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Posts Tagged ‘Consumers’

Online shopping in digital stores and shopping in bricks-and-mortar stores offer different forms of experiences. It starts from the environment or setting in which the shopper is situated — being present in a 3D physical retail space or viewing a 2D screen of a computer or mobile device. It is the difference between how much and what specifically a shopper can see and absorb when looking around in a physical store compared with looking at a screen. The difference in setting may have a further impact on behaviour, like how shoppers find products and how they inspect them.

Imagine a shopper, Dan, entering a large fashion store. Dan’s head immediately turns around as much as 180 degrees scanning the scene. Just a few steps in front of Dan there is a low desk with shirts, and another desk with sweaters to the left; to the right Dan observes shirts hanging on a rectangle-shaped stand, and he notices how their designs differ from those on the desk; along the walls are more shirts and trousers, etc. Dan decides to approach first the shirts to the left because they have multiple colours, lifting one or two to look more closely at them; later he also turns to the wall to see trousers and tries to match them with shirts. As Dan’s shopping trip advances he may enter deeper into the store to check on some accessories or another variety of shirts. Very early in the visit the shopper can figure out what may be found in main sections of the scene. Then starts a sort of discovery tour that may be guided by a master goal but progresses as the shopper identifies relevant and visually attractive items (stimuli). The scene is ‘updated’ as the shopper goes deeper into the store, or into adjacent halls, and details that were more distant and vague before become sharper and clearer.

A different kind of shopping process usually occurs in online website stores: first of all because much fewer products (stimuli) can be observed in a relatively short glimpse of the screen-scene. The way merchandise in the online store is located and explored is much more gradual.  An online store actually encourages a more goal-driven search process (e.g., choosing names of categories from a menu, selecting attribute options to narrow down the search to a relevant selection of products). Then starts a back-and-forth process of exploration of different items (e.g., by clicking on item titles or images and entering product pages), and visiting additional major categories of products. However, the experience of search and exploration is so different: whereas in the physical store the shopper can ‘wash the eyes’ with shapes, designs and colours of products, and follow the eyes through the shopping trip, it is much harder to do so in an online store where one has to go step-by-step or in a piecemeal manner. Nevertheless, online shoppers have more flexibility and a wider span of possibilities for viewing product options simultaneously on the screen of a desktop or laptop computer than on the screen of a smartphone.

Certainly there are more clever and creative e-commerce or store websites that are able to generate an improved experience of exploration and inspection of products. For example, there are online stores that show grids composed of tiles of images representing major categories and sub-categories of products. The images are more lively, and some of them exhibit motion as well. With some images, hovering with a mouse on the product photo (before clicking) changes the angle in which a garment or handbag, for instance, is shown. On product pages, some options may be selected that immediately affect the product image (e.g., colours, dimensions, designs); products may be rotated dynamically or by selecting from a line of static thumbnail images under the main frame.

A large majority of shoppers enquire about products online before visiting a physical store. According to a Google/Ipsos survey (‘Omnichannel Holiday Study’, Nov. 2017-Jan. 2018), 78% of US holiday shoppers searched products before going into a store; the online search helps shoppers in planning their shopping trip to the store, narrow down the options they should be seeking at the store, but it also ‘inspires the purchase’ (thinkwithgoogle.com, October 2018). In another research by Publicis (‘Shopper First Retailing’, 2018), an even higher proportion of shoppers, 87%, report that they begin searches in digital channels (online, mobile), up from 71% in 2017 (RetailDive.com, 15 August 2018). Searching the Internet is regarded as a productive method to look for directions and learning about product options, as preparation for making purchase decisions. Shoppers do not feel obliged also to make the purchase online, even if they browse the e-commerce website of an online-only retailer (‘e-tailers’) or of a mixed retailer that operates both a website store and physical stores. Consumers like especially to consult reviews of peer users who have already had experience with products they consider.

This learning process seems functional and goal-driven where shoppers need some guidance to put order into their shopping journey. Online sources, including e-commerce websites, seem to provide an efficient solution for this purpose. The process may indeed inspire shoppers with ideas, perhaps to the extent of helping the shopper to focus on viable and worthwhile purchase options and avoid wandering too long clueless in a store. In such a case in particular, visiting the online store of a mixed retailer can prove most useful before arriving to one of its physical store locations — and this makes the website an even more effective tool for the retailer.

However, retailers that operate physical stores would not want shoppers to come too prepared with their minds pre-determined what to buy. While shoppers usually have a general plan of what they are looking for, final purchase decisions are still made mostly in-store. Hence it is so important for physical stores to be designed and arranged in an appealing and stimulating manner — to allow consumers to complete successfully their shopping trip in-store, and furthermore encourage and induce them to purchase a few more ‘treasures’ they discover in the store.

It may be relevant to consider here two scenarios:

For retailers that operate physical stores in multiple, even numerous locations, there should be a stronger incentive to leave their customers with enough reasons to conclude their shopping in-store rather than on the website store. Thus, the online store has to be visually attractive, user-friendly and informative, but it does not have to be fully equipped with features that convince customers to complete their shopping and purchasing online. The website should not go all the way in effort to draw shoppers from physical stores. Whereas the online store may provide more functional, productive experiences (e.g., efficient, time-saving), the physical store would be more capable in creating pleasant emotional experiences (e.g., excitement, thrill, joy). The positive emotions invoked should not be taken lightly because they drive purchases.

For e-tailers with no physical stores there should be greater need to invest in the quality and feel of experiences they can provide in their e-commerce websites. The introduction of shoppers to the online store should be more delightful as well as informative and user-friendly. Visual elements and interactive features have to be inviting and helpful in guiding the visitor into different sections of the store — on the ‘main stage’ of the screen estate and not just through the menu and search engine.

The latter applies, nonetheless, also to mixed retailers that have stores in just a few locations (e.g., major cities) and wish to reach much greater numbers of customers that do not have a store near them. It may also be relevant when targeting customer segments who for any reason have little time free to travel to a store, and in regions where shoppers are reluctant to go out during harsh weather conditions (e.g., steaming hot and dusty or freezing cold and snowy). [Note: Location data might be used to channel a reduced or enhanced version of a store website according to whether the user is in vicinity of a physical store by the retailer, a form of ‘geo-fencing’].

Delicatessen in Gstaad

The bricks-and-mortar stores remain very much in demand. According to a Google/Ipsos online survey (‘Shopping Tracker’, US, April-June 2018), 61% of American shoppers prefer shopping with brands that also have physical stores than ones that are online only. Key benefits suggested for shopping in physical stores are the immediacy in which shoppers are likely to obtain the products they require; getting hands-on — seeing and interacting with products before buying; and being more fun than shopping online (35% feel so) (thinkwithgoogle.com, John McAteer, November 2018). The Publicis study indicates more generally that 46% of shoppers prefer to buy in physical stores (vis-à-vis 35% who prefer shopping using their laptops and 18% on mobile phones) (RetailDive). Apparently, shoppers are not blind to benefits and advantages of shopping in physical stores over online stores, and many are not ready to leave them to fade out.

It is not suggested that online stores necessarily have to be made to appear like physical stores on the screen — mimicking the scene of a bricks-and-mortar store may be perceived as just artificial, awkward and inconvenient (though retailers who also have physical locations can integrate actual store images into relevant sections of the online store). On the one hand, the retailer (or e-tailer) should take advantage of the strengths of the digital medium in organising, displaying and tracing information in the online store. On the other hand, online stores may have to breakaway in some degree from rigid structures of tables, lists and matrices. Grids of image tiles make a good start. Yet, more versatile visualisation possibilities have to be considered to provide visitors of store websites (or mobile apps) a more stimulating presentation of the variety of products the store has to offer. The interactive presentation should expose visitors to an array of products available (e.g., by type, use purpose, or brand), and lead their way from there into sub-categories and specific product models or brands.

  • Virtual Reality (VR) technology may be used to emulate a view of a store in 3D space, but the equipment needed to create a truly compelling experience is not in reach of most consumers, at least not yet. The more crucial question is: why should consumers prefer an imitation or illusion when almost everyone can visit real physical stores and shops. At least one aspect VR is unlikely to provide adequately is the social experience.

Instead of treating online shopping and shopping in physical stores as substitutes competing with each other, the more sensible approach for mixed retailers is to create ways in which they can combine and complement each other. The connection can be a two-way street, especially given that shoppers use mobile devices more frequently during store visits (71% of shoppers according to Publicis study cited by RetailDive). From online to store, for example, a mobile app of the retailer used in-store can help the shopper navigate and find the way to the places of products that he or she detected and learned about in a preliminary search and study online (e.g., Home Depot). From in-store to online, the shopper may use the app of the retailer in-store to find more information about products found in the store by scanning a barcode for the product of interest (e.g., Sephora [cosmetics] allows access to product reviews, order history of the shopper, and more) [examples adopted from McAteer in thinkwithgoogle]. More technologies that help in bridging between the virtual and physical domains of shopping include beacons and augmented reality (AR).

  • There are other areas not covered above in which online shopping is distinguished from in-store shopping and require more attention, such as customer service, specifically providing advice and assistance to shoppers, and the fulfillment of orders (a ‘click-and-collect’ programme is another way of linking the physical and online stores).

The physical and digital (virtual) domains have each their strengths in creating different forms of shopping experiences. Physical stores and shops have built-in advantages in evoking emotional experiences while shopping — they are tangible and more direct, can provide good personal care, and may attract and excite shoppers by means of interior design and visual merchandising in their physical spaces. Furthermore, beyond vision, physical stores allow shoppers to enact other senses (e.g., touch, smell) that cannot be experienced in the digital domain. It is unsure how much a store website (or app) can give rise to a similar emotional experience and attachment in shoppers, yet there are aspects that can be borrowed into the digital domain that would make it seem not just functional but also more appealing and immersive. Nonetheless, mixed retailers may have the best opportunity to combine the strengths from the physical and digital domains and link them to produce shopping experiences that are more productive and enjoyable altogether.

