Consumers face multiple choices every time they shop before they make buying decisions. Manufacturers seek to influence those decisions through the way they design, brand, market and distribute their products, but they would also do well to consider the role that consumer deliberation plays in helping people decide whether to buy.
That is the key recommendation of a study by Liang Guo and Juanjuan Zhang, who took as their starting point earlier findings that people often do not discover their preferences during the decision-making process. As a result, these preferences – on which they make decisions – depend on the specific choice context.
“We posit that deliberation mediates the mapping from the choice context to preferences. This is because deliberation is costly. It consumes tangible resources, takes time and even the mere act of thinking comes at a cost. A consumer is then only willing to deliberate if her choice context provides her with enough motivation,” they said.
Motivation can come from product design and firm strategies, as the authors show in a modeling exercise. Firms can induce or suppress deliberation by adjusting quality and pricing, depending on their goals.
“On a strategic level, firms can either selectively target high and low valuation segments with different products, or serve the entire mass market with a single product. For a firm to benefit from selective targeting, consumers must deliberate and find out in which segment they belong. For a firm to choose mass marketing, consumers must prefer not to deliberate; if they do, the firm will then want to exploit heterogeneous consumer valuations through selective targeting.”
These strategies require different tactics. To motivate deliberation, the products need to appear sufficiently different from each other so firms must maintain quality dispersion between their products. In addition, they should reduce the price of the high-end product to make it appear as a clear bargain, which would attract consumers to deliberate over whether they indeed have a need for high-end consumption.
To suppress deliberation, both quality and price should be reduced to present a product as a low-profile, low-stake option that consumers can comfortably buy out of impulse.
These strategies have different impacts on profitability. Inducing deliberation creates extra surplus. The firm can capture part of that surplus through selective targeting but must leave enough surplus to motivate consumer motivation. They must also bear in mind the cost of inducing deliberation. “The firm should choose selective targeting if deliberation is not too costly and mass marketing otherwise,” the authors said.
They also note that deliberation has another impact: firm profit, consumer surplus and social welfare can all increase with the deliberation cost, indicating that making it easier for consumers to learn their preferences does not necessarily benefit the firm, the consumer or society.
The key lesson from this exercise is that firms can end up making expensive mistakes if they ignore deliberation. If a firm chooses selective targeting but underestimates the deliberation costs, its product line may be insufficient to stimulate deliberation. “Consumers will conservatively avoid high-end consumption and the firm will be over-segmenting the market with a high-end product that meets no demand,” the authors said.
But if a firm pursues mass marketing and overestimates the cost of deliberation, “its product may appear too high profile to be a no-brainer. Consumers may want to deliberate before they buy and will only buy if they indeed hold high valuation. The firm will hence be under-segmenting the market with a product that is overqualified for some consumers.”
The authors advise firms to exercise caution when basing product design on market research data, because actual consumers may still need to deliberate at the point of purchase.
“Respondents to market research should ideally represent the target market in terms of deliberation costs, as well as other variables. It may be a concern if consumers with stronger cognitive skills or self-awareness of preferences respond more frequently to surveys. In addition, market research should provide participants with incentives to undertake the same efforts of deliberation as in real-life purchase decisions,” they said.
The authors conclude that this paper, while bringing insights to the understudied area of consumer deliberation, should be seen as a starting point for understanding the role of such deliberation in shaping firms’ product line decisions.