To Be or Not to Be Price Conscious—a Segment‐Based Analysis of Compromise Effects in Market‐Like Framings

Numerous researchers have investigated the compromise effect, according to which a middle option of a consideration set is assumed to be perceived more attractive by consumers, thus becoming more likely to be chosen than the extreme options. However, a closer examination of the experimental designs that were used in previous studies on compromise effects clearly reveals a lack of realism in terms of forced choices between fictitious options in hypothetical choice settings of student samples. This article reports two consecutively implemented studies demonstrating that the compromise effect is robust even in an enhanced design that incorporates basic conditions of real purchase decisions in laboratory‐based experiments. Specifically, the relative share of the middle option increases significantly in an overall analysis when experienced consumers make unforced decisions between real brands in a binding choice context. However, segmented analysis indicates substantial differences, meaning that (1) the compromise effect is strong and significant among quality‐seeking consumers, whereas (2) the compromise effect is weak and insignificant among price‐conscious subjects.     

Biased Tariff Choices: Exploring Role Effects in B to B Settings

Purpose: The authors examine whether motivational and cognitive causes that explain tariff choice biases in business-to-consumer (B2C) settings also hold in business-to-business (B2B) markets. Opposed to prior B2C research that is dominated by individual decision making, the study proposes role effects in buying centers influence the exploration of tariff choice and tariff choice biases in B2B settings.

Originality: A rich body of research into biased tariff choices, especially flat-rate biases, exists for B2C markets, yet a dearth of research marks tariff choice behavior in B2B settings. This study is the first one on tariff choice especially dedicated to B2B settings.

Methodology and Findings: The findings from transactional and survey data pertaining to a mobile phone service provider reveal that tariff choice biases also occur in B2B markets. Seventy-nine percent of all tariff choices among decision makers are biased; 73 percent are due to the flat-rate bias. The (mis-)judgment effect, the insurance effect, and the convenience effect significantly influence tariff choice and the flat-rate bias.

Research Implications: The authors provide a flowchart of strategies that structures the practical implications. Based on this flowchart, they propose that mobile phone service providers should undertake a flat-rate preference strategy, because B2B customers may accept the flat-rate bias to profit from the insurance effect. The authors argue that following a flat-rate preference strategy is advisable, because turnover can be protected entirely while the vulnerability of that strategy is low.     

Reversing the Similarity Effect in Stock‐Outs: A New Look at a Renowned Phenomenon in Consumers’ Brand Switching Behavior

Over 40 years of research has established the robustness of the similarity effect (SE; Tversky, 1972 ), which states that the introduction of new options into choice sets predominantly reduces the choice share of similar options. The present work examines whether the SE systematically reverses when real brands are excluded from assortment subsets, as is the case with stock‐outs in real purchase decisions. To this end, within‐subject decisions are examined under certain out‐of‐stock (OOS) conditions in an enhanced experimental design that resembles real shopping environments. Specifically, unforced choices of experienced consumers, inclusive of real payments, are observed for products in online transactions. The results of two studies corroborate the existence of a reserved SE. Specifically, the OOS‐induced switching patterns systematically refute the assumptions of classic economic theory, since consumers disproportionately switch to alternatives which are similar to the unavailable item in contrast to dissimilar substitutes. Finally, managerial implications and potential directions for follow‐up research in the general domain of marketing are deduced.     

Compromise and attraction effects in food choice

Food choices are being implicated as a key driver in the rising rates of obesity, as well as associated with other health problems that impact both individuals and society as a whole (Cawley and Meyerhoefer). Calorie listings, whether provided on menus or packaged goods, increase consumer's awareness of the calories in potential food choices and, as a result, make consumers more likely to evaluate a product relative to others in the choice set based on this attribute (e.g. choosing a higher or lower calorie option). In this research, we explore whether the provision of calorie information, when presented in the context of other food options, will result in (1) compromise effects, whereby individuals select intermediate (or middle) options in a choice set, and (2) attraction effects, whereby individuals gravitate towards items that are similar to others but also dominate these items in the choice set. In two experimental studies we find evidence for the compromise effect and the attraction effect. These findings extend work demonstrating that the context in which food decisions occur can impact choice, and builds on existing knowledge regarding the consequences of providing calorie information for food items. Although most work has shown that making calories salient has a beneficial impact on the accuracy of consumer calorie estimates and food choice, in this work we show that the compromise and attraction effects – two well‐established findings in decision‐making literature – can actually shift consumers to either higher or lower calorie options. This carries important implications for consumers making choices in information‐rich choice environments.     