Ron Ventura, Ph.D. (Marketing)

 

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Many companies are well-known to consumers by their corporate names, including manufacturers, chain retailers and service providers. The corporate name may serve as the leading brand identifier (like an ‘umbrella’ name) for the company’s products or services. But furthermore the corporate-level brand name is the gate to access the organisation’s image as held in the public opinion of consumers. In the last decade companies are increasingly judged by their values, culture, and market and public conduct. Consumers are more strongly influenced in their choice of products or services of a company by what they think of and how they feel towards its corporate brand.

A Tel-Aviv-based strategic management consulting firm, TACK, constructed a two-dimension metric for assessing the image strength (or sturdiness) of companies in Israel. The metric comprises a rational-oriented ‘pillar’ named Logic and an affective-driven ‘pillar’ called Magic. Each dimension of the image strength metric is measured by two (rating-scale) items.

Logic represents how much a company is appreciated by consumers, and to what extent the company makes it worthwhile for consumers to be its customers.

Magic expresses how much a company is loved by consumers, and to what extent consumers believe that the company cares about its customers.

Magic pertains to the emotional ties between the company and its customers and is therefore particularly important to the relationships built by a company with the customers. We cannot underestimate the importance of the logical or cognitive-based evaluation of the company, by weighing its advantages and disadvantages, as the basis for the interest and preference consumers show in using the company’s products and services. However, reasoned appreciation of the company and its offerings will likely not hold-up a relationship without developing an attachment to the corporate-name brand.

TACK applied its Logic & Magic metric for the third continuous year in 2019 to 71 Israeli companies (e.g., food producers, retail chains, telecom service providers, banks). Measures were collected in a survey of 503 adult Israeli consumers (Hebrew-speaking). The companies are not necessarily managed purely as a ‘branded house’; however, this study is not concerned with additional brands owned by the company (e.g., brands that may be endorsed by the corporate brand name or products positioned as sub-brands). The demonstrated mappings of corporate brands (in Hebrew), along the dimensions of Logic and Magic, bring forward some sobering realizations shared below:

Firstly, it is noticeable that, from a consumer perspective, companies that are doing better on the logical-functional front are also more successful on the emotional front, and thus are doing better overall in connecting with consumers. We cannot conclude from this a cause-and-effect relation. But the findings do suggest that a wise strategy that is sensitive to consumers (i.e., it sees things through the eyes of consumers) can win on both fronts. In other words, a company as such that succeeds, through its strategy, in gaining the appreciation of consumers for its performance and advantages of its products and services, is also likely to win the affection, trust and approach of the consumers.

There are hardly any corporate brands that seem to get a high score on Logic but relatively lack in their score on Magic, and vice versa. This implies that a company cannot sustain a ‘cold-minded’ appraisal of its performance and offerings while failing to win the hearts of its customers; and just as well, a company cannot sustain an affectionate connection with its customers without establishing the foundation of approval of its functional benefits to customers (e.g., being relevant and attractive). Nevertheless. it should be noted that the spread among corporate brands with relatively higher Logic and Magic scores is greater than among brands with relatively lower scores on both dimensions (there are more of them and they are more condensed). There is still much variability among the best performing companies — they are not consistently doing better in the same way.

Secondly, the quality of products and services is just one of the factors consumers likely consider in their logical-functional evaluations, and is possibly not the more prominent one. There seem to be large differences in perceived quality of the products of at least some of the companies or in the weight assigned to quality. Moreover, companies whose products appeal in their high quality or expertise to only a relatively small segment of consumers (a niche) seem to fall behind and do not come out favourably in this type of all-market brand rankings. It is not so surprising to realise that the stronger and leading corporate brands are those of companies that aim to fulfill the needs and preferences of the wider common base of the mass market.

Let us look at a few examples:

  1. In the category of retail food chains, a heavy discount retailer, Rami Levy, is positioned close to the top-right corner of the map (both in its category and overall) with high Logic and Magic scores, while a delicacy retailer Tiv Ta’am is at the bottom-left corner of the map. The two major food retail chains are in-between, one in the top-right quadrant (Shufersal) and the other in the bottom-left quadrant (Bittan [Mega]). Tiv Ta’am may bring better-quality products (e.g., fresh produce, imports of delicacies) than other food retailers, but its stores are considered too expensive, lucrative, and they are not liked. Rami Levy and Shufersal are listed among the Superbrands of Israel for 2018 in the retail category.
  2. In the category of coffee houses, we find in relatively high positions the low-cost, basic-service chain of Cofix, and the espresso-bar, self-service chain Aroma. In the worst position we find Arcaffe, an Italian-style chain of coffee bars serving fine coffee, sandwiches and other products, but it fails to receive the appreciation of the greater public for their offerings and service. Aroma is much more popular although their products and its serving standard are moderate. Yet Arcaffe is considered more ‘top-notch’, made for European-connoisseurs, and is relatively more expensive. Eventually, Aroma and Coffix are also much more emotionally appealing to Israeli consumers than Arcaffe. Roladin, a bakery and coffee-house chain, can be argued to be much closer in quality and service standard to Arcaffe than to Aroma; yet, Roladin is appreciated and considered worthwhile (Logic) similar to Aroma and is even a little more loved and cherished (Magic) than Aroma —  the advantage of Roladin over Arcaffe seems to be that they understand better what the greater part of Israelis like to eat and expect to find in a coffee-house for a light meal. Aroma and Roladin are listed among Israel’s Superbrands of 2018 (dining out) whereas Arcaffe is absent.
  3. In the media category, among the news press publishers, HaAretz holds a much lower position on both Logic and Magic than Israel HaYom; Yediot Aharonot is located closer to HaAretz. Two marked differences between them: (a) HaAretz is left-leaning (affiliated with the Guardian and New-York Times) and Yediot is oriented to the centre-left, whereas Israel HaYom is right-wing; (b) HaAretz is superior, especially in some areas, in quality of commentary and analysis to the two other newspapers (tabloid-fashioned). But the political left, and the HaAretz newspaper associated with it, are out of favour in recent years, and perhaps as a result the tolerance to its reporting by large circles of society is low, no matter its apparent news quality. [It is noted that all three also have a news website, though in the case of Yediot the online channel is branded separately as ‘ynet’ — it is positioned close and just a bit better than the press edition]. Yediot (+ynet) and Israel HaYom are listed in the media category of Israel’s Superbrands for 2018 but HaAretz is absent (its economics and business branch TheMarker is included).
  4. Interestingly, the researchers of TACK report that preference for Arcaffe and for Tiv Ta’am, each in its category, is stronger among consumers who describe themselves as leaning to the political left. The relevance of political attitudes to dining-out and food shopping is a little obscure, but it gives an indication of the portrayal of their more likely customers. More importantly, this research evidence amplifies the argument that corporate brands more entrenched in niches — like HaAretz, Arcaffe and Tiv Ta’am — are much less likely to be considered strong leading brands.

Thirdly, response to price and value perceptions are not free of an emotional loading. An economic approach views the calculation of value as a rational procedure of weighing the benefits and cost of a product or service offer. However, when an offer is judged as unfair to the disadvantage of the buyer, this may stir anger and resentment of the consumer in response to the price offer. The resentment is more often directed to the retailer, but it may be pointed towards the manufacturer of a national brand as well, depending on whom the consumer believes to be more responsible for a price differential or increase.

The judgement of unfair price differentials is contingent on the reference price used (e.g., a price paid by a friend for the same product at another store this week). In the case of a price increase, the reaction is subject to whether consumers can see justification to a price increase by attributing the increase in retail price to a rise in cost that retailers or manufacturers could not control (e.g., price of raw materials). In the past decade much resentment developed because consumers failed to find such justifications. Instead, the perception more accepted was that retailers and manufacturers were rolling their cost rises mostly to consumers, and they raised prices merely to improve their profits. In Israel this problem was evident especially in the food category where consumers were witnesses to continued feuds between the food chain retailers and manufacturers. More broadly, many Israeli consumers appear to these days to have little tolerance to retailers, service providers or manufacturers that seem to raise prices unfairly or try to position themselves to be more up-scale and luxurious — disappointment and anger at them motivates consumers to punish them in some way. This kind of resentment and urge to act in revenge is apparent also in the results of the study by TACK.

Price is given priority by more Israeli consumers, and it seems to overweight possible advantages in quality of products, services or the environment of shopping. In some cases consumers may fail to appreciate any such advantages while in others they simply consider the price premium as unjustified or unaffordable (which may add frustration to their evoked emotions). This can be another aspect that explains the differences between companies described above: (a) for instance, the gaps on Logic and Magic between coffee-house chains like Cofix and Aroma compared with Arcaffe,  and vis-à-vis Roladin, or (b) Rami Levi which is probably perceived as making greater effort to charge affordable prices (although it declined a little from last year), far better than a delicacy chain such as Tiv Ta’am. In other categories, it is more difficult to make clear inferences. In telecom services (mobile, TV, Internet), for example, all major companies receive relatively low appreciation and are less loved. A specialised dairy producer (Tara) is positioned less favourably than the two major and larger dairies (Tnuva and Strauss) which happened to be more shaken by consumer protests of several years ago (Tara is more preferred though among ages 55+ according to TACK). Among fashion retailers, a low-cost retailer of casual wear (Fox) is positioned just slightly higher on Logic but lower on Magic than some major main-stream retailers (H&M, Castro, Zara); yet another retailer (Renuar) that is probably somewhat more exclusive appears to be considered less worthwhile and having moderately less of magic (as reference, Polgat [for men], which has visibly better quality clothing, is not included).

The study of image strength by TACK sheds light on the relative positions in which consumers hold corporate brands both in their minds (Logic) and in their hearts (Magic).  It is somewhat surprising to find such a strong association between the logical-functional dimension and the affective dimension — it suggests that a company cannot sustain a positive stance on one dimension without the other for a long time. There is some discomfort also in realising that price could be more dominant than quality, but it is important to acknowledge how perceptions of value, and especially unfairness, can influence the emotional reaction of consumers to the corporate-level brands. Effectively, being attentive and sensitive to what the wider circles of consumers in the country need and expect to have is a key to be regarded overall as a favourable, strong leading brand.

