Westerner focusing on each product at a time (note: such a difference may also be applicable to a screen display of products on a webpage).

The difference in perspective is applicable also in viewing photographs of scenes, not just when being physically present on-site. Easterners more accustomed to a holistic view would be more capable at capturing the gist of a photographed scene as it relies on perceiving relations between multiple figures and objects in the scene. Westerners following an analytic perspective, on the other hand, would be more capable at noticing the attributes of particular objects. It should be noted, therefore, that while people in the collectivist East may have the advantage of identifying relations better, people in the individualist West may have the advantage of observing object details better (i.e., could be judging single objects with greater scrutiny). It furthermore appears that people match their aesthetic preferences to their culture-orientated perspective. Kastanakis and Voyer give an example wherein Eastern portrait paintings or photographs “tend to diminish both the size and the salience of the central figure and emphasize the field”.  Such differences in perspective and thinking style should be considered, as the authors advise, in the aesthetic design of advertising materials and other communications as well as in retail sites.

Stronger relational processing has relevance to attributes, and moreover to a perceived relationship between price and physical product attributes used as intrinsic cues for quality. Lalwani and Shavitt (2013) provided ground support for the association between modes of self-construal — independent vs. interdependent — and reliance on a perceived price-quality relationship. The way people look upon their own self-concept vis-à-vis their relation to others radiates to their perceptions and processing of relations between price and quality attributes. Importantly, however, they show that the linkage is mediated by the distinction between analytic and holistic thinking styles. Interdependent (collectivist-oriented) consumers are more capable at processing price-quality relations, where holistic thinking in particular positively predicts greater reliance on such relationships [2].

In addition to visual processing and aesthetics, culture is known to affect perception, processing and preferences of smell and sound. Consumers may be biased to better recognise smells familiar to them in their culture or to better comprehend culturally familiar melodies. The bias occurs, as said by Kastanakis and Voyer, during recall and recognition before the information even enters the attitude formation, judgement, and decision making processes. Consider thereby the mixtures of styles and forms one would find in a country that absorbs immigrants originating from cultures different from each other or from the culture incumbent in the receiving country, for example in music and food. As people borrow from the traditions of communities of other cultural origins and adopt also from those typical locally, they get exposed to and experience mixtures of music melodies or food flavours. Yet, even with years passing certain things do not change — consumers may continue to feel more secure and comfortable with the familiar music genres and food styles they were raised on at home, associated with a given culture.

  • Kastankis and Voyer note a lack in cross-cultural research on taste perceptions; that is unfortunate because food is such a significant domain, but the smell of food may still have a cultural impact on consumers’ reactions.

Furthermore, the language one speaks can determine the perspective, individualist or collectivist, one applies. Immigrants, for instance, may change how they present themselves depending on the language they use: that of their origin or the one adopted in their current country of residence. The language carries the values and norms of a culture it is associated with, such as how people perceive themselves. For example, bi-cultural Chinese-born people refer to their own internal traits and attributes to describe themselves in English but describe themselves in relation to others when using Chinese. Kastanakis and Voyer argue that language is not emphasised enough as an aspect of culture: “language triggers a culture-bound representation of the self”.


Idiocentrism and Allocentrism are views held by people at the individual level in parallel to the individualist and collectivist cultural views of societies, respectively. This reference to individual-level culturally oriented views becomes particularly prominent when the personal view does not match the societal-level view dominant in one’s country of residence: for example, when people of Asian origin living in the United States, a country with an individualist culture, personally maintain an allocentric view.

Dutta-Bergman and Wells (2003) found some interesting differences in values held and lifestyles practised by idiocentrics and allocentrics living in the American individualist culture. For example, idiocentrics are likely to be more satisfied with their financial situation and optimistic than allocentrics; idiocentrics are also more disposed to be workaholic, yet are more innovative. Allocentrics are more likely to be health conscious; additionally, they are more inclined to invest in food preparation and other chores at home and to engage in group socialising than idiocentrics [3]. (Note: Idiocentrism and Allocentrism are approached as individual-level dispositions adopted by people; they are not necessarily contingent on any immigration status or country-of-origin.)


 

The differences between individualist and collectivist cultures may influence human cognition in several more ways explained by Kastanakis and Voyer. Key areas involve self- versus others-related cognitions, self-esteem, and information processing. Briefly mentioning some noteworthy implications: (1) People in Western cultures have a stronger tendency to make dispositional attributions for behaviour (e.g., to one’s personal traits or competencies) and discard situational factors, as opposed to Easterners; (2) Causal reasoning in Eastern cultures tends to give greater consideration to interactions between personal (dispositional) factors and situational or contextual factors than in Western cultures; (3) In Western cultures people will prefer to classify products based on typical functional or physical attributes of categories (i.e., rule-based classification) whereas in Eastern cultures people will rely more on family resemblance and relationships between products (i.e., relational classification); (4) In persuasion, Westerners (e.g., Americans) prefer to take side in conflicts while Easterners (e.g., Chinese) are persuaded more by compromise solutions and are more ready to deal with contradictions.

Readers are reminded additionally of the differences in processing of visual information already described earlier (i.e., between the Western object-focused analytic approach and the context-orientated holistic approach in the East). These differences may be well-connected with the approach consumers take in judging and classifying products visually displayed (e.g., physically in-store, virtually in print or screen images).

Three final comments to conclude: First, as always we have to be careful with generalisations made such as between ‘Western culture’ and ‘Eastern culture’. There are differences in elements of culture between countries associated more closely with either the individualist or collectivist streams of culture. There is furthermore variation among communities and sectors within countries, and some tendencies may also be considered as individual-level differences (e.g., holistic vs. analytic thinking). Second, there is need in the West to explore and deepen the understanding of other streams of culture (e.g., African, Middle Eastern, South American). Third, Kastankis and Voyer address changes in perspective and behaviour of people in Asian nations caused by their growing exposure to the Western individualist cultural orientation. However, a more salient phenomenon prevalent in recent decades seems to be the immigration of people originating from non-Western cultures coming to live in countries of the West. Especially in Europe, the extent of exchange in ideas, values and customs between people with Western-orientation (‘incumbents’) and non-Western cultural orientations (e.g., from Africa and the Middle East) should have great impact on the balance between cultures on the continent (as well as in the UK), and not least the kind of consumer culture that will prevail in future.

International marketers must keep fully aware of and account for the differences between Western individualist orientation and Eastern collectivist orientation, and more so their multiple facets of manifestation in perception and cognition. Particularly important is paying attention to the differing thinking styles (i.e., analytic vs. holistic thinking) for their possible implications in processing and responding, for example, to persuasive attempts in advertising in online and offline channels, store design and visual merchandising. Extending marketing plans or initiatives across seas and borders, without making consideration for these potential differences, may significantly diminish the effectiveness of the actions taken in new destination markets to the extent of proving utterly precarious.

Ron Ventura, Ph.D. (Marketing)

References:

[1] The Effect of Culture on Perception and Cognition: A Conceptual Framework; Minas N. Kastanakis and Benjamin G. Voyer, 2014; Journal of Business Research, 67 (4), pp. 425-433. (Accepted version is available at eprints.lse.ac.uk/50048/ on LSE Research Online website).

[2] You Get What You Pay For? Self-Construal Influences Price-Quality Judgments; Ashok K. Lalwani and Sharon Shavitt, 2013; Journal of Consumer Research, 40 (August), pp. 255-267 (DOI: 10.1086/670034).

[3] The Values and Lifestyles of Idiocentrics and Allocentrics in an Individualist Culture: A Descriptive Approach; Mohan J. Dutta-Bergman and William D. Wells, 2002; Journal of Consumer Psychology, 12 (3), pp. 231-242.

 

 

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Choosing reading books can be a serious undertaking. Even the choice of a novel or a detective book may not be taken lightly by readers. There are different ways in which consumers may get into choosing a book; some search and selection patterns in the decision process carried out by consumers can be observed in bookstores. It is possible to infer from observations, with some limitations, styles of shopping for books, involving certain tactics or rules utilised in the process. Book fairs especially offer an interesting and vibrant venue for book shopping with options not regularly available at stores. Such events may also provide an opportunity to detect new or distinctive patterns and styles of shopping that arise from the dynamic happening and busy environment.

