Say you’re out shopping for basic household goods – perhaps orange juice and soup. Or light bulbs. Or diapers for the young child. How do you choose the products you buy? Could it be an elaborate decision, or perhaps a simple one?
It could be complex: Factors such as price, quality, and brand loyalty may run through your mind. Indeed, some scholars allow us complicated types of consumer decision-making, by which people accumulate substantial product knowledge, then weigh that knowledge against the chance to explore less-known products.
But in a new paper, MIT researchers claim that your brain is making a simpler calculation while you shop: You’re probably deploying an “index strategy,” an easy ranking of products. It may not be a truly perfect calculation, given all the available information, however the study suggests that a catalog strategy comes very close to being optimal, and it is a far easier method for consumers to make their choices.
“The advantage of making a slightly better decision would not be worthwhile,” says John Hauser, the Kirin Professor of Marketing in the MIT Sloan School of Management along with a co-author of the new study. Rather, he asserts, a simple index strategy “is getting you really pretty close to an ideal decision in a much lower cost – both search cost and cognitive cost.” Basic rankings help you make quick decisions, and then leave room to think about things apart from your weekend shopping choices.
Typical types of consumer thought often treat the brain as an always-running computer, and hold that customers constantly be worried about the ways in which their choices interact. For instance: When it comes to one diaper brand, these models posit that consumers are involved they will lose possibilities to find out more about other brands. The MIT team also believes that consumers accumulate information, but in a less complicated, more intuitive way.
“When we glance at our options, we normally evaluate them one by one,” says Juanjuan Zhang, an affiliate professor of promoting at MIT Sloan and another co-author of the study. “We would argue that that’s the way we think, and that is not the same as how other models in marketing work.”
The paper – titled “Learning from Experience, Simply” – is published within the journal?Marketing Science. The co-authors are MIT doctoral candidate Song Lin, Zhang, and Hauser.
The study described in the paper is explicitly meant to bridge the space between empirical studies of consumer decision-making and mathematical models within the field. Hauser, Lin, and Zhang suggest that some types of consumer thought are “PSPACE-hard” -?that’s, so mathematically difficult they can be virtually unsolvable even with the fastest computer, in which the number of steps required to find a solution is a direct purpose of the problem’s size.
“They’re assuming consumers can make decisions that computers can’t solve,” Hauser says. “And they’re assuming consumers make these in seconds as they walk down the aisle within the supermarket.” Besides, he notes, “Even a computer uses simple heuristics to resolve these problems.”
To test whether an index strategy reasonably describes how consumers think, Lin, Zhang, and Hauser conducted an empirical study of consumers who purchase diapers, utilizing a commercial data group of 262 households and almost 3,400 purchases, which turned up several relevant patterns, such as the proven fact that individuals are more likely to change diaper brands within their first 13 purchases.
To the researchers, this means that customers are learning, and valuing the chance to switch – as the data fits the concept of the index strategy. It explains product choices as well as other models, while showing how consumers might be inclined to lower their thinking costs in terms of time.
“If we assume individuals are by using this heuristic, it explains the information equally well as the optimal [models] do,” Hauser says.
At the same time frame, the thought of the index strategy doesn’t rule out consumer reassessment of brands. Studying for example diapers, the researchers note, implies that people do learn newer and more effective details about products, and often flip their index rankings as a result.
Thus the results of index strategies resemble those of complex models, but arrive there in a much more direct way.
“Two reasons for diapers turn it into a good category,” Hauser says. “One is the fact that we can identify those who are new, or weren’t within the category for some time. – It is a place where you’d expect learning. The other thing is, researching diapers is most likely pretty vital that you new parents. There are incentives to understand.”
For operator, the researchers appear at first sight open to further studies, and aspire to get empiricists and theorists of consumer cognition to “talk to 1 another” for an increasing extent. The supermarket aisle, in the end, isn’t the only spot where don’t be surprised understanding how to occur.
