Informed consumers

February 28, 2008

I was reading an article about how consumers having less information about a product they like before purchase could generate more utility for him/her.  This is contradictory to what we think which is the more information consumers have, the more informed their decisions will be, which would lead to a greater amount of satisfaction in the future.

Our thinking:

(1) Businesses should provide us with all the information necessary regarding their product

(2) A utility maximizing consumer would weight all factors in before purchase

(3) Purchase after all information is weighed in and choose the best product

Recent research concludes that after a consumer has a liking towards a particular product:

(1) Limited information about the particular product would lead to wishful thinking

(2) This wishful thinking is based on our perceptions about the product

(3) Generates imagery in our minds about the product being the best in its class

(4) Huge consumer surplus (Value you place on the product minus its price)

After the purchase….  Lets have an example.  Assume you just bought a Canon A570 camera and there was limited reviews about the product.  So your perceptions based on your affection towards the product is high which leads you to beleive it is the best available camera in the market for the price.  Your utility generated from the product is high.  1 week later, people start posting reviews about the product from their personal use of the camera.  Bad reviews about the product would draw down your views about the camera whereas good reviews would give u reassurance of your correct decision making you happy!  If there were no reviews – you would have been quite enjoying and valuing the product, the same way you did before purchase.

 Imran Khan

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5 Responses to “Informed consumers”

  1. Tasia Says:

    Personally, finding out bad reviews is always better, because then I don’t buy a product that I got hyped up for and then faced with total disappointment a week later. Reviews definitely can kill ( or save, haha) a potential product to be purchased.

  2. mellaz Says:

    I agree with Tasia, it is always good to have some feedback\comments on products before buying it.

    On eBay, most of us check the ratings\feedback for the seller before closing any bid.

    I personally read many reviews on http://reviews.cnet.com/ and advise everyone to use it!

  3. wattsy Says:

    I agree, It’s really beneficial to read reviews before buying products. I like reading reviews on Futureshop’s web-site. Especially when you are buying a product that is expensive (tvs, computers etc.) It’s nice to read reviews to find out if there are any flaws with the product(s).

  4. romizuddin Says:

    I agree with you guys that it is always better to buy products, after you have reviewed written details or comments. Research shows that about 68% of online shoppers read at least four reviews before making a purchase. I always try to get the details about the products as well as compare with other similar product before buying.

  5. agelliott Says:

    If you are interested in buying big ticket items especially electronics, a good place to look would be Audioholics, Digital Home Canada or even CNet are great places to do research.


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