The effect of attribute-based and alternative-based processing on consumer choice in context

The current research proposes that the extent to which consumer choices are affected by the decision process depends on the underlying nature of the choice problem. Specifically, choices resulting from substantial inter-brand comparisons and tradeoff analyses are vulnerable to whether product information is evaluated by attribute- or alternative-based processing. By contrast, choices resulting from a minimal cognitive processing are less sensitive to variations in the decision strategy employed. We test our theory in the well-known domain of choice context effects. Across three studies using multiple operationalizations of the decision process (i.e., information display format, product presentation mode, and processing goal), we find converging evidence that the more cognitively involving compromise choice increases when the environment facilitates attribute- versus alternative-based processing. Conversely, the choice of asymmetrically dominating option, which is characterized by relatively little analytical processing, does not depend on the type of decision strategy highlighted by the task.     

“Fact or artifact? Empirical evidence on the robustness of compromise effects in binding and non-binding choice contexts”

In this article, the compromise effect (CE) is investigated according to which the choice share of a particular product is expected to increase when it is in an intermediate position in a subset of a product line. In a laboratory-based replication study, we tested CE both in hypothetical non-binding settings most commonly used in previous research on CE as well as in settings where experienced consumers make unforced and binding purchase decisions between real brands of two particular categories. While results prove robustness of the compromise effect even in the binding choice context, its magnitude is significantly reduced, hence indicating a hypothetical bias. Thus, since the CE is evidently less prevalent in the more realistic binding choice setting, compromise effects must be considered overrated to a certain degree in the previous studies on hypothetical decisions.     

The Impact of Attribute Importance in the Effects of Option Framing on Choice: Budget Range and Justification as Moderators of Loss Aversion

Loss aversion or an endowment‐based explanation clearly predicts that subtractive option framing (i.e. deleting mode or starting from a full model) will have a stronger effect on choice than additive option framing (i.e. adding mode or starting from a base model). This research examines whether the differential effects of option framing (additive vs. subtractive) on choice vary depending on the importance of attributes that constitute the defaults. Furthermore, this research proposes that consumers’ budget range and justification for choice serve to moderate the differential effects of option framing on choice.     

I'll have what she's having: (Social) Perceptions of default options and implications for marketing and decision making

The power that default options have in shaping choice has been well established, yet relatively little is known about how decision makers experience and interpret such preselected options. Research suggests that individuals assume defaults represent a recommended course of action, yet the basis for this recommendation is unclear. Across two experimental studies, we explored consumer theories of default recommendations, examining spontaneous and experimentally manipulated perceptions of the basis of the default, and the impact on decision making across different contexts. Evidence across diverse populations and tasks shows that options were retained to a greater extent when represented as the default, consistent with classic default effects. Furthermore, a significant default effect emerged when the decision context was framed as complex. In line with research on social influence, defaults were most effective when they were presumed to reflect the most popular option (regardless of context). Interestingly, participants rated defaults as being more likely to represent the most popular option, regardless of decision context or default explanation provided to them. These findings highlight the importance of understanding the contexts in which default choices are relied upon and how those defaults are perceived by decision makers.     

The effect of time pressure on the choice between brands that differ in quality,price, and product features

Consumers often make purchase decisions while under time pressure. This research examines the effect of time constraints on the choice of brands that differ in perceived quality, price, and product features. Specifically, when making choices under time pressure, consumers were found to be more likely to choose higher-quality brands over lower-quality brands and top-of-the-line models with enhanced product features over basic models with fewer features. Alternative explanations for these effects are explored, and practical implications are discussed.     

Consumer choices under product option framing: Loss aversion principles or sensitivity to price differentials?