The open-air Hebrew Book Fair has been taking place in a main central square in Tel-Aviv for over forty years in every June. Originally the book fair was held for a week but in recent years it has been extended by three more days due to its high popularity. It must immediately be noted that the book fair is an event reserved for publishers. It is a kind of ‘direct-sales’ event in which publishers meet face-to-face with readers to present their book collections to them for purchase on special discounts (the main bookstore chains run their own parallel competitive events with discounts in-store or near their stores). Visitors at the book fair can find Hebrew-native books and books translated to Hebrew from English and other languages; topical categories cover, for instance, prose, poetry  and novels; detective and thrillers; history, science, and other areas of knowledge; and last but not least children & youth books. Such an enormous selection of books is not available ordinarily at bookstores in the country. The larger publishing houses may occupy ten or more counters in-line.

The visitor traffic at the event, as in this year, suggests that print books are still highly desired by people. Nevertheless, to attract even more visitors, particularly families with children, the organisers added in the past few years food and drink stands and a sitting area with tables in the square’s centre. It may help to increase the convenience to visitors and festivity of the event though it could sacrifice a bit the respectability of this literary event. However, it may be a matter of necessity or priority to make the event more popular and vibrant so as to bring larger reader audiences back to books.

As suggested above, this book fair is a busy event with tens of thousands of books of numerous titles on display from different publishers and across a wide range of topics. It retains also a long tradition wherein Israeli authors attend to sign their books for visitors-buyers. Some book counters may become crowded with shoppers during certain hours through the afternoon and evening (i.e., after work and school hours) which can make it harder to access books and check them out more deeply. Hence it may require shoppers to apply tactics for choosing books of their interest and taste a little differently than they would while shopping in a bookstore. Yet visitors find their ways to browse books, sometimes more loosely, sometimes more meticulously; it seems to happen overall in an orderly manner, each visitor getting his or her place at a book counter or desk.

Visitors can be seen walking along counters of a given publisher, staying at a counter for a while to observe its books, then moving along. After selecting a few books from separate but adjacent counters of the same publisher, the visitor often returns to a previous counter to pay. However, visitors-buyers are also offered the option to keep books already selected behind the counter (a combination of convenience and security for both sellers and customers).

Three forms of browsing candidate books of interest can be primarily noticed: Firstly, eye-scanning the front covers of books from top. Secondly, lifting a book, turning it over and reading its back cover — an abstract, short review recommendations, or a brief biography of the author(s). A visitor may examine a few books from a counter this way, but being able to do so comfortably may truly depend on how many people are already at the counter. Hence, visitors who cannot find a free spot at a counter are often seen looking over a counter-top quickly, moving to the next counter, then coming back if perhaps there was a book that had caught their attention previously to check on the book more closely. But visitors generally do not have to wait too long to find a free spot at a counter. Thirdly, one gets to open a book and sample-read sections from its pages, or looking at photographs, charts or maps inside the book. Instances of reading inside books were observed much less frequently.

Examining a book’s content more deeply to form a better founded impression or opinion of it is more difficult and hence is less likely than would be seen at bookstores. Yet, if time and space at the counter allow, it is possible to find a visitor examining a book more meticulously. It appears to be particularly relevant and appropriate for ‘knowledge books’ such as in history, sciences and technology, the social sciences, economics and business. For example, a visitor in his ~70s was leaning over an open book on the history of WW2 by Max Hastings, appearing concentrated in reading and observing maps and photographs (‘Inferno/All Hell Let Loose’, translated). He seemed interested overall in history of the two world wars of the 20th century, judging from other books he browsed; after nearly ten minutes he handed three chosen books to keep, and continued searching [A].

  • Please be advised that the age estimates of visitors are based on observation alone in best judgement of the author.

Comparing books on a given topic can be an even more difficult task to perform at a counter. It is hardly practical to hold two books open simultaneously for comparison, but visitors may examine books sequentially in attempt to evaluate and choose which one is more suitable to their objectives. For instance, a visitor (male, ~60) looked into a book — its introduction, inner pages, and content — on the history of the state of Israel (by Michael Bar-Zohar), but he apparently did not find what he was looking for as he asked the seller if there were books on the period preceding the establishment of the state. The seller brought him two books (concerning the Arab-Israeli conflict): he opened one of them, went through its pages, and put it aside, then browsed at greater length pages in the other book and looked at photographs. Eventually he chose the first book on the state of Israel, after looking into it again, and the third book (total time 15 minutes, [B]).

The search and examination of books sometimes involves moments of deliberation. In some cases, as above [B], the visitor may ask for advice from a seller. Alternately, as in another case observed, a seller who noticed a visitor (female, 30-35) hesitating, offered her help with recommendations. The visitor-shopper was already holding two books and the seller brought her more books the latter thought may suit the shopper accordingly in prose or novels by Israeli authors. They continued talking about the books as the shopper browsed loosely inside some of the books or read from the back cover [C].

Deliberation can take some additional forms. For example, a female visitor (~45) was considering the purchase of a book on equity investments. She was checking in particular a book purporting to be adapted and designated for women. The visitor went through some book pages, being unsure it was a good choice, and seemed recoiled upon noticing the book was from 2011 (i.e., ‘Is it still valid and relevant?’). But eventually, following a short exchange with the (female) seller, the visitor-shopper decided to take it anyway [D]. A visitor (male, 25-30) at another publisher has shown an intriguing shopping process with deliberation to the last moment: He was already holding a book when moving to another counter to look over books of prose, selected one of them, then browsed some science and knowledge books (e.g., by an Israeli scholar, lecturer and prolific writer on sciences and philosophy, Haim Shapira), but collected none. Subsequently the shopper moved to a more remote counter where he picked-up instantly a book, came back to the previous counter of science and knowledge books to purchase three books. However, after he had already paid and the books were put in a bag by the seller and handed over to him, he took out one of the books and picked-up instead a different book in front of him on biblical philosophy (by Shapira, 10 minutes, [E]).

Shopping patterns can range from exploratory, looking for opportunities with little idea pre-conceived in mind, to being pre-minded, that is, having a goal to find a particular book. Moreover, visitors-shoppers may mix styles at different levels of search, examination and choice while shopping from the same publishing house. Mixed tactics could be seen above in the shopping of visitors [E] and [C]. Following are two more examples of this kind: (1) A young visitor (female, ~17-18) was browsing prose or fiction books, going through pages and reading inside some of the books or reading from the back covers of others, then passed to looking from top at books in adjacent counters of the publisher (a more haphazard quick scan), finally returning to the first counter to buy [F]; (2) A visitor (male, ~45, at a counter of books on history and politics) took a cursory look over a biography of one of Israel’s prominent leaders of the past, kept searching and shortly after found a book on the history of Sephardic Jews (‘Marranos’, Yirmiyahu Yovel) and looked into the book more dedicately; the visitor, who seemed overall interested in Israeli and Jewish history, picked up a book at the last moment by an Israeli historian on the commanders of the Nazi concentration camps (‘Soldiers of Evil’) and purchased it with the book on Marranos [G].

  • In a curious brief episode, demonstrating an apparent pre-determined choice of book, a visitor in his mid-40s approached a counter, stood pausing or looking over the books, then instantly extended his hand to pick-up three copies of a book on the Bitcoin, which he purchased; one of the sellers seemed so impressed that she asked to take a photo of him holding the books with her mobile phone to which he smilingly agreed [H].

The main publishing houses presenting at the book fair offered deals of ‘3 for 100’, that is, three books for 100 shekels (~$28 in June). One publisher even offered five books for 150 shekels. These deal offers were displayed on signage boards above counters. A fourth book could be purchased for 50% of its list price, but this offer was not displayed. Visitors-shoppers who had already selected three books enquired whether there would be a discount for additional books, and were replied with the 50% offer. For instance, visitor [A] so enquired before continuing his search. Another visitor (male, ~30) who was holding four books by Ken Follett seemed unable to make up his mind which three to buy, posed the question about a fourth book discount, deliberated a little longer while shuffling the books in his hand, and finally passed all four to the seller to purchase [I]. In some cases, however, it was the seller who initiated the offer of discount on a fourth book in hope to increase the sale. Visitor [C], for example, accepted an offer as such and bought four books, probably in appreciation of, and perhaps feeling obliged to reciprocate, the advice she received from the seller. Conversely, another visitor (~30), who selected three books in history and politics on his own refused the offer by the seller when submitting his books to purchase [J].

