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The Impact Of Decoys And Background Information On


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The Impact Of Decoys And Background Information On

  1. 1. The impact of decoys and background information on consumers preferences and decision making IAREP/SABE CONGRESS Paris, 6 July 2006 Fabio Buoncristiano, University of Bologna Daniele Scarpi, University of Bologna
  2. 2. Overview <ul><li>Research goals </li></ul><ul><li>Theoretical foundation </li></ul><ul><li>Method </li></ul><ul><li>Results </li></ul><ul><li>Conclusions and implications </li></ul>
  3. 3. Research goals <ul><li>Empirical analysis of context effects combination: </li></ul><ul><ul><ul><li>Background contrast effect </li></ul></ul></ul><ul><ul><ul><li>Attraction effect </li></ul></ul></ul><ul><ul><ul><li>Phantom options </li></ul></ul></ul><ul><li>Choice in conflict: past experience vs current choice set </li></ul><ul><li>Impact of real vs phantom decoys </li></ul><ul><li>Useful implications for retailers </li></ul>
  4. 4. Introduction The process through which consumers form their preferences.... .... resembles more a work of architecture and building , starting from certain base – values.... .... rather than an archaeological work of digging for bringing to light pre – existent values and preferences.
  5. 5. Theoretical foundation: background contrast effect <ul><li>Trade-off value between attributes in a first choice influences subsequent choice </li></ul><ul><li>Individuals compare alternatives currently available with the alternatives encountered in the past </li></ul><ul><li>Same product perceived differently in a different context </li></ul><ul><ul><ul><ul><ul><li>Memory of a positive context products seem less attractive </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Memory of a negative context products seem more attractive </li></ul></ul></ul></ul></ul>
  6. 6. Theoretical foundation: attraction effect <ul><li>An inferior alternative (decoy) influences the actrattiveness of the other options </li></ul><ul><li>The decoy increases the share of the option dominating it </li></ul><ul><li>Violation of regularity and indipendence from irrilevant alternatives principles (e.g. Luce 1959) </li></ul>
  7. 7. Theoretical foundation: phantom options <ul><li>“ Illusory options that look real but are unavailable at the time the decision is made” (Pratkanis & Farquhar, 1992) </li></ul><ul><ul><ul><li>e.g., out of stock products, show fully booked, etc. </li></ul></ul></ul><ul><li>Unavailability increases the perceived importance of attributes on which the phantom excells </li></ul><ul><li>Thus, irrilevant information can influence consumers’ preferences (Potter & Beach, 1994) </li></ul>
  8. 8. Phantom options (A) <ul><li>A number of researchs dealing with phantoms have dealt indirectly with consumer response to stockouts (e.g. Farquhar & Pratkanis, 1987; Pratkanis & Farquhar, 1992) </li></ul><ul><li>We deal directly with stockout </li></ul><ul><li>Considering out – of – stock – out products as phantoms, we bridges the studies of the effects of phantoms (Carpenter et al., 1994; Janiszewski, 2002) with studies of consumers’ response to stockouts (e.g., Fitzsimons, 2000) </li></ul>
  9. 9. Phantom options (B) <ul><li>Information can be objectively irrelevant, but subjectively relevant (principle of relevance or maxim of relation: Grice, 1975; Sperber &Wilson, 1986) </li></ul><ul><li>Praktanis & Farquhar (1992) distinguish between known and unknown phantoms (i.e. recognized as illusory vs believed to be real until one tries to buy them) </li></ul><ul><li>known phantoms provide objectively and subjectively irrelevant information; </li></ul><ul><li>unknown phantoms provide information which is objectively irrelevant, but subjectively relevant. </li></ul><ul><li>But does the nature of the phantom matter? </li></ul>
  10. 10. Hypotheses (1) <ul><li>H1: introducing a decoy in the choice set creates an attraction effect, which leads to a preference for the option closest to the decoy </li></ul><ul><li>H2: the attraction effect exerts a different strength when the background information is conflicting with the decoy, and when it is not </li></ul><ul><li>In particular, we are going to verify whether: </li></ul><ul><li>the attraction effect will be stronger when consumers have background information conflicting (H2a) or not conflicting (H2b) with the decoy. </li></ul>
