Special Session Summary Consumer Preference Development

Steve Hoeffler, University of North Carolina
[ to cite ]:
Steve Hoeffler (2002) ,"Special Session Summary Consumer Preference Development", in NA - Advances in Consumer Research Volume 29, eds. Susan M. Broniarczyk and Kent Nakamoto, Valdosta, GA : Association for Consumer Research, Pages: 406-407.

Advances in Consumer Research Volume 29, 2002     Pages 406-407

SPECIAL SESSION SUMMARY

CONSUMER PREFERENCE DEVELOPMENT

Steve Hoeffler, University of North Carolina

The objective of the session was to explore several dimensions of consumer preference development. One of the clear themes that ran through all three talks was the critical impact of experience. In addition, all three talks took the more difficult approach of manipulating the level or type of experience in a meaningful way.

The Ariely, Loewenstein, and Prelec talk looked at the impact of anchors on preference development in a completely novel hedonic environment. In four experiments, they showed that consumers’ pricing of a simple hedonic stimulus (an unpleasant sound played over headphones) is not consistent with fundamental valuation in that it is powerfully influenced by non-informative anchor-values. The Hoeffler and West presentation looked at the combination of context and experience and the corresponding impact on preference consolidation or the acquiring of tastes. In their last study (Study 5), they begin to piece apart the critical mechanisms associated with both preference consolidation and "acquiring of taste." Lastly, the Wood talk looked at the impact of the level of expertise on learning in really new product environments. Results from this research highlight the differential roles of motivational cues and overconfidence in new product learning performance.

While the presentations had an extremely high overlap in terms of the substantive area, the variety of methods was quite stunning. The Ariely, Loewenstein, and Prelec talk used was based on laboratory studies with a completely novel stimulus (aversive sounds) to investigate the influence of anchors. Hoeffler and West used both surveys with follow-up taste tests and experimental manipulations with actual products (e.g., the making of lemonade) to investigae preference formation. Wood uses both interviews and experiments to investigate consumer learning for really new products.

 

"'COHERENT ARBITRARINESS’: DURATION-SENSITIVE PRICING OF HEDONIC STIMULI AROUND AN ARBITRARY ANCHOR"

Dan Ariely, Massachusetts Institute of Technology

George Loewenstein, Carnegie Mellon University

Drazen Prelec, Massachusetts Institute of Technology

Economic theories of valuation generally assume that prices of commodities and assets are derived from underlying "fundamental" values. For example, in finance theory, asset prices are believed to reflect the market estimate of the discounted present value of the asset’s payoff stream. In labor theory, the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work. Finally, and most importantly for this paper, consumer microeconomics assumes that the demand curves for consumer productsCchocolates, CDs, movies, vacations, drugs, etc.Ccan be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products.

Because it is difficult, as a rule, to measure fundamental values directly, empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuation are consistent with theoretical predictionCfor example, whether labor supply responds appropriately to a change in the wage rate, whether (compensated) demand curves for commodities are downward sloping, or whether stock prices respond in the predicted way to share repurchases. It has often been noted, however, that such "comparative static" relationships are a necessary but not a sufficient condition for fundamental valuation (e.g., Lawrence H. Summers, 1986). Gary Becker (1962) was perhaps the first to make this point explicitly, when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves.

In this paper we provide evidence that consumers’ absolute valuations of simple pains are surprisingly arbitrary. In four experiments, we show that consumers’ pricing of a simple hedonic stimulus (an unpleasant sound played over headphones) is not consistent with fundamental valuation in that it is powerfully influenced by non-informative anchor-values. However, we also show that when subjects are asked to price sounds of different durations, the relative valuations of noises of different durations are coherentBas if supported by demand curves derived from fundamental preference. Valuations, therefore, display a peculiar combination of arbitrariness and coherence that we refer to as "coherent arbitrariness." Our experiments show how comparative static tests could support predictions that follow from fundamental valuation even when values incorporate a substantial arbitrary component.

At a theoretical level we show that these findings are consistent with an account of preferences that posits that preferences are initially malleable but become "imprinted" (i.e., precisely defined and largely invariant), after the individual is called upon to make an initial decision. Prior to imprinting, preferences are "arbitrary," meaning that they are highly responsive to both normative and non-normative influences. Following imprinting, preferences become "coherent," meaning that they are more precisely defined and largely fixed in subsequent decisions. The model predicts that consumers will respond to changes in conditions in a coherent fashion, as if supported by demand curves derived from fundamental preference, even when their initial valuations are arbitrary.

In four studies, subjects stated their willingness to accept pain from listening to annoying sounds, in exchange for payment (WTA). Subjects were presented with annoying sounds of different durations, indicated their WTA, and they received sounds and payments based on their prices. At the onset of each session, subjects were asked to listen to the sound. Since the sound was very smple, subjects had full information about the hedonic experience. After the initial exposure, subjects were asked to state whether, hypothetically, they would be willing to listen to the sound again for either a large or small payment. Subsequently, their actual WTA was elicited to listen to the noise for different intervals (10, 30 and 60 seconds in the first experiment). WTA values exhibited a pattern that we label "coherent arbitrariness." Suggestive of coherence, prices were systematically related to noise duration. But, suggestive of arbitrariness, prices were powerfully influenced by the arbitrary high/low anchor accompanying the hypothetical question. We show that this pattern is consistent with a model that posits that preferences are initially malleable but become "imprinted"Ci.e., precisely defined and largely invariantCafter the individual makes an initial choice. The first experiment documents coherent arbitrariness at the individual level, the second in experimental markets, the third with random initial anchors and high payoffs. The fourth experiment examined a specific prediction of the modelCthat prices would be disproportionately influenced by the first of multiple anchors.