Visitors were induced by these deals to buy more books from any single publisher. A single book could usually be bought with a 20% discount but this offer was not made public, proposed by a seller only on request of the visitor. This policy makes it simply unworthy economically for visitors to cherry-pick the books they most require or desire from different publishers (consider that many of the books cost 80-120 shekels each!). The greater problem, however, is that it may drive consumers to buy books they do not care for or do not have time to read soon. Henceforth, visitors could end up buying a pack of books, collected from several publishers, for the whole year to read. It puts quantity before quality in buying books. The ones standing to suffer from this policy are of course the book retailers who will likely see fewer shoppers at their stores in the coming months. From a publisher’s viewpoint, they may see it as only a reprisal to similar deals offered at bookstores throughout the year.

Visitors-shoppers at the book fair appear to use composite decision strategies for choosing books at the counters of a publisher: a different type of rule or method may be fitted to choose among different books (e.g., picking-up a book planned ahead to purchase, using book titles or author names as memory cues for books they have considered recently, examining inside books with greater scrutiny to evaluate them). Furthermore, the book shoppers are searching for informational cues, starting from the front cover of a book, going to the back cover, then getting inside the book. They could be extending the search for cues about a book as they feel is needed (e.g., cut the search short if sufficient information has been retrieved) or are stimulated to learn more about the book (e.g., intrigued by information on the back cover to look inside).

The difference in shopping for books at the book fair compared with bookstores seems to be not so much in the types of rules or tactics used as in the extent and frequency they are used. Book shoppers may feel at greater ease to search for a book at a store with a print of a book review cut from a newspaper (as observed in a store) than they would in the book fair (surely the same applies if one seeks guidance from his or her smartphone). One may also feel more comfortable and free to browse inside a book at a bookstore, at a quiet corner to stand or perhaps on a couch or sofa to sit and read, than at the book fair. Yet, visitors of the book fair seemed to adapt quite well to the conditions at the counters; they appear to use rules or methods similar to those that can be seen at bookstores, only adjusting them to search and choose more efficiently, particularly by restricting deeper examinations to situations where a book demands it.

  • Additional research methods can aid in identifying and verifying more accurately the book images and information viewed by visitors and the decision rules they use. Those methods include particularly eye-tracking and a real-time protocol of the shopping decision process (‘think aloud’). But executions of such methods may be inconveniently intrusive and interfere with the natural course of the shopping trip for visitors. Another method to consider with less intervention is an interview with a visitor-shopper after concluding a shopping episode.

Gaining greater insight into shopping for books and understanding the decision processes visitors-shoppers follow at a book fair can help in devising new designs of book displays (e.g., better organise books by topics or themes, easier-to-find) and improved practices to accommodate the visitors at the event. The organisers and publishing houses may also come up with a new co-operative scheme that would allow visitors to accomplish more effectively their objective in selecting and buying the books that interest them most or they desire to read.

Ron Ventura, Ph.D. (Marketing)

 

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Transparency; reliability; trust: These key terms are rehearsed and highlighted many times in textbooks and business books, academic and trade articles about managing customer relationships. Holding up to them is based, for example, on being honest, truthful and fair when making product or service offers to customers and in any other dealings between a company and its customers. However, those concepts that are good in managerial and marketing theory are too often lost when it comes to practice.

In addition, experts, technology consultants and other advocates of digital marketing are praising the capacity gained by companies to know so much about the behaviour and personal characteristics of their customers. One of the great benefits of this customer knowledge is in enabling companies to construct offers that will closely fit the needs, preferences and consumption or usage habits of their customers. Again, a gap emerges between what companies are supposedly capable to do with digital technologies available to them, including information and tools, and what they actually do. More accurately,  oftentimes companies are not doing enough in utilising those technologies to the intended purpose of creating better fitting offerings and messages.

The present post is based on a true story of a troubling journey to acquire an iPhone from a mobile telecom service provider (it will be called here ‘WM’). But this post is not just about the case of a particular company. Similar forms of problematic conduct are likely to be encountered at competing mobile service providers as well as other telecom service companies such as TV (cable and satellite), telephony (voice and data) and Internet providers. Moreover, at least some of these types of flawed conduct will be familiar to the reader from interaction with service providers in other domains (e.g., banking and finance, credit cards, insurance, healthcare, travel and tourism). In essence, this conduct refers most typically to providers of contractual services, and particularly when services extend over months and years.

An upgrade of a customer’s mobile phone is often accompanied by a modification of his or her service package; it is justified especially when a large generation gap exists between the previous and the new model. Two-part and three-part tariff schemes have been common in mobile communication for many years, splitting the price of service between fixed and variable components. Usage possibilities and patterns have changed, however, with smartphones, pertaining in particular to the online flow of data and the use of mobile applications (‘apps’). Service packages more frequently combine bundles of included (‘pre-paid’) units — minutes (voice), messages (SMS), and data MBs/GBs (mobile websites and apps); the weight of variable cost (i.e., based on price per unit), drops vis-à-vis a fixed cost component.

Subscribed customers are encouraged to pre-commit to ever larger bundles or unit quotas, some of them could constantly be left unspent each month. At least in one category it is sensible for mobile service providers to ‘give away’ a large quantity of messages amid the expanded messaging by customers via free chatting apps (e.g., WhatsApp, Facebook’s Messenger). The marginal cost per unit of any kind could be much lower now for the mobile network companies to make it economic for them to offer larger bundles, and thus attract customers to their ‘great value’ plans (i.e., the customer gets lots of ‘free’ units). Albeit, if customers do not utilise large enough portions of their quotas, they could end up paying for units they never get to benefit from.

A service plan was offered with the new phone purchased, including 10GBs of data, 5000 minutes and 5000 messages per month. This volume signalled a dramatic increase from my previous consumption levels. No doubt the new smartphone could support a huge data volume not possible with the previous semi-smartphone model, but also a volume hard to imagine how it may be used. Nor was it perceivable how to use anything near 5000 SMS. That is the magic of large numbers — they can be fascinating and captivating, yet meaningless at least in a short to medium term. The sales representative at the store and service centre of WM promised that it will save up to 45% of my bill so far. With the service package I get also ‘marvellous high-fidelity’ wireless-Bluetooth earphones, supposedly as a bonus or gift. No other plan was suggested. The relation of the earphones to the discount was not explained. Protesting that I do not really need those earphones did not help. It was awkward, but then it seemed that the enlarged traffic volume, that one might learn how to take advantage of, with a reduction in monthly cost could be worth it. The value of the earphones was negligible to me (but apparently not to WM). That is probably where System 1 got the hold of me. When not feeling on solid ground, swapped with documentation, and distracted, one may fail to pose difficult, intelligent questions;  System 2 remains dormant or blocked. It was a combination of desire to believe the offer is good for me, and to trust the company that it will treat me fairly.

The secret behind the earphones was revealed in the next monthly bill. If paid in cash, their price was about $150 vis-à-vis $900 for the iPhone. I agreed to pay for the iPhone in 12 credit installments (adding  5% in cost). However, the additional and unexpected payment for the earphones was set to be spread over 36 months (+65%! added to price in cash). The discount on service was for 12 months. The payments for the earphones would “eat” much of the discount during the first year. Furthermore, they will drag for another 24 months while the cost of service package returns to its previous level, though of course with a much greater usage allowance. Lesson: Beware of ‘free gifts’ and make sure to get all the details (see more in the section below on contracts).

This has brought me promptly back to the service centre — the staff refused to take their earphones back and gave me another nice demonstration of their performance. However, with the help of a kind supervisor we agreed that payments for both iPhone and earphones will be changed to 6 instalments with no interest (see more in the section on execution).

