Inviting customer complaints can kill business

Giving customers a chance to complain can be a bad idea if customers believe they’re to blame for a product’s failure, a new study from the Sauder School of Business at UBC shows.

“It’s commonly assumed that giving customers a chance to voice grievances allows companies to maintain relationships,” says Marketing Professor Darren Dahl, who co-authored the recent Journal of Marketing study with PhD student Lea Dunn.

“But our research shows that when a person feels implicated in a product’s failure – think building Ikea furniture – they’re more likely to shift blame to the product when complaining and increase ill will toward it.”

In an experiment, subjects were divided into two groups and directed to replicate the preparation of an “award-winning smoothie.” All of the participants were set-up to fail with poor quality food processors.

Half the group was made to feel the smoothie failure was their fault and the other half was told that it was likely a machine malfunction.Participants primed to believe the failure was their fault rated the machine lower on a nine-point scale after complaining – 3.29 – versus the same participants who were not given the chance to complain – 4.31.Participants primed to blame the processor rated the device higher after given the chance to complain – 4.02 versus 3 out of nine.

A further experiment showed that when self-blamers were provided with affirmative statements about their competence, they became more likely to rate a product favourably after complaining – 5.22 versus 3.36 on a nine-point scale.

“With companies turning to social media to communicate with consumers, the power of customer complaints has been amplified,” says Professor Dahl. “Our study shows that companies shouldn’t just let people sound off. They need to be stroking egos, as well.”

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Inviting customer complaints can kill business

The End Of Economy As We Know It

In Europe, we are now getting used to read about the Euro crisis, and the fiscal cliff in the US has a view that would make Grand Canyon full of envy. During the last ten years, central banks have expanded their balance sheets from 3 to 13 trillions dollars. But one country could be even worse off and that is Japan. During 2011 sales of adault diapers exceeded those for babies for the first time. With a debt level that would make the greek economy look really well managed, the rate of birth vs the number of senior citizens, the equation is hard to solve:

Kyle Bass

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The End Of Economy As We Know It

Social Media 2013

The latest developments and stats:

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Social Media 2013

In store facial recognition: How often are your customers shopping?

NEC has developed a facial recognition software that enables to track age, gender and shopping frequency across multiple stores.

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In store facial recognition: How often are your customers shopping?

In the mood to shop: Exploring the Financial Costs of Sadness

Your emotions can certainly impact your decisions, but you might be surprised by the extent to which your emotions affect your pocketbook. New research from psychological scientist Jennifer Lerner of the Harvard Kennedy School of Government and colleagues Yi Le and Elke U. Weber of Columbia University explores how impatience brought on by sadness can in turn produce substantial financial loss. The study is published inPsychological Science, a journal of the Association for Psychological Science.

Using data collected at the Harvard Decision Science Laboratory and the Center for Decision Sciences at Columbia, the authors found that subjects randomly assigned to view a video that induced sadness exhibited impatience and myopia, which were manifested in financial decisions that elicited higher gains in the short term, but lesser gains over the longer term. Thus, subjects in the sadness condition earned significantly less money than subjects in the neutral condition. They showed what is known as “present bias,” wherein decision makers want immediate gratification and so they ignore greater gains associated with waiting.

“Across three experiments, the median sad participant valued future rewards (i.e., those delayed by 3 months) 13% to 34% less than did the median neutral-state participant. These differences emerged even though real money was at stake and even though discount rates in the neutral condition were already high,” the authors reported.

“These experiments, combining methods from psychology and economics, revealed that the sadder person is not necessarily the wiser person when it comes to financial choices,” they concluded. “Instead, compared with neutral emotion, sadness — and not just any negative emotion — made people more myopic, and therefore willing to forgo greater future gains in return for instant gratification.”

Lerner and her co-authors contend that the findings have important implications for the design of public policy — in areas such as estate planning and credit card regulations.

“Public-policy design and implementation need to be based on consideration of the full range of psychological processes through which decisions are made,” the authors argue. “Fully understanding these processes may also help address the economic problems associated with Americans’ increasing reliance on credit cards.”

Jennifer Lerner is Professor of Public Policy and Management at the Harvard Kennedy School of Government as well as Director of the Harvard Laboratory for Decision Science. This inter-disciplinary laboratory, which she co-founded with two economists, draws primarily on psychology, economics, and neuroscience to study human judgment and decision-making.

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In the mood to shop: Exploring the Financial Costs of Sadness

Why we wait: Psychologist discusses the reasons we love to line up for the latest gadgets and greatest sales

As the Black Friday sales start earlier and the smartphones play hard to get, a Kansas State University professor says psychology can explain why consumers wait in line for the latest sales, gadgets and experiences.

Different people wait in long lines for different reasons, said Laura Brannon, a professor of psychology who also researches consumer psychology. A line of people can represent a wide variety of personalities and motivations for waiting -- or camping -- in line.