Ron Ventura, Ph.D. (Marketing)


Comment on Methodology:

The brand scores are given in percentages. More detailed values reported for 2017 help to understand the metric’s structure. The score on each dimension (Logic or Magic) seems to be calculated as the sum of the ‘top-box’ proportions for the two items it is composed of (e.g., % who give a rating of 6 or 7 on a 7-point Likert-type scale in agreement with each statement of Logic, where 25% on ‘appreciate’ + 20% on ‘worthwhile’ = 45% on Logic). However, summing up those percentages is not a proper procedure — this sum does not have a meaningful interpretation because the proportions cannot be accumulated. It would be correct to take their mean rather than the sum. Another valid option is to add-up the rating values of the pair of items for each respondent and then calculate the percentage who have given a total score on that dimension of above a threshold (e.g., a score on the index of Logic of above 12) in order to produce a score that may be more easily related to.

Reference on price fairness:

The Price is Unfair! A Conceptual Framework of Price Fairness Perceptions; Lan Xia, Kent B. Monroe, & Jennifer L. Cox (2004); Journal of Marketing, 68 (October), pp. 1-15.

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A classic view regarding decision-making holds that attention serves foremost to acquire the information most relevant and important for choosing between alternatives. Thereby the role of attention is largely a passive one. However, an alternative view that is gaining traction in recent years, especially due to the help of eye tracking research, argues that attention plays a more active role in decision processes, influencing the construction of decisions.

This is a key message delivered by Orquin and Mueller Loose (2013) in their review on the role of attention in decision-making, as can be learnt from tracking of eye movements and subsequent fixations [1]. The approach taken by the researchers, however, is less usual: They do not constrain themselves concretely to the domain of decision-making; instead, they start their review and analysis of evidence from theories or models of tasks similar or related to decision-making (e.g., perception, information processing, visual search, working memory, top-down and bottom-up processes, problem solving).  Then they try to project how the functions of attention in such tasks may project to or be expressed in decision processes.

Furthermore, Orquin and Mueller Loose examine the extent to which the evidence coincides with four alternative theories and associated models of decision-making (i.e., whether empirical evidence substantiates or refutes assumptions or conclusions in each theory). They review evidence from previous research on similar or related tasks that could also be traced specifically in decision tasks, based on eye tracking in decision-making research, and evaluate this evidence in the context of the alternative decision-making theories.

The theories and related models considered are: (1) rational models; (2) bounded rationality models; (3) evidence accumulation models (e.g., the attention drift diffusion model [aDDM] posits that a decision-maker accumulates evidence in favour of the alternative being fixated upon at a given time); and (4) parallel constraint satisfaction models (a type of dual process, neural network model based on the conception of System 1’s fast and intuitive thinking [first stage] and System 2’s slow and deliberate thinking [second stage]). Rational models as well as bounded rationality models more explicitly contend that the role of attention is simply to capture the information needed for making a decision. ‘Strong’ rational models hold that all relevant, available information about choice alternatives would be attended to and taken into account, whereas ‘relaxed’ rational models allow for the possibility of nonattendance to some of the information (e.g., attributes or object [product] features). Bounded rationality models suggest that information is acquired just as required by the decision rules applied. The two other categories of models are more flexible in regard to how information is acquired and used, and its effect on the decision process and outcome. However, the authors argue that all four theories are found to be in deficit to a smaller or larger degree in their consideration of the role and function of attention in decision processes, having at least some of their assumptions being rejected by the evidence evaluated.

Selected insights drawn from the review of Orquin and Mueller Loose are enlisted here only briefly to shed light on the significance of attention in consumer decision-making.

A crucial question in decision-making is how information enters the decision process and is being utilised in reaching a choice decision: information may be acquired through attention guided by a top-down (goal-driven) process, yet information may also be captured by a bottom-up (stimulus-based) attentional process. The entanglement of both types of processes when making a decision is a prime aspect in this domain and has multiple implications. A more efficient selection process may be driven by greater experience with a task (e.g., more important information cues have a higher probability of being fixated on) and increased expertise in comprehension of visualisations (e.g., more fixations to relevant areas, and inversely fewer fixations to irrelevant areas, requiring shorter fixation durations, and longer saccades [‘jumps’ between more distant elements of information in a scene]). The interaction between bottom-up and top-down processing can amplify attention capture and improve the visual acuity of objects perceived. Bottom-up attention in particular is likely to be influenced by the saliency of a visual stimulus; however, it may not take effect when the task demands on attention are high, wherein priority is given to top-down directives for attention. Decision-making research has shown that visually salient alternatives or attributes are more likely to capture attention and furthermore affect the decision in their favour.

An interplay occurs between working memory and ‘instant’ attention: As the load of information fixated becomes larger, more elements are passed to working memory, and information is accessed from there for processing; however, as the strain on working memory increases, consumers turn to re-fixating information elements and consider them instantly or just-in-time (i.e., fixations are thus used as external memory space). This type of interplay has been identified in tasks of problem solving. Toggling between working memory and fixations or re-fixations in decision tasks can be traced, for instance, in alternative comparisons. Greater demands imposed by information complexity and decision difficulty (due to greater similarity between alternatives) may require greater effort (operations) in acquiring and processing information, yet the process may be shortened on the other hand through learning.

  • Another area with interesting implication is processing of visual objects: Previous research has shown that visual objects are not encoded as complete representations (e.g., naturalistic product images) and the binding of features is highly selective. Thereof, encoding of particular features during an object-stimulus fixation may be goal-driven, and a re-fixation may be employed to refer just-in-time to specific object [product] features as needed in a decision task, thus saving on working memory capacity.

Consumers have a tendency to develop a bias during a decision task towards a favoured alternative. This alternative would get more fixations, and there is also a greater likelihood for the last alternative fixated to be the one chosen (put differently, consumers are likely to re-affirm the choice of their favourite alternative by re-fixating it just before making the decision). A desired or favoured attribute can also benefit from a similar effect by receiving more frequent attention (i.e., fixations). The authors point, however, to a difficulty in confirming evidence accumulation models: whether greater likelihood of a more fixated alternative to be chosen is due to its higher utility or greater exposure to it. They suggest a ‘soft’ model version in support for a greater effect of extended mere exposure leading to choice of an alternative. They add that a down-stream effect of attention from perception onto choice through a bottom-up process may play a role of gatekeeping the alternatives entering a consideration set. It is noted that a down-stream effect, arising from a bottom-up process, is clearly distinguishable from a utility effect, since the former is stimulus-driven and the latter is goal-driven.

Consistent with bounded rationality theory, heuristics shape patterns of attention, directed by the information that a heuristic calls for (e.g., by alternative or by attribute). Yet, eye-tracking studies conducted to trace the progression of decision processes could not corroborate the patterns of heuristics used as proposed in the literature. More formally, studies failed to substantiate the assumption that heuristics in use can be inferred from the patterns of attention recorded. Transitions of consumers between alternative-wise and attribute-wise rules during a decision task make inferences especially difficult. Not only decision rules influence what information is attended to, but information cues met with during the decision process can modify the course of the decision strategy applied — consider the potential effect that salient stimuli captured unexpectedly in a bottom-up manner can have on the progression of the decision strategy.

In summary, regarding the decision-making theories, Orquin and Mueller Loose conclude: (a) firmer support for the relaxed rational model over the strong model (nonattendance is linked to down-stream effects); (b) a two-way relationship between decision rules and attention, where both top-down and bottom-up processes drive attention; (c) the chosen alternative has a higher likelihood of fixations during the decision task and also of being the last alternative fixated — they find confirmation for a choice bias but offer a different interpretation of the function of evidence accumulated; (d) an advantage of the favoured alternatives or most important attributes in receiving greater attention, and advantage of salient alternatives receiving more attention and being more likely to be chosen (concerning dual process parallel constraint satisfaction models).

Following the review, I offer a few final comments below:

Orquin and Mueller Loose contribute an important and interesting perspective in the projection of the role of [visual] attention from similar or related tasks onto decision-making and choice. Moreover, relevance is increased because elements of the similar tasks are embedded in decision-making tasks. Nevertheless, we still need more research within the domain because there could be aspects specific or unique to decision-making (e.g., objectives or goals, structure and context) that should be specified. Insofar as attention is concerned, this call is in alignment with the conclusions of the authors. Furthermore, such research has to reflect real-world situations and locations where consumers practically make decisions.


In retail stores, consider for example the research by Chandon, Hutchinson, Bradlow, and Young (2009) on the trade-off between visual lift (stimulus-based) and brand equity (memory-based); this research combined eye tracking with scanner purchase data [2]. However, it is worth looking also into an alternative approach of video tracking as used by Hui, Huang, Suher, and Inman (2013) in their investigation of the relations between planned and unplanned considerations and actual purchases (video tracking was applied in parallel with path tracking)[3].

For tracing decision processes more generally, refer for example to a review and experiment with eye tracking (choice bias) by Glaholt and Reingold (2011)[4], but consider nonetheless the more critical view presented by Reisen, Hoffrage and Mast (2008) following their comparison of multiple methods of interactive process tracing (IAPT)[5]. Reisen and his colleagues were less convinced that tracking eye movements was superior to tracking mouse movements (MouseLab-Web) for identifying decision strategies while consumers are acquiring information (they warn of superfluous eye re-fixations and random meaningless fixations that occur while people are contemplating the options in their minds).


 

It should be noted that a large part of the research in this field, using eye-tracking measurement, is applied with concentrated displays of information on alternatives and their attributes. The most frequent and familiar format is information matrices (or boards), although in reality we may also encounter other graphic formats such as networks, trees, layered wheels, and more art-creative diagram illustrations. Truly, concentrated displays can be found in shelf displays in physical stores and also in screen displays online and in mobile apps (e.g., retailers’ online stores, manufacturers’ websites, comparison websites). However, on many occasions of decision tasks (e.g., durables, more expensive products), consumers acquire information through multiple sessions while constructing their decisions. That is, the decision process extends over time. In each session consumers may keep some information elements or cues for later processing and integration, or they may execute an interim stage in their decision strategy. If information is eventually integrated, consumers may utilise aides like paper notes and electronic spreadsheets, but they do not necessarily do so.