The Bluetooth earphones may well be a good product and the representatives were right to offer it, but it is wrong to impose the earphones as a ‘bonus’ or incentive if the customer is not interested and declines the offer. Furthermore, at least one other package option should have been recommended that would be more aligned with previous usage in recent months. A smart system should know how to use past behaviour of the customer as a benchmark and propose a reasonable expansion of usage levels of minutes, messages and data. First, it would make the customer feel that the company knows him or her (e.g., needs and usage patterns) and is trying in accordance to provide the most suitable personalised solutions. Second, when the quota of units posits a sensible ‘ceiling’ to the customer it may serve as a goal or an aspiration level to gradually increase his or her usage towards it, and then upgrade the service plan. Otherwise, the customer may be just lost, having no appreciative reference for scaling one’s personal usage levels (perhaps that is the objective, to let customers with less self-control carry away, but that is beyond the scope of this story).

Signing contracts to purchase products or receive services is frequently a sensitive matter and a host of potential pain points. This happens because customers usually cannot fully or even adequately read the contract and comprehend it at the time of transaction, and they are not sufficiently encouraged to spend the time reading and asking questions. The contract for my smartphone included, for example, the terms of payment, basic support, terms of usage,  liability and warranty, etc.. On each desk at the store and service centre of WM stands a tablet in portrait position. Regularly, it displays ads for services and products. However, WM saves on paperwork and employs the screen also to display contracts that can be signed digitally (later sent by e-mail). Reading the contract from the screen is not very convenient and the customer also cannot control the display to the pace of his or her reading. One is quickly brought to the place for signing. The contract for the earphones was separate in origin from the iPhone’s (later corrected); when the representative came to it, he jumped to the signature position which incidentally fell at the top of the screen. When asked to see what comes before, he said this is simply to confirm that I accept the earphones. At that point I wanted to trust him and WM. This turned out to be a mistake. Lesson: Never agree to sign a contract on a screen without seeing the previous screen pages (as you should not do when signing a paper contract). The tablet screen may appear informal and friendly but the contract is binding.

  • In fact, by returning to the issue of service plans, the tablet already on the desk can be used cleverly for displaying service options to a customer while taking into account his or her personal usage patterns. That is, the company can show the customer what would be the cost implication of a proposed service plan given current usage levels, and how it may change if usage levels increase by X%.

On top of all, bad execution of proceedings can temper even actions taken in good faith. It may happen as a result of neglect, lacking proficiency by the staff (e.g., how to use the computer system), or flaws in computer software (e.g., poor execution of instructions). Here are two examples — no attempt is made to guess what has caused them:

As told above, the payment arrangement was changed with special managerial consent to six instalments with no interest, as an option in the contract allows, for both the iPhone and earphones. Unfortunately, a notice from the bank as well as the credit card monthly bill soon revealed that the whole amount was charged in a single payment. The trap is apparently in the phrasing of the contract (translated): “The sum of $$$ that will be charged in one payment (or up to six payments to the choice of the customer at the time of acquisition)”. The phrase ambiguously does not specify in how many (equal) payments, up to six, that (cash) price will be charged. This ambiguity has led to practically ignoring the content in parentheses and what was agreed accordingly. It is noted that a statement on an option of payment in instalments with interest explicitly indicates the number of payments and amount of each one. The phrasing of the first statement must similarly be fixed for that option to have any validity.

In the second case, the company left in place a monthly charge (~$6) for a quota of 70 SMS from my previous service package. Obviously, this number is negligible relative to the new allowance of 5000 SMS a month in the new service plan with the iPhone. They should have automatically removed this obsolete component together with other components from the older plan. The customer service representative at the call centre argued that I should have asked it to be cancelled. That is, instead of apologising for an honest mistake, and possibly reimbursing me for the past month, she made it look as if I may have wanted a non-significant addition of 70 SMS to 5000 SMS (>70:1 ratio). That was already infuriating because it made no sense at all. Lesson: Always check your bills carefully.

The customer journey to purchase an iPhone evolved into a kind of chain of pitfalls, acts of malpractice, and errors of unknown source or cause. It must be emphasised that the troubles are concerned with the envelope of services that enable using the iPhone and not the device itself. It is a story of failure of sales and service representatives to listen, a tendency to repeat answers regardless of the customer’s response (i.e., lack of sensitivity or rigidity forced from above), and possibly a skill problem in retrieving information and instructing their computer systems correctly. Where supervisors or managers do try to fix things, organisational and technological pitfalls may stand in their way. Nonetheless, the more disturbing moments of the experience surface when a customer feels an attempt to manipulate has been made (e.g., by diverting attention or hiding information). Being manipulated generally feels uneasy, because among other things it infringes on a consumer’s autonomy to make a decision in one’s own good, but it is all the more damaging when done just to serve the manipulator’s interest (e.g., make a sale)[*].

Companies and customers alike can help in minimising negative encounters that can spoil customer journeys. Consumers can be more vigilant, pay more attention to details, and ask questions when offers do not sound or look right. Yet in the real world consumers cannot avoid being off guard, erring in judgement, or being complacent — much of the time humans are driven by the intuitive and instinctive System 1 mode of thinking. Companies can make greater effort to ensure customers have the relevant information and comprehend it; be attentive to what customers ask or argue; and overall show respect to customers and refrain from egregiously exploiting their cognitive vulnerabilities — perhaps naïve, but not illegitimate to expect.

Ron Ventura, Ph.D. (Marketing)

 

[*] Further reading: “Fifty Shades of Manipulation”; Cass R. Sunstein , 2016; Journal of Marketing Behavior, 1 (3-4), pp. 213-244.

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The discipline of consumer behaviour is by now well versed in the distinction between System 1 and System 2 modes of thinking, relating in particular to consumer judgement and decision making, with implications for marketing and retail management. Much appreciative gratitude is owed to Nobel Prize Laureate in economics Daniel Kahneman for bringing forward the concept of these thinking systems to the knowledge of the wider public (i.e., beyond academics) in his book “Thinking, Fast and Slow” (2012). ‘System 1’ and ‘System 2’, though not always using these labels, have been identified and elaborated by psychologists earlier than Kahneman’s book, as the author so notes. However, Kahneman succeeds in making more crystal clear the concepts of these different modes of thinking while linking them to phenomena studied in his own previous research, most notably in collaboration with the late Amos Tversky.

In a nutshell: System 1’s type of thinking is automatic, associative and intuitive; it tends to respond quickly, but consequently it is at higher risk of jumping to wrong conclusions. It is the ‘default’ type of thinking that guides human judgement, decisions and behaviour much of the time. On the other hand, System 2’s type of thinking is deliberative, logical, critical, and effortful; it involves deeper concentration and more complex computations and rules. System 2 has to be called to duty voluntarily, activating rational thinking and careful reasoning. Whereas thinking represented by System 1 is fast and reflexive, that of System 2 is slow and reflective.

Kahneman describes and explains the role, function and effect of System 1 and System 2 in various contexts, situations or problems. In broad terms: Thinking of the System 1 type comes first; System 2 either passively adopts impressions, intuitive judgements and recommendations by System 1 or actively kicks-in for more orderly examination and correction (alas, it tends to be lazy, not in a hurry to volunteer). Just to give a taste, below is a selection of situations and problems in which Kahneman demonstrates the important differences between these two modes of thinking, how they operate and the outcomes they effect:

  • # Illusions (e.g., visual, cognitive)  # Use of memory (e.g., computations, comparisons)  # Tasks requiring self-control  # Search for causal explanations  # Attending to information (“What You See Is All There Is”)  # Sets and prototypes (e.g., ‘average’ vs. ‘total’ assessments)  # Intensity matching  # ‘Answering the easier question’ (simplifying by substitution)  # Predictions (also see correlation and regression, intensity matching, representativeness)  # Choice in opt-in and opt-out framing situations (e.g., organ donation)
  • Note: In other contexts presented by Kahneman (e.g., validity illusion [stock-picking task], choice under Prospect Theory), the author does not connect them explicitly to  System 1 or System 2 so their significance may only be indirectly implied by the reader.

