Consumers are always looking for a deal. But how do they decide if they’re getting one? We marketers like to think they evaluate the entire package, both price and non-price information (like brand, attributes or terms). But do they? More importantly, are some elements more influential than others? And how do they weigh non-price information against price to ultimately decide to purchase?
Our jobs as marketers only got harder when user-generated content (UGC) started popping up at the point of purchase. Reviews (unstructured text comments) and ratings (quantitative score, usually 1-5) give consumers a new, immediate source of non-price information. So, how are they using that alongside price to determine value and make a choice?
I have been working to answer these questions with Dr. Breffni Noone, Associate Professor at Penn State. In a series of studies set in a hospitality context, we looked at how consumers use price, consumer reviews and aggregate ratings to evaluate the quality and value of a purchase. We also tested how they trade off among these elements to decide what to buy.
You can read detailed results on my blog, The Analytic Hospitality Executive, but if you’re in a hurry, here are our top insights for marketers:
Reviews are key: Consumers primarily based their perceptions of value and quality on reviews, which seemed to drive choice behavior. Aggregate ratings had some impact, but much less than reviews.
Face it, analyzing the sentiment and content of reviews is hard. But your consumers are paying attention to it, so you’d better, too.
Negative reviews take you out of the running, period: We’ve said that reviews were the most powerful predictor of choice. When reviews were negative, nothing could make up for it, not even low price.
If you are in the unfortunate position of receiving negative reviews, discounting will get you nowhere. Fix the problems.
All things being equal, consumers prefer lower price: While consumers did demonstrate that they would pay more for a better-reviewed product, if everything else was equal they still preferred the lowest price.
Just because your reviews are good, doesn’t mean you can charge more. Marketers need to carefully evaluate the sentiment about their products relative to the competition before making aggressive pricing moves.
These observations are logical to marketers, who probably knew them instinctively. But now, we have empirical proof that user-generated content matters. Consumers are influenced by UGC as well as price when making purchase decisions.
Beyond providing a way to engage with customers and get feedback, UGC is an important factor in pricing and positioning decisions as well. As if our jobs weren’t complicated enough.