Orquin and Mueller Loose refer to effects arising from spatial dispersion of information elements in a visual display as relevant to eye tracking (i.e., distance length of saccades), but these studies do not account for temporal dispersion of information. Studies may need to bridge data from multiple sessions to accomplish a more comprehensive representation of some decision processes. Yet, smartphones today can help in closing somewhat the gap since they permit shoppers to acquire information in-store while checking more information from other sources on their smartphones — mobile devices of eye tracking may be used to capture this link.

Finally, eye tracking provides researchers with evidence about attention to stimuli and information cues, but it cannot tell them directly about other dimensions such as meaning of the information and valence. The importance of information to consumers can be implied from measures such as the frequency and duration of fixations, but other methods are needed to reveal additional dimensions, especially from the conscious perspective of consumers (vis-à-vis unconscious biometric techniques such as coding of facial expressions). An explicit method (Visual Impression Metrics) can be used, for example, to elicit statements by consumers as to what areas and objects in a visual display that they freely observe they like or dislike (or are neutral about); if applied in combination with eye tracking, it would enable to signify the valence of areas and objects consumers attend to (unconsciously) in a single session with no further probing.

The review of Orquin and Mueller Loose opens our eyes to the versatile ways in which [visual] attention may function during decision tasks: top-down and bottom-up processes working in tandem, toggling between fixations and memory, a two-way relation between decision strategies and visual attention, choice bias, and more. But foremost, we may learn from this review the dynamics of the role of attention during consumer decision-making.

Ron Ventura, Ph.D. (Marketing)

References: 

[1] Attention and Choice: A Review of Eye Movements in Decision Making; Jacob L. Orquin and Simone Mueller Loos, 2013; Acta Psychologica, 144, pp. 190-206

[2] Does In-Store Marketing Work? Effects of the Number and Position of Shelf Facings on Brand Attention and Evaluation at the Point of Purchase; Pierre Chandon, J. Wesley Hutchinson, Eric T. Bradlow, & Scott H. Young, 2009; Journal of Marketing, 73 (November), pp. 1-17

[3] 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.

[4] Eye Movement Monitoring as a Process Tracing Methodology in Decision Making Research; Mackenzie G. Glaholt and Eyal M. Reingold, 2011; Journal of Neuroscience, Psychology and Economics, 4 (2), pp. 125-146

[5] Identifying Decision Strategies in a Consumer Choice Situation; Nils Reisen, Ulrich Hoffrage, and Fred W. Mast, 2008; Judgment and Decision Making, 3 (8), pp. 641-658

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Health insurance, financial investments, telecom service plans — consumers frequently find it harder to make choice decisions in these exemplar domains. Such domains are more susceptible to exhibiting greater complexity: details, many and technical, to account for, multiple options difficult to differentiate and to choose from, and unclear consequences. In products, we may refer in particular to those involving digital technology and computer-based software that some consumers are likely to find more cumbersome to navigate and operate. When consumers are struggling to make any choice, they develop a stronger tendency to delay or avoid the decision at all. They need assistance or guidance in making their way towards a choice that more closely matches their needs or goals and preferences.

Handel and Schwartzstein (2018) are distinguishing between two mechanism types that obstruct or interfere with making rational decisions: frictions and mental gaps.

Frictions reflect costs in acquiring and processing information. They are likely to occur in earlier stages of a decision process when consumers are encountering difficulties in searching for and sorting through relevant information (e.g., what options are more suitable, what attributes and values to look at), and they have to invest time and effort in tracing the information and organising it. Furthermore, frictions may include the case when consumers fail to see in advance or anticipate the benefits from an available alternative  (e.g., consider the difficulty of older people to realise the benefits they may gain from smartphones).

Mental gaps are likely to make an impact at a more advanced stage: the consumer already has the relevant information set in front of him or her but misinterprets its meanings or does not understand correctly the implications and consequences of any given option (e.g., failing to map correctly the relation between insurance premium and coverage). Mental gaps pertain to “psychological distortions” that generally may occur during information-gathering,  attention and processing, but their significance is primarily in comprehension of the information obtained. In summary, it is “a gap between what people think and what they should rationally think given costs.”

In practice, it is difficult to identify which type of mechanism is acting as an obstacle on the way of consumers to a rational decision.  Research techniques are not necessarily successful in separating between a friction and a mental gap as sources of misinformed choices (e.g., choosing a dominated option instead of a dominating one apparent to the rational decision-maker). Notwithstanding, Handel and Schwartzstein are critical of research practices that focus on a single mechanism and ignore alternative explanations. In their view, disregard to the distinction between mechanisms can lead to spurious conclusions. They suggest using counterfactual approaches that test a certain mechanism, or a combination of explanations, and then argue against it with a ‘better’ prospective mechanism explanation. They also refer to survey-based and experimental research methods for distinguishing frictions and mental gaps. The aim of these methods is to track the sources of misinformed decisions.

Consumers often run into difficulty with financial investments and saving plans. In some countries policy makers are challenged with driving consumers-employees towards saving for retirement during the working years. Persuasion per se turns out to be ineffective and other approaches for directing or nudging consumers into saving are designed and implemented (e.g., encouraging people to “roll into saving” through a scheme known as ‘Save More Tomorrow’ by Thaler and Sunstein).

Confronting employees with a long list of saving plans or pension funds may deter them from duly attending to the alternatives in order to make a decision, and even risks their aborting the mission. When consumers-employees have a hard time to recognise differences between the plans or funds (e.g., terms of deposit, assets invested in, returns), they are likely to turn to heuristics that brutally cut through the list. Crucially, even if information on key parameters is available for each option, decision-makers may use only a small part of it. Similar difficulties in choosing between options may arise in financial investments, for instance when choosing between equity and index funds or bond funds. One may be assisted by suggesting a default plan (preferably, recommending a personally customised plan) or sorting and grouping the proposed plans and funds into classes (e.g., by risk level or time horizon). However, it should be acknowledged that consumer responses as described above may harbour frictions as well as mental gaps, and it could help to identify which mechanism has the greater weight in the decision process.

A key issue with health insurance concerns the mapping of relationship between an insurance premium and the level of deductibles or cost-sharing between the insurer and the insured. For example, consumers fall into a trap of accepting an insurance policy offered with a lower premium while not noticing a higher deductible they would have to pay in a future claim. An additional issue consumers have to attend to is the coverage provided for different medical procedures such as treatments and surgeries (given also the deductible level or rate). Consumers may stumble in their decision process while studying health insurance plans as well as while evaluating them.

  • Public HMOs (‘Kupot Holim’) in Israel offer expanded and premium health insurance plans as supplementary to what consumers are entitled to by the State Health Insurance Act. Yet in recent years insurance companies are prompting consumers to get an additional private health insurance plan from them — their argument is that following changes over the years in the HMOs’ plans and reforms by the government, those plans do not offer adequate coverage, or none at all, for more expensive treatments and surgeries. The coverage of private insurance plans is indeed more generous, but so are the much higher premiums , affordable to many only if paid for by the employer.

In addressing other aspects of healthcare, Handel and Schwartzstein raise the issue of consumer preference for a branded medication (non-prescription) over an equivalent and less costly generic or store-branded medication (e.g., buying Advil rather than a store-branded medication that contains the same active ingredient [ibuprofen] for pain relief as in Advil). Another vital issue concerns the tendency of patients to underweight the benefits of treatment by medications prescribed to them, and consequently do not take up medications satisfactorily as instructed to them by their physicians (e.g., patients with a heart condition, especially after a heart attack, who do not adhere as required to the medication regime administered to them).

Customers repeatedly get into feuds with their telecom service providers — mobile and landline phone communication , TV and Internet. Customers of mobile communications (‘cellular’), for example, often complain that the service plan they  had agreed to did not match their actual usage patterns or they did not understand properly the terms of the service contract they signed to. As a result, they have to pay excessive charges (e.g., for minutes beyond quota), or they are paying superfluous fixed costs.

With the advancement of technology the structure of mobile service plans has changed several times in the past twenty years. Mobile telecom companies today usually offer ‘global’ plans for smartphones that include first of all larger volumes of data (5GB, 10GB, 15GB etc.), and then practically an infinite or outright unlimited use of outgoing talking minutes and SMSs. While appealing at first, customers end up paying a fixed inclusive monthly payment that is too high relative to the traffic volume they actually make use of. On the one hand customers refrain from keeping track of their usage patterns because it is costly (a friction). On the other hand, customers fail in estimating their actual usage needs that will match the plan assigned to them (a mental gap). In fact, information on actual usage volumes is more available now (e.g., on invoices) but is not always easily accessible (e.g., more detailed usage patterns). It should be noted, however, that companies are not quick to replace a plan, not to mention voluntarily notifying customers of a mismatch that calls for upgrading or downgrading the plan.

A final example is dedicated here to housing compounds of assisted living for seniors. As people enter their retirement years (e.g., past 70) they may look for comfortable accommodation that will relieve them from the worries and troubles of maintaining their home apartment or house and will also provide them a safe and supportive environment. Housing compounds of assisted living offer residence units, usually of one or two rooms of moderate space, with an envelope of services: maintenance, medical supervision and aid, social and recreational activities (e.g., sports, games, course lectures on various topics). The terms for entering into assisted living housing can be nevertheless consequential and demanding. The costs involve mainly a leasing payment for the chosen residence and monthly maintenance fee payments.

Making the decision can be stressing and confusing. First, many elderly people cannot afford taking residence in such housing projects without selling their current home or possibly renting it (e.g., to cover a loan). In addition the value of the residence is depreciated over the years. Second, the maintenance fee is usually much higher than normal costs of living at home. Hence residents may need generous savings plus rental income in order to finance the luxury and comfort of assisted living. Except for the frictions that are likely to occur while looking for an appropriate and affordable housing compound, the prospect residents are highly likely to be affected by mental gaps in correctly understanding the consequences of moving into assisted living (and even their adult children may find the decision task challenging).

Methods of intervention from different approaches attempt to lead consumers to make decisions that better match their needs and provide them greater benefits or value. Handel and Schwartzstein distinguish between allocation policies that aim to direct or guide consumers to a recommended choice without looking into reasons or sources of the misinformed decisions (e.g., nudging techniques), and mechanism policies that attempt to resolve a misguided or misinformed choice decision by tackling a specific reason causing it, such as originating from a mechanism of friction or mental gap. From a perspective of welfare economics, the goal of an intervention policy of either type is to narrow down a wedge between the value consumers obtain from actual choices subject to frictions and mental gaps, and the value obtainable from a choice conditional on being free of frictions and mental gaps (i.e., assuming a rational decision). (Technical note: The wedge is depicted as a gap in value between a ‘demand curve’ and a ‘welfare curve’, respectively.)