In order to gain a deeper understanding of System 1 and System 2 we should inspect the detailed aspects differentiating between these thinking systems. The concept of the two systems actually emerges from binding multiple dual-process theories of cognition together, thus appearing to be a larger cohesive theory of modes of thinking. Each dual process theory is usually focused on a particular dimension that distinguishes between two types of cognitive processes the human mind may utilise. However, those dimensions ‘correlate’ or ‘co-occur’, and a given theory often adopts aspects from other similar theories or adds supplementary properties; the dual-system conception hence is built on this conversion. The aspects or properties used to describe the process in each type of system are extracted from those dual-process theories. A table presented by Stanovich (2002) helps to see how System 1 and System 2 contrast in various dual-process theories. Some of those theories are: [For brevity, S1 and S2 are applied below to refer to each system.)

  • S1: Associative system / S2: Rule-based system (Sloman)
  • S1: Heuristic processing / S2: Analytic processing (Evans)
  • S1: Tacit thought process / S2: Explicit thought process (Evans and Over)
  • S1: Experiential system / S2: Rational system (Epstein)
  • S1: Implicit inference / S2: Explicit inference (Johnson-Laird)
  • S1: Automatic processing / S2: Controlled processing (Shiffrin and Schneider)

Note: Evans and Wason related to Type 1 vs. Type 2 processes already in 1976.

  • Closer to consumer behaviour: Central processing versus peripheral processing in the Elaboration Likelihood Model (Petty, Cacioppo & Schumann) posits a dual-process theory of routes to persuasion.

Each dual process theory provides a rich and comprehensive portrayal of two different thinking modes. The theories complement each other but they do not necessarily depend on each other. The boundaries between the two types of process are not very sharp, that is, features of the systems are not all exclusive in the sense that a particular property associated with a process of System 1 may occur in a System 2 process, and vice versa. Furthermore, the processes also interact with one another, particularly in a way where System 2 relies on products of thought from System 1, either approving them or using them as a starting-point for further analysis. Nevertheless, occasionally System 2 may generate reasons for us merely to justify a choice made by System 1 (e.g., a consumer likes a product for the visual appearance of its packaging or its design).

Stanovich follows the table of theories with a comparison of properties describing System 1 versus System 2 as derived from a variety of dual process theories, but without attributing them to any specific theory (e.g., holistic/analytic, relatively fast/slow, highly contextualized/decontextualized). Comparative lists of aspects or properties have been offered by other researchers as well. Evans (2008) formed a comparative list of more than twenty attributes which he divided into four clusters (describing System 1/System 2):

  • Cluster 1: Consciousness (e.g., unconscious/conscious, automatic/controlled, rapid/slow, implicit/explicit, high capacity/low capacity)
  • Cluster 2: Evolution (e.g., evolutionary old/recent, nonverbal/linked to language)
  • Cluster 3: Functional characteristics (e.g.,  associative/rule-based, contextualized/abstract, parallel/sequential)
  • Cluster 4: individual differences (universal/heritable, independent of/linked to general intelligence, independent of/limited by working memory capacity).

Listings of properties collated from different sources (models, theories), interpreted as integrative profiles of System 1 and System 2 modes of thinking, may yield a misconception of the distinction between the two systems as representing an over-arching theory. Evans questions whether it is really possible and acceptable to tie the various theories of different origins under a common roof, suggested as an over-arching cohesive theory of two systems (he identifies problems residing mainly with ‘System 1’). It could be more appropriate to approach the dual-system presentation as a paradigm or framework to help one grasp the breadth of aspects that may distinguish between two types of cognitive processes and obtain a more comprehensive picture of cognition. The properties are not truly required to co-occur altogether as constituents of a whole profile of one system or the other. In certain domains of judgement or decision problems, a set of properties may jointly describe the process entailed. Some dual process theories may take different perspectives on a similar domain, and hence the aspects derived from them are related and appear to co-occur.

  • Evans confronts a more widely accepted ‘sequential-interventionist’ view (as described above) with a ‘parallel-competitive’ view.

People use a variety of procedures and techniques to form judgements, make decisions or perform any other kind of cognitive task. Stanovich relates the structure, shape and level of sophistication of the mental procedures or algorithms of thought humans can apply, to their intelligence or cognitive capacity, positioned at the algorithmic level of analysis. Investing more effort in more complicated techniques or algorithms entailed in rational thinking is a matter of volition, positioned at the intentional level (borrowed from Dennett’s theorizing on consciousness).

However, humans do not engage a great part of the time in thought close to the full of their cognitive capacity (e.g., in terms of depth and efficiency). According to Stanovich, we should distinguish between cognitive ability and thinking dispositions (or styles). The styles of thinking a person applies do not necessarily reflect everything one is cognitively capable of. Put succinctly, the fact that a person is intelligent does not mean that he or she has to think and act rationally; one has to choose to do so and invest the required effort into it. When one does not, it opens the door for smart people to act stupidly. Furthermore, the way a person is disposed to think is most often selected and executed unconsciously, especially when the thinking disposition or style is relatively fast and simple. Cognitive styles that are entailed in System 1, characterised as intuitive, automatic, associative and fast, are made to ease the cognitive strain on the brain, and they are most likely to occur unconsciously or preconsciously. Still, being intuitive and using heuristics should not imply a person will end up acting stupidly — some would argue his or her intuitive decision could be more sensible than one made when trying to think rationally; it may depend on how thinking in the realm of System 1 happens — if one rushes while applying an inappropriate heuristic or relying on an unfitting association, he or she could become more likely to act stupidly (or plainly, ‘being stupid’).

Emotion and affect are more closely linked to System 1. Yet, emotion should not be viewed ultimately as a disruptor of rationality. As proposed by Stanovich, emotions may fulfill an important adaptive regulatory role — serving as interrupt signals necessary to achieve goals, avoiding entanglement in complex rational thinking that only keeps one away from a solution, and reducing a problem to manageable dimensions. In some cases emotion does not disrupt rationality but rather help to choose when it is appropriate and productive to apply a rational thinking style (e.g., use an optimization algorithm, initiate counterfactual thinking). By switching between two modes of thinking, described as System 1 and System 2, one has the flexibility to choose when and how to act in reason or be rational, and emotion may play the positive role of a guide.

The dual-system concept provides a way of looking broadly at cognitive processes that underlie human judgement and decision making. System 1’s mode of thinking is particularly adaptive by which it allows a consumer to quickly sort out large amounts of information and navigate through complex and changing environments. System 2’s mode of thinking is the ‘wise counselor’ that can be called to analyse the situation more deeply and critically, and provide a ‘second opinion’ like an expert. However, it intervenes ‘on request’ when it receives persuasive signals that its help is required. Consideration of aspects distinguishing between these two modes of thinking by marketing and retail managers can help them to better understand how consumers conduct themselves and cater to their needs, concerns, wishes and expectations. Undertaking this viewpoint can especially help, for instance, in the area of ‘customer journeys’ — studying how thinking styles direct or lead the customer or shopper through a journey (including emotional signals), anticipating reactions, and devising methods that can alleviate conflicts and reduce friction in interaction with customers.

Ron Ventura, Ph.D. (Marketing)

References:

(1)  Thinking, Fast and Slow; Daniel Kahneman, 2012; Penguin Books.

(2) Rationality, Intelligence, and Levels of Analysis in Cognitive Science (Is Dysrationalia Possible); Keith E. Stanovich, 2002; in Why Smart People Can Be So Stupid (Robert J. Sternberg editor)(pp. 124-158), New Haven & London: Yale University Press.

(3) Dual-Processing Accounts of Reasoning, Judgment and Social Cognition; Jonathan St. B. T. Evans, 2008; Annual Review of Psychology, 59, pp. 255-278. (Available online at psych.annualreviews.org, doi: 10.1146/annurev.psych.59.103006.093629).

 

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A shopper may well know what types of products he or she is planning to buy in a store, but what products the shopper will come out with is much less sure. Frequently there will be some additional unplanned products in the shopper’s basket. This observation is more often demonstrated in the case of grocery shopping in supermarkets, but it is likely to hold true also in other types of stores, especially large ones like department stores, fashion stores, and DIY or home improvement stores.

