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In a recent joint paper, “The Context of Construction as a Determinant of the Stability of Consumer Preference” (Yoon, 2005, doctoral dissertation, Stanford University, CA). Asst Prof Yoon Song Oh from the Lee Kong Chian School of Business looks at the issue of how consumer choice of a particular brand of product is affected by the presence of alternative brands. Traditional economic theories assume that consumers have well-defined preferences and their product choices are driven solely by the attributes of the product. However, experiences suggest that consumers’ choices are often context dependent. In particular, the choice often depends on the availability of competing brands and whether these alternatives are perceived to be inferior or superior.
The phenomenon whereby consumer choices are influenced by the availability of competing alternatives, known as “the choice set context effect”, has been widely studied among behavioural decision researchers. Two such effects are particularly well-known: the “attraction effect” and the “compromise effect”. The former suggests that adding an alternative that is clearly inferior to the target brand substantially increases the probability that consumers will choose the target brand. Thus, sales people often try to convince consumers to purchase a given product by contrasting it with another less attractive product. The compromise effect, on the other hand, suggests that consumers in general prefer the middle option of any product range i.e. products that provide the intermediate values on all the attributes. For example, Williams-Sonoma, a kitchen appliance store, reported that the firm doubled the sales of a bread baking appliance priced at $275 when they added a new bread baking appliance which is similar but with a price that doubles that of the existing product ($429).1
Past research has demonstrated the robustness of these two effects among different types of products and different types of consumers in the short to medium term. Little attention however, has been paid to the long-term impact of these two effects on consumer choice. Prof Yoon argues that a deeper understanding of the persistence of these effects over time has important implications for the formulation of long term marketing strategy.
In particular, when preferences are formed based on the attraction effect, they tend to be more persistent, not only over time but also across different environments.
Prof Yoon explains that the results arise from the different forces driving the two effects.
The attraction effect is driven by a perceived enhancement of the target brand’s intrinsic value when compared with the inferior alternative; while the compromise effect is due mainly to the consumer’s attempt to avoid a difficult choice problem by opting for the generally acceptable solution.
Prof Yoon shows in her research that this difference in the original preference strength manifest through different vulnerability to the changes in the future choice context; when the product option was presented as the dominating, as opposed to the compromise alternative, people were more persistent in choosing the same option again a week later when the target option is no longer framed as a dominating or compromise alternative.
1 See Simonson and Tversky (1992), “Choice in Context: Trade-Off Contrast and Extremeness Aversion,” Journal of Marketing Research, 29, (Aug), 281-295.
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