Policies and methods of either approach have their advantages and disadvantages. An allocation policy has a potential for greater impact, that is, it can get farther in closing the welfare wedge.  Yet, it may be too blunt and excessive: while creating a welfare gain for some consumers, it may produce an undesirable welfare loss to consumers for whom the intervention is unfitting. Without knowing the source of error consumers make, it is argued that a nudging-type method (e.g., simplifying the structure of information display of options) could be insufficient or inappropriate to fix the real consumer mistake. A fault of allocation policies could particularly be, according to the authors, that they ignore heterogeneity in consumer preferences. Furthermore, and perhaps as a consequence, such policies overlook the presence of informed consumers who may contribute by leading to the introduction of far better products at lower prices.

Mechanism policies can in principle be more precise and effective while targeting specific causes of consumers’ mistakes, and hence correcting the costs of misinformed decisions without generating unnecessary losses to some of them. The impact could be more limited in magnitude, yet it would be measured. But achieving this outcome in practice, the authors acknowledge, can be difficult and complicated, requiring the application of some costly research methods or complex modelling approaches. They suggest that “[as] data depth and scope improve, empirically entangling mechanisms in a given context will become increasingly viable”.

The analysis by Handel and Schwarztsein of the effects of intervention policies — mechanism versus allocation — could come as too theoretical, building on familiar concepts of economic theory and models, furthermore being difficult and complicated to implement. Importantly, however, the authors open up a door for us to a wider view on sources of mistakes consumers make in decision-making and the differences between approaches aimed at improving the outcomes of their decisions. First, they clarify a distinction between mechanisms of frictions and mental gaps. Second, they contrast allocation policies (e.g., nudging) versus mechanism policies which they advocate. Third, to those less accustomed to the concepts of economic analysis, they demonstrate their ideas with practical real-world examples. Handel and Scwharzstein present a perspective well deserving to learn from.

Ron Ventura, Ph.D. (Marketing)

Reference:

Frictions or Mental Gaps: What’s Behind the Information We (Don’t) Use and When Do We Care?; Benjamin Handel and Joshua Schwartzsetein, 2018; Journal of Economic Perspectives, Vol. 32 (1 – Winter), pp. 155-178. (doi: 10.1257 / jep.32.1.155)

 

 

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Consumer purchases from Internet retailing websites continue to expand, and their share out of total retail sales increases. Yet there is no real reason to declare the demise of physical, bricks-and-mortar stores and shops any time soon. Online purchases from e-stores (including through apps) indeed pose a stressing challenge to many physical stores, but the latter still hold a solid and dominant majority share of retail sales. Nonetheless, owners of physical stores will have to make changes to their mission and approach to retailing in order to answer effectively and successfully to the challenges from electronic retailing (‘e-tailing’).

The share of sales revenues from online retailing varies across categories (e.g., from groceries to electronics) yet the share overall out of total retailing revenues still floats around 12%-15% on average; there is also important variation between countries. Tensions are high particularly because of the threat from overarching e-tailers such as Amazon and Alibaba who grew their businesses in the virtual online environment. However, retailers do not have to choose to be either in the physical domain or the virtual domain: Many large and even medium bricks-and-mortar retailers are already double-operating through their physical stores and the Internet and mobile channels. Moreover, the master of Western e-tailing Amazon is lurking into the physical world with the establishment of its Amazon Go food stores, its venture into physical bookstores in selected US locations, and notably the acquisition of the food retail chain Whole Foods — what better testimony of the recognition that physical stores are still in need. All these observations should tell us that: (1) The lines between physical and virtual (electronic) retailing are blurred and the domains are not exclusive of each other; (2) It is a matter of linking between the domains where one can operate as an extension of the other (and it does not depend on which is the domain of origin); and (3) The domains are linked primarily by importing technology powered with data into the physical store’s space.

Technology alone, however, is not enough to resolve the challenges facing physical stores. Focusing on technology is like harnessing the carriage before the horses. The true and crucial question is: What will consumers of the coming future be looking for in stores? This is important, because consumers, especially the younger generations born after 1980, still have interest in shopping in bricks-and-mortar stores but they could be looking for something different from past decades, moreover given the digital options available to them now. The answers will have to come through rethinking and modifying the mission and strategy set for physical stores. The direction that seems most compelling for the mission is to shift emphasis from the merchandise offered in a store to the kind of experience offered in the store. The strategy may involve reconsideration and new planning of: (a) the product variety and volume of merchandise made available in the store; (b) interior design and visual merchandising; (c) scope and quality of service; and (d) the technologies applied in the store, all tailored to the convenience and pleasure of the shoppers.

This article will focus primarily on aspects of design of stores, including  interior design and decoration, layout, and visual merchandising (i.e., visual display of products); together with additional sensory elements (e.g., lighting, music, texture, scent) they shape the atmosphere in the store or shop. Yet it should be noted that the four strategy components suggested above are tied and influence each other in creating the kind of experience a retailer desires the customers-shoppers to have while in-store.

Shopping experiences in a store rely essentially on the emotions the store invokes in the consumers-shoppers. Notwithstanding the sensorial and cognitive reactions of shoppers to the interior scene of the store, the positive and pleasant emotions the shoppers feel will most likely be those that motivate them to stay longer and choose more products to purchase (further desired behaviours may include recommendation to friends and posting photos from the store on social media). Prior and close enough to consumption itself, the personal shopping and purchasing experience may invoke a range of positive emotions such as joy, optimism, love (non-romantic), peacefulness, and surprise; of course there also are potential negative emotions that retailers would wish to reduce (e.g., anger, worry, sadness)[*].

The need for shift in emphasis in physical stores is well stated by Lara Marrero, a strategy director with Gensler, a British design firm: “It used to be a place where people bought stuff. Now it is a state where a person experiences a brand and its offerings”. Marrero, who is leading the area of global retail practice at the firm, predicts a future change in mentality of shoppers from ‘grab and go’ to ‘play and stay’ (“Retail 2018: Trends and Predictions”, Retail Focus, 15 December 2017). This predicted shift is still inconsistent with a current retail interpretation of linking the digital and physical domains through schemes of ‘click-and-collect’ online orders at a physical store. Additionally, consumers nowadays conduct more research online on products they are interested in before coming to a store: The question is if a retailer should satisfy with letting the consumer just ask for his or her preferred product at the store or encourage the consumer-shopper to engage and interact more in-store, whether with assistance from human staff or digital utilities, before making a purchase — the push may have to come first from the consumers. Marrero further notes the social function of stores: retail environments become a physical meeting point for consumers to share brand experiences. Retailers will have to allow sufficient space for this in the store.

In order to generate new forms of shopper experiences the setting of a store’s scene also has to change and adapt to the kind of experience one seeks to create. New styles and patterns of in-store design are revealed through photo images of retail design projects, and the stories the images accompany, on websites of design magazines (e.g., VMSD of the US, Retail Focus of the UK). They demonstrate changes in the designing approach to the interior environment of stores and shops.

A striking aspect in numerous design exemplars is the tendency to create more spacious store scenes. It does not necessarily mean that the area of stores is larger but that the store’s layout and furnishing are organised to make it feel more spacious,  for example by making it look lighter and allowing shoppers to move more easily around. Additionally, it implies ‘loading’ the store’s areas which are accessible to customers with less merchandise. First, merchandise would be displayed mostly on fixtures attached to walls around the perimeters of the store, but even then it should not look too crowded (i.e., in appreciation that oftentimes ‘less is more’ for consumers). Second, fewer desks and other display fixtures are positioned across the floor to leave enough room for shoppers to walk around conveniently (and possibly feel more ‘free’). In fashion stores, for instance, this would also apply to  ‘isles’ of demonstrated dressing displays. Third, desks should not be packed with merchandise, and furthermore, at least one desk should be left free from merchandise — leave enough surface for shoppers and sellers to present and look at merchandise and to converse about the options. In some cases, it may allow for the shoppers to socialise and consult among themselves around a desk at the store (e.g., inspired by Apple stores). Opportunities to socialise can be enhanced in larger stores  by allocating space for a coffee & wine bar, for instance, which may serve also sandwiches, patisseries and additional drinks. Stores would be designed to look and feel more pleasant and enjoyable for consumers-shoppers to hang around, contemplate their options and make purchase decisions.

  • Large stores that spread over multiple floors with facades turning outwards to the street may fix the facades with glass sheets, and in order not to block natural daylight from entering into the store they would place desks and mobile hangers or other low shelf fixtures along the windows.

Modissa Fashion Store set for Christmas

In the new-era store not all merchandise the store may offer to sell needs to be displayed in the ‘selling areas’ accessible to shoppers. Retailers may have to retreat from the decades long paradigm that everything on display is the inventory, and vice versa. It is worth considering: First, some merchandise can be displayed as video on screens, and thus also add to the ‘show’ in the store; Second, shoppers can use digital catalogues in the store to find items currently not on display — such items may still be available in stock on premises or they may be ordered within 24 hours. But furthermore, customers may be able to coordinate online or through an app with a store near them to see certain products at a set time; up-to-date analyses of page visits and sales on a retailer’s online store can tell what products are most popular, subsequently guaranteeing that the physical stores keep extra items of them in stock on premises.

Here are references to a few exemplars for illustration of actual store design projects published in design magazines’ websites:

Burberry, London — The flagship store of luxury fashion brand Burberry on Regent Street is highlighted for both the use of space in its design and the employment of digital technology in the store. A large open space atrium (of an older time theatre) occupies the centre of the store (four floors, 3000 sqm), impressive in how Burberry allowed to keep it. The digitally integrated store is commended for its fusion of a ‘digital world’ into its bricks-and-mortar environment: a large high-resolution screen plays video in the atrium, synchronised with a hundred digital screens around the store, some 160 iPads (e.g., for finding items on the catalogue that may not be on display), and RFID tags attached to garments (VMSD, 18 December 2012).