 

"EVOLUTION & DEVELOPMENT OF PREFERENCES: DISCOVERING OR ACQUIRING TASTE?"

Steve Hoeffler, University of North Carolina

Pat West, Ohio State University

Our taste and preferences change dramatically over time. These changes are in most cases too slow to draw our attention, but when we look back at our past taste and preferences, it is sometimes shocking to realize how much we have changed. These changes cover the gamete from food, to entertainment, and relations with others. In addition, they include aspects for which we both increased and decreased our liking for over time. A few examples of such changes include realizing we don’t consider Gerber’s baby food to be the culinary ideal any more; developing taste for Cognac and other alcoholic drinks; starting to find people attractive and enjoy physically expressing our attraction; looking forward to visiting a modern art museum; enjoying work etc. The central question we ask here is what are the characteristics and the ways in which these changes come about.

Think back to your first sip of beer, the first time you listened to Jazz, or the first time you ate spicy food. For most people these first tastes are mystifying, because we wonder how could anyone enjoy these experiences. Yet, over time the mystery disappears and we start to actively pursue such experiences. In many of the cases the changes in taste and preferences are gradual and take place over a long period of time. For example, many people recall drinking sweeter and lighter beers initially and progressing to heavier and more bitter beers only after first getting used to lighter beers. Analogously, as we get more experience with coffee, we develop more strict preferences for the amount of coffee, sugar and milk, and even for the type of cup and serving temperature. Often times such changes occur over a consumer’s lifetime. One expression used to describe this progression is "acquiring a taste" over time.

While some preferences (such as preferences for wine and beer) seem to change or develop over time in a certain direction, other preferences (such as preferences for soft drinks) seem to become more stable and fixed over time. These examples are meant to illustrate two general types of preferences change over time, preference consolidation (soft drinks) and acquired tastes (beer and wine). Preference consolidation refers to the idea that over time people become more certain in their own taste, they are more certain about what it is that they want, and their taste is less malleable (Hoeffler and Ariely, 1998). Acquired tastes refer to the idea that the ideal product changes over time.

The goal of this project is to discuss and show that these two basic types of learning processes (consolidation and acquiring) take place, and that they operate differently, have different implications for consumers learning, and are different across products categories. As it is an early account of these types of leanings, we will raise more questions than we answer. For example, we don’t believe that the type of learning (consolidation and acquiring) is uniquely determined. In fact, there are most likely many factors that influence the type and intensity of preference change over time; such as developmental changes, aging, discrimination, learning, adaptation, consumption vocabulary, commitment, social changes etc.

Our paper is organized as follows. First we will describe two studies in the domain of acquiring taste (beer, and wine), followed by two studies that document the preference consolidation phenomenon. Lastly, in Study 5 we will demonstrate that the distinction between the preference consolidations and acquiring (while meaningful by itself), can also be influenced by the context of the consumption experience. We will end with a discussion and suggestions for future research.

 

"INNOVATION AND THE LAZY EXPERT: PRIOR KNOWLEDGE EFFECTS ON NEW PRODUCT LEARNING"

Stacy L. Wood, University of South Carolina

Fifty years of study have culminated in two conflicting pictures of expertise (Camerer and Johnson 1991; Shanteau 1992). Behavioral decision research paints a bleak picture of experts’ performance, demonstrating poor judgments, inaccurate decisions, and overconfidence. In contrast, cognitive science supports the superiority of experts in a myriad of learning and decision processes.

Clearly, expertise effects have material implications for consumer adoption of innovation. When "really new" products are introduced, successful adoption depends on consumers’ ability to learn about the innovation. The nature and difficulty of this learning task differ across consumers based on the individual’s level of prior product category knowledge. With little prior knowledge, novices face a larger learning investment in innovation adoption. However, while experts may benefit from some extant knowledge, they must also identify and discard obsolete knowledge, heuristics, or behaviors.

In this research, three studies examine the influence of expertise on participants’ accuracy in learning new product information. "Expertise" (or prior knowledge) was both manipulated via a training exercise (Study 1) and measured by self report (Studies 2 and 3). Results suggest that experts underperform in new product learning compared to novices due to shallow information processing. When experts recognize substantial change (i.e., innovations that may make currently held knowledge obsolete) opposite effects obtain. This recognition or acknowledgment of change can be impacted by superficial characteristics of the innovation, suggesting that salience of change may act as a motivational cue. Similarly, experts outperformed novices in the same new product learning task when a non-related motivational incentive was used. Finally, overconfidence bias could be perceived as a factor underlying expert’s shallow processing in new product learning tasks. However, in a study using a false feedback technique, decreased confidence in extant product category knowledge did not increase experts’ performance in new product learning. In a conference presentation, the relationship between these findings and the related research domains of consumer expertise, knowledge/schema (or analogical) transfer, and knowledge miscalibration would be discussed.

REFERENCES

Becker, Gary (1962), "Irrational Behavior and Economic Theory," Journal of Political Economy, (70), 1-13.

Camerer, Colin F. and Eric J. ohnson (1991), "The Process-Performance Paradox in Expert Judgment: How Can Experts Know So Much and Predict So Badly?" in Toward a General Theory of Expertise: Prospects and Limits, eds. K. Anders Ericsson and Jacqui Smith, New York: Cambridge University Press, 195-217.

Hoeffler and Ariely, (1999), "Constructing Stable Preferences: A Look Into Dimensions of Experience and Their Impact on Preference Stability," Journal of Consumer Psychology, (8) 2, 113-140.

Shanteau, James (1992), "Competence in Experts: The Role of Task Characteristics," Organizational Behavior and Human Decision Processes, 53, 252-266.

Summers, Lawrence H (1986), "Does the Stock Market Rationality Reflect Fundamental Values?," Journal of Finance, 41, 5901-602.

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