The effects of options framing can be theoretically explained by loss aversion principles as well as by potential alternative explanations (e.g., sensitivity to price differentials). This paper examines the interaction effects between option framing and two types of cognitive constraints (availability of cognitive resources and additional redundant product information) on consumer choices for adding or deleting optional product features. In the process, the research attempts to provide empirical support for one theoretical model (e.g., loss aversion principles) versus the other (e.g., sensitivity to price differentials). The results support the hypotheses that consumers choose a higher number of product options when starting from a fully loaded model than from a base model, and that this effect is magnified when consumers make choices under high cognitive constraints. In essence, the results empirically support the theoretical premise of the effects of option framing being driven by loss aversion principles than by diminished sensitivity to price differentials. © 2008 Wiley Periodicals, Inc.     

The attraction effect is more pronounced for consumers who rely on intuitive reasoning

According to the attraction effect, the addition of a decoy, or dominated, option to a choice set increases the relative choice share of the dominating option. This study shows that the attraction effect is more pronounced for consumers who rely heavily on intuitive reasoning in judgment and decision making. In contrast, the attraction effect is equally pronounced for consumers who rely more and those who rely less on rational thinking. Over 600 members of a national online consumer panel participated. The results highlight the importance of understanding individual differences in relation to context effects and choice behavior.     

Understanding the role of retail store service in light of self‐image–store image congruence

The relationships among a consumer's service experience, the servicescape, and perceived value for the money spent on the service are important theoretical as well as practical issues. Little effort has, however, been devoted to understanding these in the context of the effects of consumer image–store image congruency. Image congruency has not only been shown to be valuable in relation to product choices, but has also been shown to contribute to our understanding of retail store choice and preferences. This study examines the effect of retailer service provision and the retail store environment (servicescape) on the customers' perception of value for money. The study also examines the role of self–store image congruence in the above relationships. The findings confirm the hypothesized relationships in the conceptual model (except for servicescape effects). The findings also indicate that the effects are stronger for those individuals experiencing high self–store image congruence. © 2008 Wiley Periodicals, Inc.     

What really matters in attraction effect research: when choices have economic consequences

Researchers have recently strongly questioned the robustness of the attraction effect, according to which adding a decoy option to an existing choice set affects consumers’ choice behavior. Tying in with this debate, we identify the persistent use of hypothetical choices in the domain to be a major shortcoming in attraction effect research. In an experiment on the attraction effect with a realistic choice setting that fosters external validity, we manipulate the choice framing by contrasting hypothetical choices with binding choices that entail economic consequences. We find the attraction effect to be much stronger when decisions are binding, underlining the effect’s usefulness as a marketing tool.     

An Analysis of Endorsement Effects in Affinity Marketing: The Case for Affinity Credit Cards

In recent years, affinity-marketing strategy has been widely used by for-profit organizations, particularly financial institutions, to leverage the goodwill and endorsement of affinity groups to promote their service offerings to group members. However, relatively little attention has been paid to the underlying factors driving the effectiveness of endorsement as it affects the process by which members make choices. Applying affinity credit cards as the research context, this study examines whether the addition of endorsement effects (i.e., affect transfer effect, perceived quality effect, and cause-related effect) of a positively valued affinity group would have any impact on its members' choice processes as depicted in the traditional hierarchy-of-effects model. The results of this empirical study confirm all the hypotheses, with the exception of affect transfer.     

Do real payments really matter? A re-examination of the compromise effect in hypothetical and binding choice settings

Numerous empirical studies have confirmed the existence of the compromise effect, which stipulates that options positioned between extreme alternatives in a product space are perceived as more attractive, hence becoming more likely to be chosen by consumers. However, literature on the topic frequently addresses the limited realism of prior work due to the artificial designs that were used. In a laboratory-based replication study, we examine the compromise effect across several categories in a more market-like scenario, in which experienced consumers make unforced decisions between real brands. In particular, we investigate whether the compromise effect varies in strength across the choice settings, depending on whether a hypothetical choice setting or a binding setting (in which subjects face buying obligations in terms of real payments for products) has been applied. While our results prove the robustness of the compromise effect for both choice frames, its strength differs significantly. Specifically, the compromise effect is evidently not as strong when real payments are introduced in binding choice settings. In addition, analysis of moderating factors confirms that compromise effects are stronger for categories where subjects are more in agreement about the relative quality of the options.     