Hogan, Milano — The footwear ’boutique’ store (277 sqm in via Montenapoleone) is designed to reflect the brand, “luxury but accessible”. The store’s mission has been described as follows: “Hogan is a lifestyle brand, championing contemporary culture. The store therefore needed to be dynamic, working hard to adapt from retail space to live event or gallery space”. Characteristic of the store: tilted surfaces for display, lying on top of each other like fallen-down domino bricks; and an animated display of patterns by LED lighting behind frosted glass walls — they both reflect movement, the former just symbolically while the latter more dynamically, to “express the dynamism of the city”. The store of Hogan also fosters social activity around its host bar and customization bar (Retail Focus, 15 February 2018).

Black by Dixon’s, Birmingham (UK) — The technology retail concept aspires to make “the geeky more stylish and exciting”. Digital technology is “dressed” in fashionable design, aiming at the more sophisticated Apple-generation (distinctive in the images are the mannequins “sitting” on desks as props, and colour contrasts on a dark background). (VMSD, 24 May 2011.)

Stella McCartney, Old Bond Street, London — The re-established flagship store resides in an 18th century historic-listed building (four floors, 700 sqm). Products such as dresses and handbags are displayed (sampled) across the store in different halls. The design and lighting give a very loose feeling. Refreshingly, the ground floor features an exhibit of black limestones and “carefully selected rocks” from the family’s estate, a piece of nature in-store (Retail Focus, 14 June 2018).

Admittedly, some of the more distinctive and impressive design exemplars belong to up-scale and luxury stores, but they do give direction and ideas for creating different experiences in retail spaces, even if less lavishly. Furthermore, technology can enrich the store and add a dimension of activity in it. Yet it is part of the whole design plan, not necessarily its central pillar, if at all.

Installing digital technology in a store does not mean importing the Internet and e-store into the physical store. Features of digital technology can be employed in-store in a number of ways, and the use of an online catalogue is just one of them. There is no wisdom for the physical store in trying to mimic Internet websites or compete with them. It should find ways, instead, to implement digital technologies that best suit the store’s space and transform the experience of its visiting shoppers.

Moreover, the store owner should identify those aspects that are lacking in the virtual online store and leverage them in the bricks-and-mortar store (e.g., immediacy, non inter-mediated interaction with products, sensorial stimulations other than visual and audio, feeling fun or relaxed). Thereof, the store should borrow certain technological amenities that can help to link between the domains and make the experience in-store more familiar, convenient, interesting, entertaining or exciting. According to an opinion article in Retail Focus on “The Future of High Street” (Lyndsey Dennis, 25 April 2018): “To draw customers back to brick-and-mortar, [retailers] need to rethink how they use their physical space and store formats. The key is to give customers something they can’t get online, whether that’s information, entertainment, or service“. Advanced technologies such as Virtual reality (VR) and Augmented Reality (AR) are part of the repertoire that are increasingly introduced in high street stores [e.g., AR applied in the fitting rooms of Burberry’s store, triggered by the RFID tags].

Matt Alderton, writing in ArchDaily magazine of architecture and design (25 November 2015), details key technologies and how they are implemented in stores to create new possibilities and leverage shopper experiences. One group of technologies can provide vital data to retailers which in turn can be applied to interact with shoppers and return useful information to them (e.g., beacons, RFID tags, visual lighting communications). The second group includes display technologies that may be enriching with information and entertaining to shoppers: for example, VR and AR, touch screens, and media projected on a surface such as table-top which thus becomes a touch screen. Alderton clearly sees consumer need for physical stores, the question is how consumers would want them: “What the data says is that shoppers want to move forward by going back: Like their forebears who visited Harrods, they crave emporiums that are experiential, not transactional, in nature“. (See also images in this article as they portray new-fashioned designs in space and layout; notably these stores feel less crowded by merchandise, and some show in-store digital displays.)

These are challenging times for bricks-and-mortar stores. New possibilities are emerging for physical stores to grow and thrive, yet they will have to adapt to changed shopping and purchasing patterns of consumers and develop new kinds of experiences that appeal to them. It should be a combined effort, with contribution from interior design of stores and visual merchandising, utilities and amenities based on digital technologies implemented in the store, and the support and assistance by human personnel. The in-store design is especially important in setting the scene — in appearance, comfort and appeal — that will shape shoppers’ experiences. Retailing could evolve as far as into new forms of ‘experiential shopping’.

Ron Ventura, Ph.D. (Marketing)

Reference: [*] Measuring Emotions in the Consumption Experience; Marsha L. Richins, 1997; Journal of Consumer Research, Vol. 24 (September), pp. 127-149.

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When evaluating a restaurant, the quality of food is not like other factors considered — it has a special status. The same goes quite as much for other food establishments like coffee-houses. The customers or patrons may trade-off several factors which include the food, service, venue, price and location, yet food quality usually gets a much greater weight than the other attributes, suggesting that the decision process is practically not fully compensatory. The quality of the food, its taste and how much we enjoy it, is a “pre-condition” to dining at a restaurant. However, the balance with other attributes is important; in some cases, failure on those other attributes can be detrimental to the willingness of consumers to return to a restaurant or a coffee-house.

  • Some coffee-houses effectively function as ‘coffee-restaurant’ establishments by serving meals of a variety of food items suitable for every time of day (from eggs, salads and toasts to soups, pasta, hamburger or chicken-breast schnitzel with supplements).

Suppose that Dina and Mark, a fictional couple, are dining at a restaurant and find the dishes served to them being well-prepared and they enjoy very much the food’s taste. However, they are very unhappy with the sluggish service they get and inappropriate answers of the waiter, and feel the atmosphere in the restaurant is not pleasant (e.g., too dark or too noisy). The experience of Dina and Mark can be greatly hampered by factors other than food. How superior should the food be for our diners to be ready to tolerate bad service or a place they do not feel comfortable to be in for an hour or two?

On the other hand, Dina and Mark would likely expect the food (e.g., a dish like ‘risotto ai funghi’ [with mushrooms]) to uphold to a certain gratifying standard (i.e., that the ingredients are genuine, the texture is right, and the dish is overall tasty). If the food is not perceived good enough and diners do not enjoy it, this takes out the point of considering dining at the restaurant altogether. But if the food is good though not so special or great, yet the patrons Dina and Mark feel the staff truly welcome them, treat them warmly and cater to sensitivities they may have, they could still be happy to dine at such a restaurant again, and again. When the food is already satisfactory, additional facets of the experience such as great service and a pleasing ambience can increase substantially the desirability of a restaurant or coffee-house as a place consumers would  like to patronize. We may be looking at a decision process where at first food is a non-compensatory criterion, yet above a certain perceived threshold the balance customers-patrons strike between food and other attributes of their experience becomes more intricate and complex.

Browsing reviews of restaurants that are shared on TripAdvisor’s traveller website can provide helpful clues on how customers-patrons relate to food and additional factors in their appraisals of their experiences at restaurants. Reviews were sampled of Italian and Asian restaurants in Tel-Aviv and London (members-reviewers may be city locals, national and international travellers — examples are quoted anonymously so that reviewers and the specific restaurants they review are not identified by name).

Reviewers most often open by referring to the food they have had at the restaurant; next they may give their assessment of the service they have received, design and atmosphere, price or value, and location of the restaurant. Thus, a review may start by appraising the food as good / great / delicious, and then stating that the service was good / nice / efficient. Nonetheless, it is not uncommon for diners-reviewers to open with an assessment of the service they have received at the restaurant. There seems to be a greater propensity to open the review with service when it is superb, but also on the contrary when it is terrible. Occasionally a review will refer firstly to the atmosphere in the restaurant, which is formed by aspects such as interior design or décor, lighting, music and overall ambience. Atmosphere will appear first or at least early in the review particularly when it is superior or inferior.

Additionally, we can distinguish between reviews that are composed of a few short argument-like statements about the food, service and other attributes, and reviews that tell a story (i.e., a narrative-like review). There are diners-reviewers who go especially into detail of the dishes or items of food they, and possibly their companions, have ordered, and their opinion of the food. Yet reviewers may also describe how they were treated by the serving staff, particularly when they felt exceptionally welcome and cared for or annoyed and undesired. Reviews that have a narrative give a stronger impression of the course of dinner to the reader who can more easily visualize it.

It seems that when diners-reviewers say the food is ‘good‘, they do not throw it out of hand; they do mean that the food is truly good, fresh and tasty. This appraisal should be interpreted as a base threshold for being satisfied with the food. When the food is more than ‘good’, reviewers explicitly express it with adjectives like ‘great’, ‘delicious’, ‘fabulous’ or ‘amazing’. Conversely, descriptions of the food as ‘average’, ‘OK’, and moreover as ‘mediocre’, are certainly not compliments, more likely suggesting the food was barely satisfactory. Unless there was something else especially good about the experience in that restaurant like its service or venue, the reviewer would probably have little motivation to return.  Consider for example a reviewer who said about an Italian restaurant in Tel-Aviv: “The ONLY redeeming factor is, in my opinion, the ambience, which is really cozy and relaxed. Too bad they don’t serve food to match” (capitals in origin, rating: 2 ‘rings’ out of 5). Similarly, a reviewer of an Asian restaurant in London complimented it for its “friendly and attentive” waiting staff, but concluded: “So there were a lot of positives about this place, but I’m afraid the food just wasn’t good quality. It was very bland and boring” (rating: 2 ‘rings’). On the other hand, a review of an Asian restaurant in Tel-Aviv offers the opposite case wherein the reviewer states “AMAZING food, OUTRAGEOUS service” (title, capitals in origin), and ends with the conclusion “basically terrible service which was definitely the opposite of the wonderful tasty food we were served” — the rating for this restaurant experience: also 2 ‘rings’.

  • A prospective diner who looks for a restaurant to try for the first time may find the choice task confusing and daunting when reviews of the same restaurant are quite the opposite of each other in their content. Still, it usually does not take too long to realise the ratio of positive to negative reviews given to a restaurant, in addition to the chart of distribution of ratings it received.