"People who are very motivated to have scarce items tend to have a high need to be unique," Brannon said. "On the other hand, people who are motivated by social proof tend to want to fit in with everyone else. You might see a bunch of people waiting in line, but different things might be going through all their minds. It's a little more complicated than it might first appear."

From Harry Potter midnight shows to smartphones and video games, waiting in line for the latest product or experience is not a new phenomenon. Brannon traces the most famous waiting incident back to the mid-1980s, when the Cabbage Patch Kids doll frenzy occurred. Parents promised the dolls to their children, but the demand greatly exceeded availability, she said. Although the dolls were fairly inexpensive, people still paid hundreds of dollars to obtain them.

People lined up a few weeks ago for the release of the latest smartphone, and the lines will happen again with the arrival of Black Friday on Nov. 23. Although Brannon said there might be good deals on Black Friday, there is also a lot of clever marketing involved because marketers are aware of social influence practices on the consumer.

"I think the quality of the deals offered will obviously vary by store," Brannon said. "Many stores have a few very good deals to get consumers into the store, hoping that they'll buy other things as well."

Brannon said that at least two social influence principles explain consumers' willingness to wait in line for products or experiences: the scarcity principle and the social proof principle.

The scarcity principle is similar to playing hard to get in the dating arena. The principle states that people naturally want things that are rare or difficult to obtain, Brannon said. In reality, many things -- such as diamonds -- are naturally rare and are actually valuable. Marketers understand this effect on other products, too.

"Marketers create a demand by imposing an artificial scarcity on an opportunity," Brannon said. "Research shows that people tend to react against limits on opportunities and reassert their freedom to have and do what they want."

Even though people could wait an extra week for a new smartphone or a few extra days to see a movie, the scarcity principle motivates people to buy the smartphone or see the movie because they are difficult to obtain.

The social proof principle is the concept that if other people are doing something, we use that as evidence that it must be good, Brannon said. Advertisers emphasize when their products are the best-selling or leading brand. It is usually the case that the reason a product or experience is very popular is because people realize it is of good quality or value.

"Once the lines form, there's a tendency to assume that's a cue to the value of the experience or opportunity, and people want to join in," Brannon said.

With the social proof principle, there also is an element of normative influence, which is when people want to fit in with what other people are doing, Brannon said. For instance, if five people stand on a busy street corner and look up in the air, most passersby will stop and look up as well because they'll assume there's something to see. The same concept applies when people wait in line.

"Solidarity might be one part of it," Brannon said. "For some people it might be more about the information that others' behavior provides, and for others it might be wanting to fit in. But for most people it is probably a combination of these two."

Similarly, people's willingness to wait in line also involves how the waiting is framed. People might complain about waiting in line for two hours for something required, while they are less likely to complain about waiting overnight for the latest gadget that they want.

"When someone is waiting at the DMV, they're waiting to do something they have to do," Brannon said. "When they're waiting to get an iPhone, they're waiting for something they want. The waiting makes the first one a negative experience more negative, but the waiting can increase the excitement and anticipation of the second experience."

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Why we wait: Psychologist discusses the reasons we love to line up for the latest gadgets and greatest sales

Product Choice: When Are Consumers Most Satisfied?

Consumers may be less satisfied with the choices they make if their options are presented one at a time rather than all at once, according to a new study in
the Journal of Consumer Research.
“Sequentially presented choices create uncertainty. Consumers know that alternatives will become available in the future, but not what those alternatives will be. So there is always the possibility that a better option could later be available,” write authors Cassie Mogilner (Wharton School of the University of Pennsylvania), Baba Shiv (Stanford University), and Sheena Iyengar (Columbia University).
Many decisions—selecting a bar of soap at the drugstore, an entrée at a restaurant, or a pair of shoes from Zappos—involve choosing from options presented all at once. However, many important decisions—choosing a job, a home, or even who to marry—involve options presented one at a time. Does the way options are presented affect consumer satisfaction?
In a series of experiments, consumers presented with options one at a time ended up less satisfied with, and ultimately less committed to, their choices than those presented with their options all at once. Consumers presented with their options all at once tended to remain focused on the current set of options and focused on comparing them against each other, whereas those presented with their options one at a time tended to imagine a better option, hoping it would eventually become available. This feeling of hope undermined how they later experienced their choice, resulting in lower satisfaction and commitment levels.
“The primary difference between sequentially and simultaneously presented options is the presence of alternatives. Consumer satisfaction with a chosen option depends less on its objective merits, and more on how it compares to alternatives—real or imagined. Enjoying the most satisfaction from our choices might require being willing to give up the eternal quest for the best,” the authors conclude. 

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Product Choice: When Are Consumers Most Satisfied?