Combined influence of selective focus and decision involvement on attitude–behavior consistency in a context of memory‐based decision making

Marketers often use salient stimuli to draw consumers' attention to a specific brand in the hope that a selective focus on the brand increases the sales of this brand. However, previous studies are inconsistent concerning the impact that selectively focusing on a specific brand has on final brand choice. To offer an explanation for these inconsistent results, this paper introduces decision involvement as a moderator of the relation between selective focus and attitude–decision consistency. Two studies indicate that selectively focusing on a not preferred alternative indeed alters choice decisions, but only when decision involvement is low. Study 1 further shows that this interaction effect between selective focus and involvement takes place in the selection rather than the brand consideration stage. By introducing level of processing along with decision involvement, Study 2 shows that the interaction effect emerges even in limited processing conditions. The study also reconciles different explanations for the negative effect of selective focus on attitude–behavior consistency. Selectively focusing on a not preferred choice option when consumers are low involved and use limited processing seems to lead to inconsistent choices because of an increased accessibility of the focal option, whereas selective focus on a not preferred option when consumers are low involved and use deep processing lead to inconsistent choices because of attitude polarization. © 2011 Wiley Periodicals, Inc.     

The time-harried shopper: Exploring the differences between maximizers and satisficers

Schwartz and his colleagues have proposed individual differences in consumer decision goals. Maximizers are those who always strive to make the best possible decision, whereas satisficers are those who are usually willing to settle for a “good enough” option. In this study, we explore the influence of the maximizing trait in situations where consumers have to make quick purchase decisions. The context for our empirical study is online gift purchases made under a time constraint. The results support our predictions that maximizers (vs. satisficers) engage in more prepurchase browsing behavior and also perceive more decision time pressure. Furthermore, these effects are moderated by the size of the available choice assortment. The results also show that maximizers are more likely to change their initial time-constrained choices if given the opportunity to do so. We discuss the implications of the research for the study of individual differences in consumer behavior and also for customizing retail sales and Internet marketing tactics based on buyer segmentation.     

Tradeoffs Between Price and Quality: How a Value Index Affects

The present research examines how the availability of information about the value of a product, expressed as a ratio of the quality received per dollar, influences preference formation. This index, similar to unit price which provides information about how much quantity is received per dollar, presents consumers with information regarding the quality received per dollar. An experiment that compares consumers' preferences inferred from a choice task with their preferences inferred from a conjoint task was conducted. In the choice task consumers selected the most attractive alternative from a set of options, while in the conjoint task the attractiveness of each option was rated. Consumers, presented with an index of quality received per dollar paid (the value index), are more likely to choose a lower priced, higher value option rather than a higher priced, higher quality option compared to consumers presented with only price and quality information. Clearly, how a consumer chooses to “get the best for his or her money” depends on the ease with which information about the choices can be processed.     

Effects of Product Option Framing and Temporal Distance on Consumer Choice: The Moderating Role of Process versus Outcome Mental Simulations

This research demonstrates that the type of product option framing (additive vs. subtractive) and the temporal distance between an option choice and later buying behavior can influence decision difficulty. In two studies, the authors show that consumers who engage in additive option framing experience greater difficulty in making decisions for the near future than for the distant future, whereas consumers who engage in subtractive option framing experience greater difficulty in making decisions for the distant future than for the near future. In addition, by using theories of mental simulation, the authors show that communication strategies that promote process simulations for distant‐future choices in the subtractive option framing condition and those that promote outcome simulations for near‐future choices in the additive option framing condition are most effective in reducing decision difficulty. These effects hold across varying product categories and varying option prices.     

The Effect of Set Composition on Stopping Behavior in a Finite Search Among Assortments

The process by which individuals make sequential searches among choice sets prior to choosing a single item is examined. Economic search theory prescribes that such searches should be made by focusing on expectations of the maximum utility likely to be found in each set, ignoring external features of sets such as their complexity. Empirical research in psychology, however, suggests that search behavior may be highly influenced by set features, most notably a tendency to defer choices from sets that are perceived as difficult to evaluate. An experimental investigation of choice-set search reveals that stopping decisions are indeed influenced by normatively irrelevant external features of sets, but not in a way that is completely consistent with previous work on context effects. In particular, we find that individuals are likely to stop sooner in search when encountering larger versus smaller choice sets (holding their maximum utilities constant), and decisions to stop are unaffected by two traditional measures of difficulty: whether a choice set lacks dominant options and the similarity of overall utilities of options in a set. Implications of the work for the ability to generalize findings in static choice to dynamic task settings are explored.