Too much choice can confuse consumers, says marketing guru Russell Winer
Russell S. Winer is the William Joyce Professor of Marketing at the Stern School of Business, New York University. He was in India last week to teach at The Indian School of Management and Entrepreneurship in Mumbai. An authority on marketing, he has written three books and more than 70 papers.
In an email interview, Winer talks about consumer choice, pricing and marketing on social media. Edited excerpts:
You have written on consumer choice. Is the consumer really spoilt for choice today which makes him less loyal to brands?
Choice is really a double-edged sword. More choices can be good for the consumer because she can choose exactly the right product for her. This increase in choice as well as more price competition in many product categories and more channel alternatives like the internet has led to less loyalty overall.
However, some academic research has shown that too much choice can be bad for consumers as it results in a kind of “brain freeze” at point of purchase. This research has shown that too much choice can lead to a greater chance that no choice will be made at all. For example, some grocery product categories have many SKUs (stock keeping units) due to flavours, container sizes, organic v. non-organic etc. which can make choice more difficult.
What can companies do to build loyalty among consumers? Are loyalty cards passé?
The problem with loyalty programmes is that there are too many of them, they are undifferentiated (i.e. the benefits are similar so they don’t offer unique benefits), and difficult for consumers to use with some exceptions like airlines and hotels. The best way for companies to build loyalty is not through gimmicks but by investing in their brands by constantly innovating and offering clear value propositions to their target audiences.
How has marketing research evolved over the years? How easy (or challenging) is it in the age of digital media?
Companies are now using digital technologies to conduct online interviews and focus groups, traditional marketing research. However, what has really changed is that in this era of “big data,” people are leaving tracks of their behaviour all over from credit card usage, web browsing and purchasing, media usage such as mobile, and other behaviours. Companies can now develop detailed profiles of purchasers by combining all this data and develop predictive models which can be used to target them more efficiently. For example, I now get targeted emails from companies from whom I’ve ordered in the past or even just visited their web sites. They don’t need to conduct sophisticated survey research, just monitor my behaviour.
How transformative has social media been for brand advertising? Do brands need to be wary of the backlash possible in this medium?
There has been a significant backlash against intrusive display and mobile ads on the Internet in general. The advertising industry understands that their advertising will be less effective if people are ignoring it. Thus, they are constantly trying to do a better job targeting consumers with ads for products that they are interested in or their friends are. Facebook, for example, has been very successful as an advertising platform because the products that are in the Facebook feed are either ones they have liked or their friends like. This social currency makes the ads more relevant and useful to consumers. Because friends’ word-of-mouth is the no.1 source of information consumers use in making buying decisions, social media have been very effective ad media.
India is moving towards product premiumization or trading up. How critical is pricing when societies change?
The challenge for brands selling in India is to change consumers from being price-oriented to being brand oriented and willing to pay more for quality. I think the price premium for quality brands will be small at first but will grow over time as the middle class grows, and consumers see the value from premium brands. I visited an upscale mall here in Mumbai and the stores were crowded so it is happening.
Does the e-commerce business model build scale only through low prices? Will it work in the long term?
That is one way it is happening. The beauty of e-commerce, though, is that you can be small and successful as well. The Amazons, Alibabas, and Flipkarts need scale because of their delivery costs, i.e. what we call the “last mile” problem. However, the other end of the spectrum can work as well. Many niche products are sold on the web because the sites offer something unique that cannot be found elsewhere. Put up a web site, do some search engine optimization so people can find you from search, and you’re in business.