Service appears as the second most important factor after food in a restaurant. Patrons want the waiting staff to be friendly and respectful (this of course is a two-way street), be attentive and not letting them feel forgotten, and to be flexible and kind enough to accommodate their personal sensitivities or preferences (e.g., less spicy, nuts-free, replace polenta with rice as supplement). Less pleasant or efficient service will not necessarily make diners-reviewers reject the restaurant if its food is excellent, but they could drop one grade off its rating (e.g., from 5 to 4). Inversely, when the diners-reviewers are happy with the quality and taste of food, then also meeting a warm and helpful waitress — or sitting in comfort in a beautifully designed venue — can make the whole experience so much better. Reviewers repeatedly emphasise when, on top of their pleasure of the food, they are impressed by a waiter or waitress who smiled to them, was friendly, attentive and helpful, and made them feel at home. A reviewer of an Italian restaurant in London explains why it is her favourite: “Quite simply, the food is absolutely gorgeous. Wonderful ingredients and very well cooked. But most of all the welcome that we received and service that we got from everyone is great” (rating: 5).

A particular aspect of service is the length of time a customer has to wait either to be seated at a table or while dining. Many restaurants take table reservations, but not all do. Not taking reservations is legitimate, but it is far less acceptable and even offensive when staff at a restaurant (including coffee-restaurants) run a waiting list at the doorstep and appear pleased with letting prospect customers gather and wait outside as if to show around how popular their establishment is; if you complain they may even hint at you how much they do not really need your patronage. Such past experience may have made a British reviewer visiting an Italian restaurant in Tel-Aviv be thankful when: “The staff were very pleasant and found us a seat on a very busy afternoon without behaving as if they were doing us an enormous favour”. In a different case, at an Asian restaurant in London, a reviewer commented: “Long wait to be seated, despite the place being half empty, as the servers were running around serving tables but not seating people”. Considerate restaurant proprietors may keep seats reserved for people waiting (e.g., next to the bar), and may even offer them a free drink if waiting is extended.

While at the table, diners dislike when waiters appear to forget them behind or somehow miss sight of them (e.g., waiting for menus, for taking order and bringing courses ordered, for the cheque). A reviewer in Tel-Aviv was critical pointedly of servers who “it seems lost interest”, and started chatting with their colleagues or playing on their phones. Waiting staff are expected to stand by, being ready to answer requests or voluntarily enquire if diners need anything. An American reviewer at another Italian restaurant in the city, coming “late one night”, appreciated that “my waitress made an effort to check on me regularly”. At an Italian restaurant in London, a reviewer noted that on arriving early for a meeting, “I was offered a newspaper to read while I waited which I thought a rather nice touch”; overall, he commended the service whereby “the staff proficiently and effortlessly ensured everyone felt special and were looked after”. Seemingly little touches matter!

In restaurants of fine cuisine it seems justified to wait patiently longer for an order (e.g., 20 minutes for a main course) as it could mean that the dish is freshly prepared with care for you in those very moments from start to finish [an advice received from my father]. In many ‘popular’ or casual restaurants, however, it would be much less the expectation, though it could depend on the type of food and how complicated it is perceived to prepare the dish. Furthermore, the sensitivity of customers-patrons to time spent could be subject to the occasion (e.g., meeting and dining leisurely in the evening vs. a pre-theatre dinner or a lunch break).

Reviews tend not to address directly the time until a dish ordered is served but more generally relate to the waiting time at any stage while being at the table. Some relevant references were traced in reviews of Asian restaurants in London: (a) A reviewer noted that “service can be slow” and “a bit hit and miss” (although the food and atmosphere were good); (b) Waiting for food was raised by a reviewer as an issue for concern: the waitresses seemed “understaffed” and having “stressed looking faces”, with the result that “We sat around with no food or drink for over 20 minutes before we could grab a waitresses’ attention” (the food was “fantastic” and the rating given could otherwise be 5 rather than 4 — the reviewer “would defiantly” return); (c) A reviewer who was overall happy with the friendly and efficient service and “freshly cooked and tasty delicious” food particularly remarked that the “food came quickly”.

The aesthetics of interior design of a restaurant or coffee-house can also have an impact on consumers’ attitude towards the place and on their behaviour. The style, materials, colours, surrounding decorations, furnishing, lighting etc. are instrumental in the way the design helps to create a certain atmosphere and mood (e.g., cold or warm; traditional or top-notch modern; quiet, ‘cool’ or energetic).

John Barnett and Anna Burles of ‘JB/AB Design’, a London-based agency specialising in design of coffee shops, offer six instructive guidelines on the ways design on different levels can contribute to brand experience. They start with creating a happening in the coffee shop (‘The shop is a stage’), followed by using appetizing imagery of food (‘customers eat with their eyes’); being authentic and relevant; persuasive visual merchandising; creative ambience; and giving customers good reasons to come and ‘gather around a table’ in  the coffee shop. Their recommendations sound mostly if not all adaptable to more types of food and drink establishments, including restaurants. In setting an authentic design, they advise to ‘say it like you mean it’ all round the shop : “The whole shop is a canvas for imagery and messaging that forms the basis of a conversation with your customers”.

Reviewers-diners talk less frequently of aspects of interior design and description of the space of the venue; broader references are made to atmosphere or ambience. In the case of an Italian restaurant in the Tel-Aviv area with an elegant modern design, three different reviewers noted it has “a very nice décor”, that it is “very spacious and modern”, and the “interior is beautiful, a lot of air”. A reviewer relating to an Italian restaurant in London wrote: “The décor seems a little dated, but there were some fun touches”. This reviewer also addressed music played in creating a pleasing atmosphere (“alternated nicely between Frank Sinatra and Luciano Pavarotti — perfect!”). A reviewer-diner mentioned earlier, who was impressed by the newspaper gesture, also said of that Italian restaurant: “The ambience was extremely relaxed and the décor is comfortable, plush and smart”. An Asian restaurant in Tel-Aviv was described by a reviewer as “pleasant, with very informal atmosphere, soft background music, and industrial/downtown décor”.

Some appraisals of design and atmosphere sound somewhat more reserved though still positive. For example, a reviewer said of a luxury Asian restaurant in London that it is “very dark inside, but somehow it is also very cooling place”. A reviewer in another luxury Asian restaurant was very impressed by a modern-futuristic design yet felt uncomfortable with it: “The place is playing with your perception, slightly disorienting with its colours and stairs and reflecting surfaces”. The reviewers quoted above were largely very happy with the food as well as the service. In just one case observed, a reviewer of an Asian restaurant in Tel-Aviv became very upset with the food and proclaimed “Sorry! But when we decide to go to the restaurant, we wish to have a good meal, NOT ONLY a trendy design” (capitals in origin, rating: 1). In this case the “rather nice designed place” could not compensate for a poor food experience. Customers-patrons welcome inspiring and modern designs, but the design must also feel pleasing to the eye and comfortable — be creative with designs but not be excessive.

A top priority for restaurants, and to a similar degree also for coffee-houses, remains taking the most care of the quality and taste of the food they serve. However, it is essential to also look after additional factors or facets that shape the customer’s experience such as service, design and atmosphere, price or value. The kind of service customers-patrons experience is especially a potential ‘game-changer’. Additionally, consumers may not be coming to a restaurant or coffee-house for its design but if it looks appealing the design and atmostphere can make the stay more comfortable and enoyable, and encourage patrons to stay longer, order more, and return. Food is a central pivot of customer appraisals, yet other facets of the experience can tilt it either way: spoil and even ruin the experience or instead support and enhance it.

Ron Ventura, Ph.D. (Marketing)

 

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Revelations about the Facebook – Cambridge Analytica affair last month (March 2018) invoked a heated public discussion about data privacy and users’ control over their personal information in social media networks, particularly in the domain of Facebook. The central allegation in this affair is that personal data in social media was misused for the winning political presidential campaign of Donald Trump. It offers ‘juicy’ material for all those interested in American politics. But the importance of the affair goes much beyond that, because impact of the concerns it has raised radiates to the daily lives of millions of users-consumers socially active via the social media platform of Facebook; it could touch potentially a multitude of commercial marketing contexts (i.e., products and services) in addition to political marketing.

Having a user account as member of the social media network of Facebook is pay free, a boon hard to resist. Facebook surpassed in Q2 of 2017 the mark of two billion active monthly users, double a former record of one billion reached five years earlier (Statista). No monetary price requirement is explicitly submitted to users. Yet, users are subject to alternative prices, embedded in the activity on Facebook, implicit and less noticeable as a cost to bear.

Some users may realise that advertisements they receive and see is the ‘price’ they have to tolerate for not having to pay ‘in cash’ for socialising on Facebook. It is less of a burden if the content is informative and relevant to the user. What users are much less likely to realise is how personally related data (e.g., profile, posts and photos, other activity) is used to produce personally targeted advertising, and possibly in creating other forms of direct offerings or persuasive appeals to take action (e.g., a user receives an invitation from a brand, based on a post of his or her friend, about a product purchased or  photographed). The recent affair led to exposing — in news reports and a testimony of CEO Mark Zuckerberg before Congress — not only the direct involvement of Facebook in advertising on its platform but furthermore how permissive it has been in allowing third-party apps to ‘borrow’ users’ information from Facebook.

According to reports on this affair, Psychologist Aleksandr Kogan developed with colleagues, as part of academic research, a model to deduce personality traits from behaviour of users on Facebook. Aside from his position at Cambridge University, Kogan started a company named Global Science Research (GSR) to advance commercial and political applications of the model. In 2013 he launched an app in Facebook, ‘this-is-your-digital-life’, in which Facebook users would answer a self-administered questionnaire on personality traits and some personal background. In addition, the GSR app prompted respondents to give consent to pull personal and behavioural data related to them from Facebook. Furthermore, at that time the app could get access to limited information on friends of respondents — a capability Facebook removed at least since 2015 (The Guardian [1], BBC News: Technology, 17 March 2018).

Cambridge Analytica (CA) contracted with GSR to use its model and data it collected. The app was able, according to initial estimates, to harvest data on as many as 50 million Facebook users; by April 2018 the estimate was updated by Facebook to reach 87 millions. It is unclear how many of these users were involved in the project of Trump’s campaign because CA was specifically interested for this project in eligible voters in the US; it is said that CA applied the model with data in other projects (e.g., pro-Brexit in the UK), and GSR made its own commercial applications with the app and model.