  11. 11. Hypotheses (2) <ul><li>H3: the attraction effect hypothesized in H1 exerts a different strength when consumers evaluate a choice set with a real decoy as opposed to a choice set with a phantom decoy </li></ul><ul><li>In particular, we are going to verify whether: </li></ul><ul><li>the attraction effect will be stronger (H3a) or weaker (H3b) when consumers face a real decoy than when they face a phantom decoy. </li></ul>
  12. 12. Method <ul><li>Large and representative sample (N=1100; 40% females; mean age=30) </li></ul><ul><li>Online questionnaire (rating on a 1-7 scale); The distinction between the real and phantom decoy was made by writing “currently unavailable” next to the phantom </li></ul><ul><li>Product category : Mp3 player varied on 2 attributes: </li></ul><ul><ul><ul><li>price (euro) </li></ul></ul></ul><ul><ul><ul><li>memory (gigabyte) </li></ul></ul></ul>
  13. 13. Web site design (A) <ul><li>Respondents visiting the website first chose between 2 options (these built-up the background), </li></ul><ul><li>then they were automatically directed to another web-page and had to choose between other 3 options (these 3 options were the target set). </li></ul><ul><li>50% chance each background, randomised by a software. </li></ul><ul><li>The 3 options forming the target set contained a decoy. </li></ul><ul><li>50% chance real or phantom decoy, randomised by a software. </li></ul>
  14. 14. Web site design (B) <ul><li>Each respondent received one background only and the web site was designed so to make it impossible: </li></ul><ul><ul><ul><li>to receive both backgrounds, </li></ul></ul></ul><ul><ul><ul><li>to compile more than one questionnaire, </li></ul></ul></ul><ul><ul><ul><li>to compile the same questionnaire more than once. </li></ul></ul></ul>
  15. 15. Experimental design <ul><li>To test H1: we compare the control group (no decoy) with 4 other groups (real/phantom decoy emphasizing price/memory). </li></ul><ul><li>To test H2 we compare a control group (background but no decoy) with 4 other groups (contrasting/non contrasting information and decoy on price /memory). </li></ul><ul><ul><ul><li>This procedure is run one time for the expensive background, and one time for the inexpensive. </li></ul></ul></ul><ul><li>To test H3: we compare 2 groups (real/phantom decoy) for the expensive background and 2 groups for the inexpensive background. </li></ul>
  16. 16. Results (A) <ul><li>H1: data support H1 for both kind of decoys (real/phantom). The shifts in preferences are in the hypothesised direction and are statistically significant (p<.05). Significance has been assessed using a t-test in proportion. </li></ul><ul><li>H2: data show that when there is a decisional conflict between background and decoy, the attraction effect reduces the importance of the background (i.e. decoy wins). </li></ul><ul><ul><li>Hypothesis H2a is therefore accepted, and H2b rejected: the attraction effect is stronger when consumers have background information conflicting with the decoy </li></ul></ul>
  17. 17. Results (B) <ul><li>H3: data support H3: the attraction effect exerts a different strength when consumers evaluate a choice set with a real decoy as opposed to a choice set with a phantom decoy. </li></ul><ul><li>In particular, the attraction effect is stronger when the decoy is phantom: this evidence provides support for H3b. </li></ul><ul><li>At the same time, such effect is background-dependent, as the superior strength of the phantom decoy is emphasized in the case of an expensive background </li></ul>
  18. 18. Conclusions <ul><li>There is a strong interaction between the different considered effects </li></ul><ul><li>The decoy drives attention to a particular attribute </li></ul><ul><li>The nature of the decoy (real/phantom) matters </li></ul><ul><li>Attraction effect stronger for phantoms </li></ul><ul><li>Attraction effect is stronger when background information conflicts with the decoy </li></ul><ul><li>Decoy’s role is background dependent </li></ul>
  19. 19. Managerial implications <ul><li>Catalogue design </li></ul><ul><li>Decisions on strategic products positioning </li></ul><ul><li>Track keeping of consumers’ past purchases (background) </li></ul><ul><li>Context effects used to improve communication and sales tactics </li></ul>
  20. 20. Future researchs <ul><li>This research provide a first answer to the numerous calls for empirical analyses and better samples. </li></ul><ul><li>We acknowledge its limitations, but we believe it provides a contribution to the advancement of the understanding of context effects. </li></ul><ul><li>We welcome your suggestions for future research along this path. </li></ul>