Sense for Cents
The Off by 100% Bias: The Effects of Percentage Changes Greater than 100% on Magnitude Judgments and Consumer Choice
Matthew Fisher & Milica Mormann
Journal of Consumer Research, forthcoming
Abstract:
Percentage changes greater than 100% are frequently used in consumer contexts; for example, a cordless vacuum cleaner may boast “125% longer runtime” compared to competitors. Via six studies (n = 2,395) and 11 supplementary studies (n = 3,249), the current research shows that consumers systematically underestimate the magnitude of percentage changes greater than 100%. Specifically, many consumers apply the relative size usage (e.g., “125% of,” equivalent to 25% more) instead of the appropriate relative change (e.g., “125% more,” equivalent to 100% more + 25% more), which leads them to be off by exactly 100% in their magnitude estimates. The rate of bias decreases when the difference between these two usages is emphasized. The Off by 100% bias occurs across a variety of consumer contexts, influencing behavioral intentions and incentive-compatible choice. The findings make theoretical contributions to research on processing of percentages, probability versus frequency formats, and magnitude judgments. Finally, understanding how different presentation formats of the same information can lead to different magnitude judgments enables marketers and policymakers to ensure more effective communication.
Do Sunk Costs Affect Prices in the Housing Market?
Dimuthu Ratnadiwakara & Vijay Yerramilli
Management Science, forthcoming
Abstract:
We use a unique feature of California’s property tax system to empirically identify the causal effect of selling homeowners’ past property tax payments on their choice of listing price. Although past property taxes are sunk costs, we find that they have a significant positive effect on the sellers’ choice of listing price, which is inconsistent with rational models of decision making. This effect is stronger when sellers expect to sell at a loss relative to their purchase price and for properties whose value is harder to assess. The effect of property taxes on listing price is mostly transmitted to the selling price, which is consistent with the idea that buyers use listing prices as anchors to assess property values. Overall, our results suggest that sunk costs affect prices in the housing market.
Moving, Fast or Slow: How Perceived Speed Influences Mental Representation and Decision Making
Yael Shani-Feinstein, Ellie Kyung & Jacob Goldenberg
Journal of Consumer Research, forthcoming
Abstract:
Can the sensation of moving fast versus slow systematically influence consumer behavior? With recent technological innovations, people increasingly experience speed during decision making. They can be physically on the move with their devices or virtually immersed in speed simulated through their devices. Through seven experiments, we provide evidence for a speed-abstraction effect, where the perception of moving faster (vs. slower) leads people to rely on more abstract (vs. concrete) mental representations during decision making. This effect manifests for virtually simulated (experiment 1) and physically experienced (experiment 2) movement on moving trains. We suggest that it stems from an underlying speed-abstraction schema where people associate faster speed with abstraction and slower speed with concreteness (experiments 3a-3c). Weakening this schema attenuates the effect (experiment 4). Through a field study, experiment 5 demonstrates that video ads placed on Facebook are more engaging when virtually simulated speed matches the linguistic abstraction level of the message. Dimensions of psychological distance (time, space) and factors influencing mental representation (affect, fluency, spatial- orientation) are addressed as possible alternative explanations that cannot account for the effect. We propose a framework for understanding how experiencing speed — both physical and virtual — can influence decision making.
The role of cliffhangers in serial entertainment: An experiment on cliffhangers’ effects on enjoyment, arousal, and intention to continue watching
Dominique Wirz et al.
Psychology of Popular Media, forthcoming
Abstract:
Cliffhangers are a common style element in serial entertainment. This study investigates their role in today’s high-choice media environment. It is assumed that cliffhangers lead to higher arousal, increase the enjoyment of a series, and foster the intention to continue watching. This may foster binge-watching or, more generally, high-intensity viewing of TV shows. In a laboratory experiment, individuals (N = 133) were exposed to 3 to 4 episodes of a drama series, eventually finishing either with or without a cliffhanger. Participants’ arousal, enjoyment of the show, and intention to continue watching the series were measured via self-report and psychophysiological measures (electrodermal activity and cortisol levels). The results suggest that cliffhangers lead to higher arousal but do not increase enjoyment or the intention to continue watching.
Offline Context Affects Online Reviews: the Effect of Post-Consumption Weather
Leif Brandes & Yaniv Dover
Journal of Consumer Research, forthcoming
Abstract:
This empirical study investigates whether unpleasant weather — a prominent aspect of a consumer’s offline environment — influences online review provision and content. It uses a unique dataset that combines 12 years of data on hotel bookings and reviews, with weather condition information at a consumer’s home and hotel address. The results show that bad weather increases review provision and reduces rating scores for past consumption experiences. Moreover, 6.5% more reviews are written on rainy days and that these reviews are 0.1 points lower, accounting for 59% of the difference in average rating scores between four- and five-star hotels in our data. These results are consistent with a scenario in which bad weather (i) induces negative consumer mood, lowering rating scores, and (ii) makes consumers less time-constrained, which increases review provision. Additional analyses with various automated sentiment measures for almost 300,000 review texts support this scenario: reviews on rainy days show a significant reduction in reviewer positivity and happiness, yet are longer and more detailed. This study demonstrates that offline context influences online reviews, and discusses how platforms and businesses should include contextual information in their review management approaches.
High-Energy Ad Content: A Large-Scale Investigation of TV Commercials
Joonhyuk Yang et al.
Journal of Marketing Research, forthcoming
Abstract:
A trend reported by both academics and practitioners is that advertising on TV has become increasingly energetic. This study investigates the association between the energy level in ad content and consumers’ ad-tuning tendency. Using a data set of over 27,000 TV commercials delivered to U.S. homes between 2015 and 2018, the authors first present a framework to algorithmically measure the energy level in ad content from the video of ads. This algorithm-based measure is then compared with human-perceived energy levels showing that the measure is related to the level of arousal stimulated by ad content. By relating the energy levels in ad content with the ad-tuning tendency using two empirical procedures, the authors document the following: overall, more energetic commercials are more likely to be tuned in or less likely to be avoided by viewers. The positive association between energy levels in ad content and ad tuning is statistically significant after controlling for placement and other aspects of commercials. However, the association varies across product categories and program genres. The main implication of this study is that advertisers should pay attention to components of ad content other than loudness, which has been regulated by law.
How Viewer Tuning, Presence, and Attention Respond to Ad Content and Predict Brand Search Lift
Matthew McGranaghan, Jura Liaukonyte & Kenneth Wilbur
Marketing Science, forthcoming
Abstract:
New technology measures TV viewer tuning, presence, and attention, enabling the first distinctions between TV ad viewability and actual ad viewing. We compare new and traditional viewing metrics to evaluate the new metrics’ utility to advertisers. We find that 30% of TV ads play to empty rooms. We then use broadcast networks’ verifiably quasi-random ordering of ads within commercial breaks to estimate causal effects of ads on new viewing metrics among four million advertising exposures. We measure ad metadata and machine-code content features for 6,650 frequent ad videos. We find that recreational product ads preserve audience tuning and presence. Prescription drug advertisements decrease tuning and presence, more so for drugs that treat more prevalent and severe conditions. We also investigate whether new viewing data can inform advertiser objectives, finding that attention helps predict brand search lift after ads.