Knowledge, Cost, and Information Search

ABSTRACT - Whether the cost is directly influenced by knowledge has not been clearly explained previously. But it can be hypothesized that compared to the less knowledgeable consumers, consumers who have high level of knowledge about product category and brand can search the information at less cost (time cost, psychological cost, and physical cost).

Citation:

Saeran Doh (2001) ,"Knowledge, Cost, and Information Search", in AP - Asia Pacific Advances in Consumer Research Volume 4, eds. Paula M. Tidwell and Thomas E. Muller, Provo, UT : Association for Consumer Research, Pages: 122-126.

Asia Pacific Advances in Consumer Research Volume 4, 2001      Pages 122-126

KNOWLEDGE, COST, AND INFORMATION SEARCH

Saeran Doh, Keio University, Japan

ABSTRACT -

Whether the cost is directly influenced by knowledge has not been clearly explained previously. But it can be hypothesized that compared to the less knowledgeable consumers, consumers who have high level of knowledge about product category and brand can search the information at less cost (time cost, psychological cost, and physical cost).

"Will external information search cost influenced by the knowledge play any vital role during consumers’ external information search?" That is the inquiry of this paper.

INTRODUCTION

In the previous studies(Punj and Staelin 1983, Srinivasan and Ratchford 1991) there are no causal relationship among the construts, i.e., the process of how knowledge(product category and brand) influences to the cost and to the level of external information search. Based on the previous models (Punj and Staelin 1983, Srinivasan and Ratchford 1991), it seems reasonable to argue that the cost factor can be an intermediating factor between knowledge and external information search to influence consumers’ external information search process. Simplifying somewhat, this paper will concentrate to clarify the relationships among the constructs of knowledge, cost, and information search.

The present study will try to develop a theory in regard to the cost positioning, and later, experimental analysis will be performed based on the developed theory. In the existing research, cost has not been considered to be influenced by the knowledge. It is evident from the previous studies that a knowledgeable person is different from a person who does not have enough knowledge in different view of points, for example, time required to collect information, efficiency to search using their knowledge, and ability to identify an appropriate store, magazine, and /or catalog. But, existing researches, omitted the construct cost as an intermediating factor to explain the relationship between knowledge and information search.

The existing researches((Punj and Staelin 1983, Srinivasan and Ratchford 1991) explained that cost was positioned just as an external factor which was not related to knowledge, and the search cost was thought to have independent effect on external information search.

It can be assumed that the more consumers gain information, the more they can act effectively in order to understand the information and simplify their search behavior.

The purpose of this paper is to explain and examine the causal relationship from prior knowledge to external information search through the cost factor as an intermediating factor.

Seeing roughly two previous models, Punj and Staelin Model(1983), Srinivasan and Ratchford model(1991) have the structure of paths from knowledge to benefit then to external information search which is also determined by cost. [The reason why I developed this model is just limiting those factors (knowledge, cost, benefit, information search) for comparing them with the equation model of this study.] The information cost’s role in two models are external factor. Examining the relationship among knowledge, benefit, external information search Punj and Staelin(1983, p.367) assumed the structure of knowledge to external information search and then to benefits(satisfaction, cost saving). In their model, benefit was positioned to be determined later than external information search. Srinivasan and Ratchford model (1991, p.234) hypothesized the causal flow from knowledge to benefit then to information search. Their benefit is the perceived benefit where consumer will expect before the search behavior is taken.

HYPOTHESES

This study was done in the intention to develop a causal model which would clarify the relationship between knowledge and information search. Knowledge of product category and brand can contribute to ease the pain of cost, consequently, it has direct influence on the level of the information search. In general, external information search costs include the time cost, physical cost, and psychological cost, which impact on the information search process.

For example, time is needed when consumers search something intensively. Psychological costs occur, especially, when consumers try to differentiate a brand from other brands based on its anticipated performance. Physical cost denotes the consequences that affects a consumer during the information search. When consumers have enough knowledge of the product category, they can easily make product judgement and evaluation, for example, which brand is better, where to find the brand, and how much is the price. The more the product category knowledge, the less the cost of external information search. Depending on this reasoning I hypothesize:

H₁: Product category knowledge will give negative effect on the external information search cost.

The product category knowledge means the product functions, terminology and meanings of a product, through which consumers know about the important attributes of a product or their interrelationships. Consumers with high product category knowledge can comprehend the relevant questions, or can process new information with less effort. Therefore, the product category knowledge increases the amount of benefit. However, as a consumer acquires more knowledge about the product category, the additional benefit of the knowledge brings about becomes less significant one. So, the hypothesis is:

H₂: Product category knowledge will give negative effect on the external information search benefit.

The brand knowledge includes the knowledge about the attributes of a brand. If consumers have enough brand knowledge, they search more efficiently with their knowledge. Conversely, if consumers do not know much attributes of a brand, they take much time cost, psychological cost, and physical cost. That is why consumers having less brand knowledge, the external information search cost increases. Here, I hypothesize:

H₃: Brand knowledge will give negative effect on the external information search cost.

As consumers search one more unit of external information, the external information search benefit increases but the increase is comparatively slow. Then, as the brand knowledge is increased, the additional information search benefit will be decreased .

H₄: Brand knowledge will give negative effect on the external information search benefit.

Again when consumers search information, they do not want to search the information in the way that takes much time. Then the hypothesis is:

H₅: External information search cost will give negative effect on the external information search.

External information search benefit is an expected perceived benefit of the information search. As consumers search the external information, they can expect to purchase good quality product with low price, also they can purchase the specific type of product they hope to obtain. Here the hypothesis is:

H₆: External information search benefit will give positive effect on the external information search.