Matching Brands: Why Do Consumers Prefer Tostitos Salsa with Tostitos Tortilla Chips?

onsumers prefer matching brands for products that are consumed together because they believe products from the same brand have been designed to go together, according to a new study in the Journal of Consumer Research.
“How much do brand combinations affect how much consumers enjoy products that are consumed together? It seems that matching brand labels enhance enjoyment by encouraging consumers to believe that the products were tested and designed to go well together,” write authors Ryan Rahinel and Joseph P. Redden (both University of Minnesota).
In one study, consumers ate Tostitos brand tortilla chips and Tostitos brand salsa but were told that the chips and salsa were various combinations of fictional brand names (“Festivity” or “Party Time”). Consumers enjoyed the chips and salsa more when told that the two foods were from the same brand.
In another study, consumers again ate Tostitos tortilla chips and salsa but were told that the chips and salsa were various combinations of “Brand A” and “Brand B.” Some were told that the brands had conducted joint research and design on the two products, while others were told that the brands had coordinated on matters unrelated to taste (coupons and distribution). The latter group of consumers enjoyed chips and salsa from the same brand more than chips and salsa from different brands. However, both groups enjoyed the chips and salsa more when told that the brands had conducted joint product research and design, regardless of the brands they were told they were consuming.
“There is no universal answer to which brand a consumer likes the most. The brand a consumer prefers for a particular product depends on the brand of other products with which it is being combined. A company that offers products that are consumed together will have an advantage over other rival brands that do not offer both individual products, since consumers will want to have matching brands,” the authors conclude. 

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Matching Brands: Why Do Consumers Prefer Tostitos Salsa with Tostitos Tortilla Chips?

Trying to Save Money? Ask for Crisp New Bills at the Bank

Consumers will spend more to get rid of worn bills because they evoke feelings of disgust but are more likely to hold on to crisp new currency, according to a new study in the Journal of Consumer Research.
“The physical appearance of money can alter spending behavior. Consumers tend to infer that worn bills are used and contaminated, whereas crisp bills give them a sense of pride in owning bills that can be spent around others,” write authors Fabrizio Di Muro (University of Winnipeg) and Theodore J. Noseworthy (University of Guelph).
Does the physical appearance of money matter more than we think? Money is said to be interchangeable. If we lend someone a $20 bill, it shouldn’t matter if they pay us back with the same $20 bill or a different one. This is why diamonds, real estate, and art are not suitable as currency. But money may not be as interchangeable as consumers think.
In several studies, consumers were given either crisp or worn bills, and asked to complete a series of tasks related to shopping. Consumers tended to spend more with worn bills than with crisp bills. They were also more likely to break a worn larger bill than pay the exact amount in crisp lower denominations.
However, when consumers thought they were being socially monitored, they tended to spend crisp bills more than worn bills. When testing the well-known finding that people spend more when given the equivalent amount in lower denominations (four $5 bills) than when holding a large single denomination (a $20 bill), the authors found that the physical appearance of money can enhance, attenuate, or even reverse this effect.
“Money may be as much a vehicle for social utility as it is for economic utility. We tend to regard currency as a means to consumption and not as a product itself, but money is actually subject to the same inferences and biases as the products it can buy,” the authors conclude. 

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Trying to Save Money? Ask for Crisp New Bills at the Bank

A scientific explanation to why people perform better after receiving a compliment

A team of Japanese scientists have found scientific proof that people doing exercises appear to perform better when another person compliments them. The research was carried out by a group lead by National Institute for Physiological Sciences Professor Norihiro Sadato, Graduate University for Advanced Studies graduate student Sho Sugawara, Nagoya Institute of Technology Tenure-Track Associate Professor Satoshi Tanaka, and in collaboration with Research Center for Advanced Science and Technology Associate Professor Katsumi Watanabe. The team had previously discovered that the same area of the brain, the striatum, is activated when a person is rewarded a compliment or cash. Their latest research could suggest that when the striatum is activated, it seems to encourage the person to perform better during exercises. The paper is published online in PLOS ONE (November 7, 2012, edition).

Forty-eight adults recruited for the study were asked to learn and perform a specific finger pattern (pushing keys on a keyboard in a particular sequence as fast as possible in 30 seconds). Once participants had learned the finger exercise, they were separated into three groups. One group included an evaluator who would compliment participants individually, another group involved individuals who would watch another participant receive a compliment, and the third group involved individuals who evaluated their own performance on a graph. When the participants were asked to repeat the finger exercise the next day, the group of participants who received direct compliments from an evaluator performed better than participants from the other groups. It indicates that receiving a compliment after exercising stimulates the individual to perform better afterwards.

According to Professor Sadato, "To the brain, receiving a compliment is as much a social reward as being rewarded money. We've been able to find scientific proof that a person performs better when they receive a social reward after completing an exercise.  There seems to be scientific validity behind the message 'praise to encourage improvement'. Complimenting someone could become an easy and effective strategy to use in the classroom and during rehabilitation." 

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A scientific explanation to why people perform better after receiving a compliment

Content is not the only king

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Content is not the only king

Retailing 2020

Downloadable outlook from PWC on the state of retail in 2020. Start download by clicking here.o

Retailing 2020

Interactive Shopping Window

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Interactive Shopping Window