There can be a number of reasons or triggers for shoppers to consider additional products to purchase during the shopping trip itself — products forgotten and reminded of by cues that arise while shopping, attractiveness of visual appearance of product display (‘visual lift’), promotions posted on tags at the product display (‘point-of-purchase’) or in hand-out flyers, and more. The phenomenon of unplanned purchases is very familiar, and the study of it is not new. However, the behaviour of shoppers during their store visit that leads to this outcome, especially the consideration of product categories in an unplanned manner, is not understood well enough. The relatively new methodology of video tracking with a head-mounted small camera shows promise in gaining better understanding of shopper behaviour during the shopping trip; a research article by Hui, Huang, Suher and Inman (2013) is paving the way with a valuable contribution, particularly in shedding light on the relations between planned and unplanned considerations in a supermarket, and the factors that may drive conversion of the latter into purchases (1).

Shopper marketing is an evolving specialisation which gains increasing attention in  marketing and retailing. It concerns activities of consumers performed in a ‘shopper mode’ and is strongly connected with or contained within consumer marketing. Innovations in this sub-field by retailers and manufacturers span digital activities, multichannel marketing, store atmospherics and design, in-store merchandising, shopper marketing metrics and organisation. However, carrying out more effective and successful shopper marketing programmes requires closer collaboration between manufacturers and retailers — more openness to each party’s perspective and priorities (e.g., in interpretation of shopper insights), sharing information and coordination (2).

In-Store Video Tracking allows researchers to observe the shopping trip as it proceeds from the viewpoint of the shopper, literally. The strength of this methodology is in capturing the dynamics of shopping (e.g., with regard to in-store drivers of unplanned purchases). Unlike other approaches (e.g., RFID, product scanners), the video tracking method enables tracking acts of consideration, whether followed or not by purchase (i.e., putting a product item in the shopping cart).

For video tracking, a shopper is asked to wear, with the help of an experimenter, a headset belt that contains the portable video equipment, including a small video camera, a view/record unit, and a battery pack. It is worn like a Bluetooth headset. In addition, the equipment used by Hui et al. included an RFID transmitter that allows to trace the location of the shopper throughout his or her shopping path in a supermarket.

Like any research methodology, video tracking has its strengths and advantages versus its weaknesses and limitations. With the camera it is possible to capture the shopper’s field of vision during a shopping trip; the resulting video is stored in the view/record unit. However, without an eye-tracking (infrared) device, the camera may not point accurately to the positions of products considered (by eye fixation) in the field of vision. Yet, the video supports at least approximate inferences when a product is touched or moved, or the head-body posture and gesture suggest from which display a shopper considers products (i.e., the ‘frame’ closes-in on a section of the display). It is further noted that difficulties in calibrating an eye-tracking device in motion may impair the accuracy of locating fixations. The video camera seems sufficient and effective for identifying product categories as targets of consideration and purchase.

Furthermore, contrary to video filmed from cameras hanging from the ceiling in a store, the head-mounted camera records the scene at eye-level and not from high above, enabling to better notice what the shopper is doing (e.g., in aisles), and it follows the shopper all the way, not just in selected sections of the store. Additionally, using a head-mounted camera is more ethical than relying on surrounding cameras (often CCTV security cameras). On the other hand, head-mounted devices (e.g., camera, eye-tracking), which are not the most natural to wear whilst shopping, raise concerns of sampling bias (self-selection) and possibly causing change in the behaviour of the shopper; proponents argue that shoppers quickly forget of the device (devices are now made lighter) as they engage in shopping, but the issue is still in debate.

Video tracking is advantageous to RFID  and product scanners for the study of unplanned purchase behaviour by capturing acts of consideration: the RFID method alone (3) enables to trace the path of the shopper but not what one does in front of the shelf or stand display, and a scanner method allows to record what products are purchased but not which are considered. The advantage of the combined video + RFID approach according to Hui and his colleagues is in providing them “not only the shopping path but also the changes in the shoppers’ visual field as he or she walks around the store” (p. 449).

The complete research design included two interviews conducted with each shopper-participant — before the shopping trip, as a shopper enters the store, and after, on the way out. In the initial interview, shoppers were asked in which product categories they were planning to buy (aided by a list to choose from), as well as other shopping aspects (e.g., total budget, whether they brought their own shopping list). At the exit the shoppers were asked about personal characteristics, and the experimenters collected a copy of the receipt from the retailer’s transaction log. The information collected was essential for two aspects in particular: (a) distinguishing between planned and unplanned considerations; and (b) estimating the amount of money remaining for the shopper to make unplanned purchases out of the total budget (‘in-store slack’ metric).

237 participants were included in analyses. Overall, shoppers-participants planned to purchase from approximately 5.5 categories; they considered on average 13 categories in total, of which fewer than 5 were planned considerations (median 5.6). 37% of the participants carried a list prepared in advance.

Characteristics influencing unplanned consideration:  The researchers sought first to identify personal and product characteristics that significantly influence the probability of making an unplanned consideration in each given product category (a latent utility likelihood model was constructed). Consequently, they could infer which characteristics contribute to considering more categories in an unplanned manner. The model showed, for instance, that shoppers older in age and female shoppers are likely to engage in unplanned consideration in a greater number of product categories. Inversely, shoppers who are more familiar with a store (layout and location of products) and those carrying a shopping list tend to consider fewer product categories in an unplanned manner.

At a product level, a higher hedonic score for a product category is positively associated with greater incidence of unplanned consideration of it. Products that are promoted in the weekly flyer of the store at the time of a shopper’s visit are also more likely to receive an unplanned consideration from the shopper. Hui et al. further revealed effects of complementarity relations: products that were not planned beforehand for purchase (B) but are closer complementary of products in a ‘planned basket’ of shoppers (A) gain a greater likelihood of being considered in an unplanned manner (‘A –> B lift’).  [The researchers present a two-dimensional map detailing what products are more proximate and thus more likely to get paired together, not dependent yet on purchase of them].

Differences in behaviour between planned and unplanned considerations: Unplanned considerations tend to be made more haphazardly — while standing farther from display shelves and involving fewer product touches; conversely, planned considerations entail greater ‘depth’. Unplanned considerations tend to occur a little later in the shopping trip (the gap in timing is not very convincing). An unplanned consideration is less likely to entail reference to a shopping list — the list serves in “keeping the shopper on task”, being less prone to divert to unplanned consideration. Shoppers during an unplanned consideration are also less likely to refer to discount coupons or to in-store flyers/circulars. However, interestingly, some of the patterns found in this analysis change as an unplanned consideration turns into a purchase.

Importantly, in the outcome unplanned considerations are less likely to conclude with a purchase (63%) than planned considerations (83%). This raises the question, what can make an unplanned consideration result in purchase conversion?

Drivers of purchase conversion of unplanned considerations: Firstly, unplanned considerations that result in a purchase take longer (40 seconds on average) than those that do not (24 seconds). Secondly, shoppers get closer to the shelves and touch more product items before concluding with a purchase; the greater ‘depth’ of the process towards unplanned purchase is characterised by viewing fewer product displays (‘facings’) within the category — the shopper is concentrating on fewer alternatives yet examines those selected more carefully (e.g., by picking them up for a closer read). Another conspicuous finding is that shoppers are more likely to refer to a shopping list during an unplanned consideration that is going to result in a purchase — a plausible explanation is that the shopping list may help the shopper to seek whether an unplanned product complements a product on the list.

The researchers employed another (latent utility) model to investigate more systemically the drivers likely to lead unplanned considerations to result in a purchase. The model supported, for example, that purchase conversion is more likely in categories of  higher hedonic products. It corroborated the notions about ‘depth’ of consideration as a driver to purchase and the role of a shopping list in realising complementary unplanned products as supplements to the ‘planned basket’. It is also shown that interacting with a service staff for assistance increases the likelihood of concluding with a purchase.