Punj and Staelin(1983), Srinivasan and Ratchford (1991) used cost and benefit concepts when they explained the relationship between knowledge and information search. But, they did not hypothesize the information search cost as an intermediating factor between knowledge and external information search.

This paper divides prior knowledge into two contents, that is, product category knowledge and brand knowledge, based on the past consumer decision making research. By dividing the prior knowledge, we can more clearly grab the contents of knowledge. In the existing models, researchers usually used only one knowledge or mixed knowledge of two types of knowledge. That is the reason why they were not sucessful in providing clear cut explanation of the knowledge’s role to explain search behavior.

TABLE 1

THE CONSTRUCTS AND INDICES

METHOD

I used LISREL [Joreskog Karl G. and Dag Sorbom (1989), LISREL7: A Guide to the Program and Applications, 2^nd ed., SPSS Inc.] (Analysis of Linear Structural Relationship by the Method of Maximum Likelihood) for testing the relationships between the factors as a causal model. The causal model developed consists of five factors and the causal relationships among them. Of these five constructs two are exogenous factors; product category knowledge and brand knowledge, and three are endogenous factors; information search cost, information search benefit, and external information search. The Srinivasan and Ratchford model(1991) which had nine factors is modified into five factors model so that it can be compared with our model, especially, to see the role of cost factor as an intermediating factor. Note should be taken here that we compare our model only with Srinivasan and Ratchford(1991)model but not with Punj and Stalein(1983) model because comparing the role of cost is our main purpose of comparison. Punj and Stalein(1983) model’s benefit is measured as the satisfaction after a searching behavior, therefore, it is not adequate to compare it with our model.

Data Collection

Data were collected regarding personal computer by using the method of questionnaire. In Japanese society, college students engage in considerable information search behavior when they buy a personal computer. The complexity of the product and price level are the reason for their intensive search behavior. Another reason is that the computer market is a changeable market in which models and technologies change very rapidly. 254 respondents(a private university in Tokyo) who had experience of purchasing at least one personal computer were interviewed as the sample of this study. Although it was not a random sample, it was considered to be acceptable for testing our hypotheses. The relatively high homogeneity with regard to age, educational background is thought to be appropriate points of this sample.

RESULTS

Table 2 shows the overall comparison of two models. As shown in table 2, our model has better overall goodness of fit than the modified Srinivasan and Ratchford(1991) model. Also the partial comparison of two models indicates our model at least as good as the modified Srinivasan and Ratchford’s model.

The hypothesis that states brand knowledge affects the external information search benefit negatively was supported. The size of coefficient of our model (-0.486) is almost identical with that of the modified Srinivasan and Ratchford(1991) model (-0.444). The hypothesis that states the external information search cost influences the external information search negatively was also supported. The estimated coefficient of our model (-0.439) is almost similar to that of the modified Srinivasan and Ratchford(1991) model (-0.432).

In summary, the comparison between our model and the modified Srinivasan and Ratchford model, revealed that the overall evaluation as well as the partial evaluation of our model of this paper is better than or at least identical to the modified Srinivasan and Ratchford model(1991).Thus we can say that the internalization of cost factor can better explain the relationship between knowledge and information search than treating the cost as exogenous factor.

FIGURE 1

THE EQUATION MODEL OF THIS STUDY

DISCUSSION

Implications

This paper suggests the causal linkage from knowledge to the information search through the cost variable as well as the benefit.

In addition, the causal path through cost is stronger than the path through benefit. This means when a consumer does information search behavior he/she is more interested in decreasing the cost than increasing the benefit. In the existing research, information search benefit had larger weight than cost, but the result of this study suggests we should pay more attention to the information cost. And the result of this study indicates that product category knowledge has larger impact on the cost than brand knowledge has. This also suggested the need to give more attention to the roles of product category knowledge.

In summary, the result of this paper shows that cost is stronger than benefit in connecting knowledge with information search. This may mean with providing information to consumer so that they can save their time, psychological, physical costs will facilitate their information search behavior. By making consumers engage in more easily information searching activities, marketers may influence the consumers’ purchasing activities. Also the consumers, exposure to stores, magazines, catalogs, and advertising will increase the future demand of the consumers.

The implication of marketing is that marketers should identify which knowledge affects the cost, or benefit. The result of this research suggests the category knowledge has stronger influence on the cost than the brand knowledge. Marketers usually pay attention to the brand knowledge in order to inform the consumer more about their brands, but the product category knowledge should also be emphasized.

In summary, this research is very meaningful in that it clearly suggests the need to consider the cost as an endogenous factor. In addition, it was found that cost had stronger impact than benefit did in linking the causal path from knowledge to information search.

Limitations and Future Studies

This study has focused on knowledge factor(Brucks 1985, Suzan 1985) It did not incorporated the involvement factor just like Petty and Cacioppo(1983, 1986) examined both knowledge and involvement in Elaboration Likelihood Model. In the future study involvement construct needs to be included, and the relative role of it should be compared to that of knowledge. In addition, this research is done in the framework of purchasing context. In the future study the ongoing search behavior is also needed to be investigated.

FIGURE 2

THE MODIFIED SRINIVASAN AND RATCHFORD MODEL (1991)

TABLE 2

THE COMPARISON OF THE OVERALL GOODNESS OF FIT

TABLE 3

THE RESULTS OF OUR MODEL

TABLE 4

THE RESULTS OF THE MODIFIED SRINIVASAN AND RATCHFORD MODEL

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