What Really Influences Customers in the
Age of (Nearly) Perfect Information

@EmanuelRosen
When marketing
theories were
developed, consumers
made decisions very
differently
We’ll reexamine common beliefs about…
❶ Branding
❷ Loyalty
❸ “Irrationality”
❹ Communication
❺ Market Research
What exactly has
changed in the way
consumers make
decisions?
A shift from relative
to absolute
I used a
Toshiba that
worked fine

It’s the most
expensive so it
must be the best
O
A Customer’s Decision is influenced
by a mix of three sources

O

P
Prior
preferences

O

Other
people

M
M
Marketers
❶ Branding
Common belief:

“A company’s brand is
more important today
than it has ever been.”
“Higher Yelp penetration leads to
an increase in revenue for
independent restaurants, but a
decrease in revenue for chain
...
Implication: Brands Mean Less
• Lower barriers to entry

• Easier Diversification
❷ Loyalty
Common belief:

Nurturing customer
loyalty is the best
investment.
What percentage
of guests always
stay at the same
8%
hotel brand? ___
Source: Deloitte
Past Experience and Loyalty
are Less Important
• Success is driven by your current product
• Your competitors face the sam...
❸ “Irrationality”
Common belief:

Customers are irrational.
Choices greatly
influenced by context and
framing of an offer
Consumers act more rationally
• “Irrationality” tactics not as effective
• As consumers, we’ll make better choices
❹ Communication
Common belief:

Positioning, brand
awareness, persuasion
are key
When Consumers Rely on Reviews
• Don’t try to persuade them that your
product is the best. (They go to O for that)
• Posit...
❺ Market Research
Common belief:

Ask lots of questions
and you’ll know what
consumers want
A 2007 study conducted before the release
of iPhone concluded that such convergent
products are not desired by U.S. consum...
The Problem? The
study measured __
P
but consumers
were influenced
by __
O
From Predicting to Tracking
• Less measurement of P, satisfaction, loyalty.
• More systematic tracking of O.
• Experiment....
We reexamined five concepts:
❶ Branding
❷ Loyalty
❸ “Irrationality”
❹ Communication
❺ Market Research
@EmanuelRosen
http:/...
Absolute value DBW14 Emanuel Rosen
Absolute value DBW14 Emanuel Rosen
Absolute value DBW14 Emanuel Rosen
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Absolute value DBW14 Emanuel Rosen

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A short talk about our book "Absolute Value: What Really Influence Customers in the Age of (Nearly) Perfect Information" given at DBW14 (January 15, 2014). For more about the book, go to www.AbsoluteValueBook.com (Itamar Simonson and Emanuel Rosen

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Absolute value DBW14 Emanuel Rosen

  1. 1. What Really Influences Customers in the Age of (Nearly) Perfect Information @EmanuelRosen
  2. 2. When marketing theories were developed, consumers made decisions very differently
  3. 3. We’ll reexamine common beliefs about… ❶ Branding ❷ Loyalty ❸ “Irrationality” ❹ Communication ❺ Market Research
  4. 4. What exactly has changed in the way consumers make decisions? A shift from relative to absolute
  5. 5. I used a Toshiba that worked fine It’s the most expensive so it must be the best
  6. 6. O
  7. 7. A Customer’s Decision is influenced by a mix of three sources O P Prior preferences O Other people M M Marketers
  8. 8. ❶ Branding Common belief: “A company’s brand is more important today than it has ever been.”
  9. 9. “Higher Yelp penetration leads to an increase in revenue for independent restaurants, but a decrease in revenue for chain restaurants” Source: Michael Luca, “Reviews, Reputation, and Revenue: The Case of Yelp.com,” Harvard Business School Working Paper No. 12-016, September 2011.
  10. 10. Implication: Brands Mean Less • Lower barriers to entry • Easier Diversification
  11. 11. ❷ Loyalty Common belief: Nurturing customer loyalty is the best investment.
  12. 12. What percentage of guests always stay at the same 8% hotel brand? ___ Source: Deloitte
  13. 13. Past Experience and Loyalty are Less Important • Success is driven by your current product • Your competitors face the same problem • Measuring loyalty is less informative
  14. 14. ❸ “Irrationality” Common belief: Customers are irrational. Choices greatly influenced by context and framing of an offer
  15. 15. Consumers act more rationally • “Irrationality” tactics not as effective • As consumers, we’ll make better choices
  16. 16. ❹ Communication Common belief: Positioning, brand awareness, persuasion are key
  17. 17. When Consumers Rely on Reviews • Don’t try to persuade them that your product is the best. (They go to O for that) • Positioning worked when they relied on M • Don’t focus on brand awareness • Generate interest in specific products • Promote ongoing flow of O content
  18. 18. ❺ Market Research Common belief: Ask lots of questions and you’ll know what consumers want
  19. 19. A 2007 study conducted before the release of iPhone concluded that such convergent products are not desired by U.S. consumers
  20. 20. The Problem? The study measured __ P but consumers were influenced by __ O
  21. 21. From Predicting to Tracking • Less measurement of P, satisfaction, loyalty. • More systematic tracking of O. • Experiment. Adjust. Experiment.
  22. 22. We reexamined five concepts: ❶ Branding ❷ Loyalty ❸ “Irrationality” ❹ Communication ❺ Market Research @EmanuelRosen http://www.absolutevaluebook.com/

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