  • Location in the store matters: An aisle is relatively a more likely place for an unplanned consideration to occur, and subsequently has a better chance when it happens to result in a purchase. The authors recommend assigning service staff to be present near aisles.

Complementarity relations were analysed once again, this time in the context of unplanned purchases. The analysis, as visualised in a new map, indicates that proximity between planned and unplanned categories enhances the likelihood of an unplanned purchase: if a shopper plans to purchase in category A, then the closer category B is to A, the more likely is the shopper to purchase in category B given it is considered. Hui et al. note that distances in the maps for considerations and for purchase conversion of unplanned considerations are not correlated, implying hence that the unplanned consideration and a purchase decision are two different dimensions in the decision process. This is a salient result because it distinguishes between engaging in consideration and the decision itself. The researchers caution, however, that in some cases the distinction between consideration and a choice decision may be false and inappropriate because they may happen rapidly in a single step.

  • The latent distances in the maps are also uncorrelated with physical distances between products in the supermarket (i.e., the complementarity relations are mental).

The research shows that while promotion (coupons or in-store flyers) for an unplanned product has a significant effect in increasing the probability of its consideration, it does not contribute to probability of its purchase. This evidence furthermore points to a separation between consideration and a decision. The authors suggest that a promotion may attract shoppers to consider a product, but they are mostly uninterested to buy and hence it has no further effect on their point-of-purchase behaviour. The researchers suggest that retailers can apply their model of complementarity to proactively invoke consideration by triggering a real-time promotion on a mobile shopping app for products associated with those on a digital list of the shopper “so a small coupon can nudge this consideration into a purchase”.

But there are some reservations to be made about the findings regarding promotions. An available promotion can increase the probability of a product to be considered in an unplanned manner, yet shoppers are less likely to look at their coupons or flyers at the relevant moment. Inversely, the existence of a promotion does not contribute to purchase conversion of an unplanned consideration but shoppers are more likely to refer to their coupons or flyers during unplanned considerations that result in a purchase.  A plausible explanation to resolve this apparent inconsistency is that reference to a promotional coupon or flyer is more concrete from a shopper viewpoint than the mere availability of a promotion; shoppers may not be aware of some of the promotions the researchers account for. In the article, the researchers do not address directly promotional information that appears on tags at the product display — such promotions may affect shoppers differently from flyers or distributed coupons (paper or digital via mobile app), because tags are more readily visible at the point-of-purchase.

One of the dynamic factors examined by Hui et al. is the ‘in-store slack’, the mental budget reserved for unplanned purchases. Reserving a larger slack increases the likelihood of unplanned considerations. Furthermore, at the moment of truth, the larger is the in-store slack that remains at the time of an unplanned consideration, the more likely is the shopper to take a product from the display to purchase. However, computations used in the analyses of dynamic changes in each shopper’s in-store slack appear to assume that shoppers estimate how much they already spent on planned products in various moments of the trip and are aware of their budget, an assumption not very realistic. The approach in the research is very clever, and yet consumers may not be so sophisticated: they may exceed their in-store slack, possibly because they are not very good in keeping their budget (e.g., exacerbated by use of credit cards) or in making arithmetic computations fluently.

Finally, shoppers could be subject to a dynamic trade-off between their self-control and the in-store slack. As the shopping trip progresses and the remaining in-store slack is expected to shrink, the shopper becomes less likely to allow an unplanned purchase, but he or she may become more likely to be tempted to consider and buy in an unplanned manner, because the strength of one’s self-control is depleted following active decision-making. In addition, a shopper who avoided making a purchase on the last occasion of unplanned consideration is more likely to purchase a product in the next unplanned occasion — this negative “momentum” effect means that following an initial effort at self-control, subsequent attempts are more likely to fail as a result of depletion of the strength of self-control.

The research of Hui, Huang, Suher and Inman offers multiple insights for retailers as well as manufacturers to take notice of, and much more material for thought and additional study and planning. The video tracking approach reveals patterns and drivers of shopper behaviour in unplanned considerations and how they relate to planned considerations.  The methodology is not without limitations; viewing and coding the video clips is notably time-consuming. Nevertheless, this research is bringing us a step forward towards better understanding and knowledge to act upon.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) Deconstructing the “First Moment of Truth”: Understanding Unplanned Consideration and Purchase Conversion Using In-Store Video Tracking; Sam K. Hui, Yanliu Huang, Jacob Suher, & J. Jeffrey Inman, 2013; Journal of Marketing Research, 50 (August), pp. 445-462.

(2) Innovations in Shopper Marketing: Current Insights and Future Research Issues; Venkatesh Shankar, J. Jeffrey Inman, Murali Mantrala, & Eileen Kelley, 2011; Journal of Retailing, 87S (1), pp. S29-S42.

(3) See other research on path data modelling and analysis in marketing and retailing by Hui with Peter Fader and Eric Bradlow (2009).

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One of the more difficult and troublesome decisions in brand management arises when entering a product category that is new to the company: Whether to up-start a new brand for the product or to endow it with the identity of an existing brand — that is, extending a company’s established brand from an original product category to a product category of a different type. The first question that would probably pop-up is “how different is the new product?”, acting as a prime criterion to judge whether the parent-brand fits the new product.

Notwithstanding, the choice is not completely ‘black or white’ since intermediate solutions are possible through the intricate hierarchy of brand (naming) architecture. But focusing on the two more distinct strategic branding options above helps to see more clearly the different risk and cost implications of launching a new product brand versus using the name of an existing brand from an original product category. Notably, the manufacturers, retailers and consumers, all perceive risks, albeit from the different perspective of each party given its role.

  • Note: Brand extensions represent the transfer of a brand from one type of product to a different type, to be distinguished from line extensions that pertain to the introduction of variants within the same product category (e.g., flavours, colours).

This is a puzzling marketing and branding problem also from an academic perspective. Multiple studies have attempted in different ways to identify the factors that best explain or account for successful brand extensions. While the stream of research on this topic helpfully points out to major factors, some more commonly agreed upon, a gap remains between the sorts of extensions predicted to succeed according to the studies and the extensions performed by companies that happen to succeed or fail in the markets in reality. A plausible reason for missing the outcomes of actual extensions, as argued by the researchers Milberg, Sinn, and Goodstein (2010), is neglecting the competitive settings in categories that are the target of brand extension (1).

Perhaps one of the most famous examples of a presumptuous brand extension has been the case of Virgin (UK), from music to cola (drink), airline, train transport, and mobile communication (ironically, the origin of the brand as Virgin Music has since been abolished). The success of Virgin’s distant extensions is commonly attributed to the personal character of Richard Branson, the entrepreneur behind the brand: his boldness, initiative, willingness to take risks, and adventurism. These traits seem to have transferred to his business activities and helped to make the extensions more credible and acceptable to consumers.

Another good example relates to Philips (originated in The Netherlands). Starting from lighting (bulbs, now more in LED), the brand extended over the years to personal care (e.g., face shavers for men, hair removal for women), sound and vision (e.g., televisions, DVD and Blue-Ray players, originally in radio sets), PC products, tablets and phones, and more. Still, when looking overall at the different products, systems and devices sharing the Philips brand, they can mostly be linked as members in a broad category of ‘electrics and electronics’, a primary competence of the company. As the company grew with time, launched more types of products whilst advancing with technology, and its Philips brand was perceived as having greater experience and good record in brand extensions, this could facilitate the market acceptance of further extensions to additional products.

  • In the early days of the 1930s to 1950s radio and TV sets relied for operation on vacuum tubes, later moving to electronic circuits with transistors or digital components. Hence, historically there was an apparent physical-technological connection between those products and the brand’s origin in light bulbs, a connection much harder to find now between category extensions, except for the broad category linkage suggested above.

Academic research has examined a range of ‘success factors’ of brand extensions, such as: perceived quality of the parent-brand; fit between the parent-brand and the extension category; degree of difficulty in making an extension (challenge undertaken); parent-brand conviction; parent-brand experience; marketing support; retailer acceptance; perceived risk (for consumers) in adopting the brand extension; consumer innovativeness; consumer knowledge of the parent-brand and category extension; the stage of entry into another category (i.e., as an early or a late entrant). The degree of fit of the parent-brand (and original product) with the extension category is revealed as the most prominent factor contributing to better acceptance and evaluation (e.g., favourability) of the extension in consumer studies.