In simple terms, as can be learned from a more technical article in The Guardian [2], the model is constructed around three linkages:

(1) Personality traits (collected with the app) —> data on user behaviour in Facebook platform, mainly ‘likes’ given by each user (possibly additional background information was collected via the app and from the users’ profiles);

(2) Personality traits —> behaviour in the target area of interest — in the case of Trump’s campaign, past voting behaviour (CA associated geographical data on users with statistics from the US electoral registry).

Since model calibration was based on data from a subset of users who responded to the personality questionnaire, the final stage of prediction applied a linkage:

(3) Data on Facebook user behaviour ( —> predicted personality ) —>  predicted voting intention or inclination (applied to the greater dataset of Facebook users-voters)

The Guardian [2] suggests that ‘just’ 32,000 American users responded to the personality-political questionnaire for Trump’s campaign (while at least two million users from 11 states were initially cross-referenced with voting behaviour). The BBC gives an estimate of as many as 265,000 users who responded to the questionnaire in the app, which corresponds to the larger pool of 87 million users-friends whose data was harvested.

A key advantage credited to the model is that it requires only data on ‘likes’ by users and does not have to use other detailed data from posts, personal messages, status updates, photos etc. (The Guardian [2]). However, the modelling concept raises some critical questions: (1) How many repeated ‘likes’ of a particular theme are required to infer a personality trait? (i.e., it should account for a stable pattern of behaviour in response to a theme or condition in different situations or contexts); (2) ‘Liking’ is frequently spurious and casual — ‘likes’ do not necessarily reflect thought-out agreement or strong identification with content or another person or group (e.g., ‘liking’ content on a page may not imply it personally applies to the user who likes it); (3) Since the app was allowed to collect only limited information on a user’s ‘friends’, how much of it could be truly relevant and sufficient for inferring the personality traits? On the other hand, for whatever traits that could be deduced, data analyst and whistleblower Christopher Wylie, who brought the affair out to the public, suggested that the project for Trump had picked-up on various sensitivities and weaknesses (‘demons’ in his words). Personalised messages were respectively devised to persuade or lure voters-users likely to favour Trump to vote for him. This is probably not the way users would want sensitive and private information about them to be utilised.

  • Consider users in need for help who follow and ‘like’ content of pages of support groups for bereaved families (e.g., of soldiers killed in service), combatting illnesses, or facing other types of hardship (e.g., economic or social distress): making use of such behaviour for commercial or political gain would be unethical and disrespectful.

Although the app of GSR may have properly received the consent of users to draw information about them from Facebook, it is argued that deception was committed on three counts: (a) The consent was awarded for academic use of data — users were not giving consent to participate in a political or commercial advertising campaign; (b) Data on associated ‘friends’, according to Facebook, has been allowed at the time only for the purpose of learning how to improve users’ experiences on the platform; and (c) GSR was not permitted at any time to sell and transfer such data to third-party partners. We are in the midst of a ‘blame game’ among Facebook, GSR and CA on the transfer of data between the parties and how it has been used in practice (e.g., to what extent the model of Kogan was actually used in the Trump’s campaign). It is a magnificent mess, but this is not the space to delve into its small details. The greater question is what lessons will be learned and what corrections will be made following the revelations.

Mark Zuckerberg, founder and CEO of Facebook, gave testimony at the US Congress in two sessions: a joint session of the Senate Commerce and Judiciary Committees (10 April 2018) and before the House of Representatives Commerce and Energy Committee (11 April 2018). [Zuckerberg declined a call to appear in person before a parliamentary committee of the British House of Commons.] Key issues about the use of personal data on Facebook are reviewed henceforth in light of the opening statements and replies given by Zuckerberg to explain the policy and conduct of the company.

Most pointedly, Facebook is charged that despite receiving reports concerning GSR’s app and CA’s use of data in 2015, it failed to ensure in time that personal data in the hands of CA is deleted from their repositories and that users are warned about the infringement (before the 2016 US elections), and that it took at least two years for the social media company to confront GSR and CA more decisively. Zuckerberg answered in his defence that Cambridge Analytica had told them “they were not using the data and deleted it, we considered it a closed case”; he immediately added: “In retrospect, that was clearly a mistake. We shouldn’t have taken their word for it”. This line of defence is acceptable when coming from an individual person acting privately. But Zuckerberg is not in that position: he is the head of a network of two billion users. Despite his candid admission of a mistake, this conduct is not becoming a company the size and influence of Facebook.

At the start of both hearing sessions Zuckerberg voluntarily and clearly took personal responsibility and apologized for mistakes made by Facebook while committing to take measures (some already done) to avoid such mistakes from being repeated. A very significant realization made by Zuckerberg in the House is him conceding: “We didn’t take a broad view of our responsibility, and that was a big mistake” — it goes right to the heart of the problem in the approach of Facebook to personal data of its users-members. Privacy of personal data may not seem to be worth money to the company (i.e., vis-à-vis revenue coming from business clients or partners) but the whole network business apparatus of the company depends on its user base. Zuckerberg committed that Facebook under his leadership will never give priority to advertisers and developers over the protection of personal information of users. He will surely be followed on these words.

Zuckerberg argued that the advertising model of Facebook is misunderstood: “We do not sell data to advertisers”. According to his explanation, advertisers are asked to describe to Facebook the target groups they want to reach, Facebook traces them and then does the placement of advertising items. It is less clear who composes and designs the advertising items, which also needs to be based on knowledge of the target consumers-users. However, there seems to be even greater ambiguity and confusion in distinguishing between use of personal data in advertising by Facebook itself and access and use of such data by third-party apps hosted on Facebook, as well as distinguishing between types of data about users (e.g., profile, content posted, response to others’ content) that may be used for marketing actions.

Zuckerberg noted that the ideal of Facebook is to offer people around the world free access to the social network, which means it has to feature targeted advertising. He suggested in Senate there will always be a pay-free version of Facebook, yet refrained from saying when if ever there will be a paid advertising-clear version. It remained unclear from his testimony what information is exchanged with advertisers and how. Zuckerberg insisted that users have full control over their own information and how it is being used. He added that Facebook will not pass personal information to advertisers or other business partners, to avoid obvious breach of trust, but it will continue to use such information to the benefit of advertisers because that is how its business model works (NYTimes,com, 10 April 2018). It should be noted that whereas users can choose who is allowed to see information like posts and photos they upload for display, that does not seem to cover other types of information about their activity on the platform (e.g., ‘likes’, ‘shares’, ‘follow’ and ‘friend’ relations) and how it is used behind the scenes.

Many users would probably want to continue to benefit from being exempt of paying a monetary membership fee, but they can still be entitled to have some control over what adverts they value and which they reject. The smart systems used for targeted advertising could be less intelligent than they purport to be. Hence more feedback from users may help to assign them well-selected adverts that are of real interest, relevance and use to them, and thereof increase efficiency for advertisers.

At the same time, while Facebook may not sell information directly, the greater problem appears to be with the information it allows apps of third-party developers to collect about users without their awareness (or rather their attention). In a late wake-up call at the Senate, Zuckerberg said that the company is reviewing app owners who obtain a large amount of user data or use it improperly, and will act against them. Following Zuckerberg’s effort to go into details of the terms of service and to explain how advertising and apps work on Facebook, and especially how they differ, Issie Lapowsky reflects in the ‘Wired’: “As the Cambridge Analytica scandal shows, the public seems never to have realized just how much information they gave up to Facebook”. Zuckerberg emphasised that an app can get access to raw user data from Facebook only by permission, yet this standard, according to Lapowsky, is “potentially revelatory for most Facebook users” (“If Congress Doesn’t Understand Facebook, What Hope Do Its Users Have”, Wired, 10 April 2018).

There can be great importance to how an app asks for permission or consent of users to pull their personal data from Facebook, how clear and explicit it is presented so that users understand what they agree to. The new General Data Protection Regulation (GDPR) of the European Union, coming into effect within a month (May 2018), is specific on this matter: it requires explicit ‘opt-in’ consent for sensitive data and unambiguous consent for other data types. The request must be clear and intelligible, in plain language, separated from other matters, and include a statement of the purpose of data processing attached to consent. It is yet to be seen how well this ideal standard is implemented, and extended beyond the EU. Users are of course advised to read carefully such requests for permission to use their data in whatever platform or app they encounter them before they proceed. However, even if no information is concealed from users, they may not be adequately attentive to comprehend the request correctly. Consumers engaged in shopping often attend to only some prices, remember them inaccurately, and rely on a more general ‘feeling’ about the acceptable price range or its distribution. If applying the data of users for personalised marketing is a form of price expected from them to pay, a company taking this route should approach the data fairly just as with setting monetary prices, regardless of how well its customers are aware of the price.

  • The GDPR specifies personal data related to an individual to be protected if “that can be used to directly or indirectly identify the person”. This leaves room for interpretation of what types of data about a Facebook user are ‘personal’. If data is used and even transferred at an aggregate level of segments there is little risk of identifying individuals, but for personally targeted advertising or marketing one needs data at the individual level.

Zuckerberg agreed that some form of regulation over social media will be “inevitable ” but conditioned that “We need to be careful about the regulation we put in place” (Fortune.com, 11 April 2018). Democrat House Representative Gene Green posed a question about the GDPR which “gives EU citizens the right to opt out of the processing of their personal data for marketing purposes”. When Zuckerberg was asked “Will the same right be available to Facebook users in the United States?”, he replied “Let me follow-up with you on that” (The Guardian, 13 April 2018).

The willingness of Mark Zuckerberg to take responsibility for mistakes and apologise for them is commendable. It is regrettable, nevertheless, that Facebook under his leadership has not acted a few years earlier to correct those mistakes in its approach and conduct. Facebook should be ready to act in time on its responsibility to protect its users from harmful use of data personally related to them. It can be optimistic and trusting yet realistic and vigilant. Facebook will need to care more for the rights and interests of its users as it does for its other stakeholders in order to gain the continued trust of all.

Ron Ventura, Ph.D. (Marketing)

 

 

 

 

 

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