Aaker and Keller specified in a pioneer article (1990) two requirements for fit: (a) the extension product category is a direct complement or a substitute of the original category; (b) the company, with its people and facilities, is perceived as having the knowledge and capability of manufacturing the product in the extension category. These requirements reflect a similarity between the original and extension product categories that is necessary for successful transfer of a favourable attitude towards the brand to the extension product type (2). A successful transfer of attitude may occur, however, also if the parent-brand has values, purpose or image that seem relevant to the extension product category, even when the technological linkage is less tight or apparent (as the case of Virgin suggests).

  • Aaker and Keller found that fit, based especially on competence, stands out as a contributing factor to higher consumer evaluation (level of difficulty is a secondary factor while perceived quality plays more of a ‘mediating’ role).

Volckner and Sattler (2006) worked to sort out the contributions of ten factors, as retrieved from academic literature, to the success of brand extensions; relations were refined with the aid of expert advice from brand managers and researchers (3). Contribution was assessed in their model in terms of (statistical) significance and relative importance. The researchers found  fit to be the most important factor driving (perceived) brand extension success in their study, followed by marketing support, parent-brand conviction, retail acceptance, and parent-brand experience. The complete model tested for more complex structural relationships represented through mediating and moderating (interacting) factors (e.g., the effect of marketing support on extension success ‘passes’ through fit and retailer acceptance).

For brand extensions to be accepted by consumers and garner a positive attitude, consumers should recognise a connectedness or linkage between the parent-brand and the category extension. The fit between them can be based on attributes of the original and extension types of product or a symbolic association. Keller and Lehmann (2006) conclude in this respect that “consumers need to see the proposed extension as making sense” (emphasis added). They identify product development, applied via brand (and line) extensions, as a primary driver of brand growth, and thereby adding to parent-brand equity. Parent-brands do not tend to be damaged by unsuccessful brand extensions, yet the authors point to circumstances where greater fit may result in a negative effect on the parent-brand, and inversely where joining a new brand name with the parent-brand (as its endorser) may protect the parent-brand from adverse outcomes of extension failure (4).

When assessing the chances of success of a brand extension, it is nevertheless important to consider what brands are already present in the extension category that a company is about to enter. Milberg, Sinn, and Goodstein claim that this factor has not received enough attention in research on brand extensions. In particular, one has to take into account the strength of the parent-brand relative to competing brands incumbent in the target category. As a starting point for entering the extension category, they chose to focus on how well consumers are familiar with the competitor brands vis-à-vis the extending brand.  Milberg and her colleagues proposed that a brand extension can succeed despite a worse fit with the category extension due to an advantage in brand familiarity, and vice versa. Consumer response to brand extensions was tested on two aspects: evaluation (attitude) and perceived risk (5).

First, it should be noted, the researchers confirm the positive effect of better fit on consumer evaluation of the brand extension when no competitors are considered. The better fitting extension is also perceived as significantly less risky than a worse fitting extension. However, Milberg et al. obtain supportive evidence that in a competitive setting, facing less familiar brands can improve the fortune of a worse fitting extension, compared with being introduced in a noncompetitive setting: When the incumbent brands are less familiar relative to the parent-brand, the evaluation of the brand extension is significantly higher (more favourable) and purchasing its product is perceived less risky than if no competition is referred to.

  • A reverse outcome is found in the case of better fit where the competitor brands are more highly familiar: A disadvantage in brand familiarity can dampen the brand extension evaluation and increase the sense of risk in purchasing from the extended brand, compared with a noncompetitive setting.

Two studies performed show how considering differences in brand familiarity can change the picture about the effect of brand extension fit from that often found without accounting for competing brands in the extension category.

When comparing different competitive settings, the research findings provide a more constrained support, but in the direction expected by Milberg and colleagues. The conditions tested entailed a trade-off between (a) a worse fitting brand extension competing with less familiar brands; and (b) a better fitting brand extension competing with more familiar brands. In regard to competitive settings:

The first study showed that the evaluation of a worse fitting extension competing with relatively unfamiliar brands is significantly more favourable than a better fitting extension facing more familiar brands. Furthermore, the product of a worse fitting brand extension is preferred more frequently over its competition than the better fitting extension product is (chosen by 72% vs. 6%, respectively). Also, purchasing a product from the worse fitting brand extension is perceived significantly less risky compared with the better fitting brand. These results indicate that the relative familiarity of the incumbent brands that an extension faces would be more detrimental to its odds of success than how well its fit is.

The second study aimed to generalise the findings to different parent-brands and product extensions. It challenged the brand extensions with somewhat more difficult conditions: it included categories that are all relevant to respondents (students), and so competitor brands in extension categories are also relatively more familiar to them than in the first study. The researchers acknowledge that the findings are less robust with respect to comparisons of the contrasting competitive settings. Evaluation and perceived risk related to the worse fitting brand competing with less familiar brands are equivalent to the better fitting brand extension facing more familiar brands. The gap in choice shares is reduced though in this case it is still statistically significant (45% vs. 15%, respectively). Facing less familiar brands may not improve the response of consumers to the worse fitting brand extension (i.e., not overcoming the effect of fit) but at least it is in a position as good as of the better fitting brand extension competing in a more demanding setting.

  • Perceived risk intervenes in a more complicated relationship as a mediator of the effect of fit on brand extension evaluation, and also in mediating the effect of relative familiarity in competitive settings. Mediation implies, for example, that a worse fitting extension evokes greater risk which is responsible for lowering the brand extension evaluation; consumers may seek more familiar brands to alleviate that risk.

A parent-brand can assume an advantage in an extension category even though it encounters brands that are familiar within that category, and may even be considered experts in the field: if the extending brand is leading within its original category and is better known beyond it, this can give it a leverage on the incumbents if those brands are more ‘local’ or specific to the extension category. For example, it would be easier for Nikon leading brand of cameras to extend to binoculars (better fit) where it meets brands like Bushnell and Tasco than extending to scanners (also better fit) where it has to face brands like HP and Epson. In the case of worse fitting extensions, it could be significant for Nikon whether it extends to CD players and competes with Sony and Pioneer or extends to laser pointers and faces Acme and Apollo — in the latter case it may enjoy the kind of leverage that can overcome a worse fit. (Product and brand examples are borrowed from Study 1). Further research may enquire if this would work better for novice consumers than experts. Milberg, Sinn and Goodstein recommend to consider additional characteristics that brands may differ on (e.g., attitude, image, country of origin), suggesting more potential bases of strength.

Entering a new product category for a company is often a difficult challenge, and choosing the more appropriate branding strategy for launching the product can be furthermore delicate and consequential. If the management chooses to make a brand extension, it should consider aspects of relative strength of its parent-brand, such as familiarity, against the incumbent brands of the category it plans to enter in addition to a variety of other characteristics of product types and its brand identity. However, the managers can take advantage as well of intermediate solutions in brand architecture to combine a new brand name with an endorsement of an established brand (e.g., higher-level brand for a product range). Choosing the better branding strategy may be helped by better understanding of the differences and relations (e.g., hierarchy) between product categories as perceived by consumers.

Ron Ventura, Ph.D. (Marketing)

Notes:

1. Consumer Reactions to Brand Extensions in a Competitive Context: Does Fit Still Matter?; Sandra J. Milberg, Francisca Sinn, & Ronald C. Goodstein, 2010; Journal of Consumer Research, 37 (October), pp. 543-553.

2.  Consumer Evaluations of Brand Extensions; David A. Aaker and Kevin L. Keller, 1990; Journal of Marketing, 54 (January), pp. 27-41.

3.  Drivers of Brand Extension Success; Franziska Volckner and Henrik Sattler, 2006; Journal of Marketing, 70 (April), pp. 18-34.

4. Brands and Branding: Research Finding and Future Priorities; Kevin L. Keller and Donald R. Lehmann, 2006; Marketing Science, 25 (6), pp. 740-759.

5. Ibid. 1.

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