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Using information situations to guide marketing strategy.

Introduction

Marketing managers have traditionally tried to categorize or classify the types of marketing they pursue. Managers typically label themselves as doing consumer marketing, industrial marketing, services marketing, high-technology marketing, non-profit marketing, health-care marketing, or some other type (or combination of types) of marketing. Identifying the type of marketing they do has provided managers with valuable insights and guidance. They have been able to examine how best to respond to what is different and distinctive about their situations, leading to the development of more effective marketing programs.

This article proposes a new way of categorizing the type of marketing done for an offering. It is based on the "information situation" existing in primary target markets. The argument is offered that determination of whether a "search", "experience" or "credence" information situation is being faced in desired markets can lead to the development of highly logical and profitable marketing strategies.

The case for examining information situations is presented by first providing definitions of what is meant by search, experience, and credence situations. This is followed by the introduction of several propositions that point to the best marketing strategies to use in the three information situations. Examples are provided that tend to lend support to the propositions.

Defining search, experience and credence situations

The idea of examining information situations is derived from research in the economics and marketing disciplines on what has been labeled the "economics of information" (Darby and Karni, 1973; Ford et al., 1990; Milgrom and Roberts, 1986; Nelson, 1970; 1974; Schmalensee 1978). This body of research has looked at the behavior of consumers and sellers in markets for search, experience, and credence goods, where these have been defined as follows:

* With a search good, a consumer can learn most of what he or she would like to know about the good before actually making a purchase.

* With an experience good, most of what a consumer would like to know about the good can only be learned after purchasing and using the good.

* With a credence good, a consumer can never really learn most of what he or she would like to know about the good, even after using it many times.

Considerable theoretical and empirical research has been done on the differences in behaviors associated with each type of good (Ford et al., 1990; Kirmani and Wright, 1989). Moreover, several managerial discussions have appeared that draw on this classification scheme for guidance on how to market certain goods more successfully, particularly those with a large service component (Bloom and Reve, 1990: Kotler 1988; Zeithaml et al., 1985).

However, classifying goods into search, experience, and credence categories can present conceptual and practical difficulties, limiting the usefulness of the approach. Categorizing a good can be difficult because it may have a mixture of search, experience, and credence properties or attributes. For example, food products have search properties (e.g. price, nutrients, packaging), experience properties (e.g. taste), and credence properties (e.g. effect on one's lifespan). Furthermore, categorization can be complicated because what may be a search property for one highly knowledgeable consumer may be a credence property for another less skilled consumer, who may never be in a position of knowing what benefits he or she received from that property (e.g. solid-state circuitry).

Instead of seeking to categorize one's offering (i.e. goods or services) as a search, experience, or credence good, it appears more reasonable to try to identify whether one faces a search, experience, or credence situation when marketing that offering to a specific (homogeneous) market segment. The situation faced by a marketer will depend on a number of factors, including:

* what attributes of the offering are most important to the market segment members (i.e. the attributes on which they would most like to base their choices);

* when, if ever, the market segment members could obtain accurate information about the most important attributes;

* how willing the market segment members are to obtain accurate information about their most important attributes.

By examining these factors, one can define the following situations:

* A search situation occurs when accurate information about the most important attributes to market segment members can be obtained before purchasing and the members are willing to incur the costs of acquiring this information.

* An experience situation occurs when accurate information about the most important attributes to market segment members can be obtained after usage and the members are willing to incur the costs of acquiring this information.

* A credence situation occurs when accurate information about the most important attributes to market segment members can never be obtained or the members are unwilling to incur the costs of acquiring accurate information about important attributes.

Table I presents a matrix that summarizes these definitions. A market segment's information situation can be identified by judging which cell in the matrix reflects when segment members can obtain accurate information and how willing the members are to incur the cost of obtaining accurate information.

The major idea here is that not only can a credence situation develop because desired information about an offering can never really be obtained, but it can also develop when the desired information is available but is viewed by consumers as too costly to obtain. Thus, credence situations can occur when consumers think accurate information is difficult and expensive to locate, when they think it will be difficult and expensive to distinguish accurate from inaccurate information, or when they think it will be difficult [TABULAR DATA FOR TABLE I OMITTED] and expensive for them to acquire the knowledge and skills necessary to locate or distinguish accurate information. Confronted with having to make choices without having desired information about important attributes, consumers will place their faith or credence in information that is available to them at relatively low cost. Typically, this will involve relying on extrinsic information cues or "signals" such as brand name, price, or endorsements (Zeithaml, 1988).

It should be noted that these definitions permit search or experience situations to exist when highly knowledgeable consumers in a market segment are able to locate, distinguish, and process accurate information very inexpensively relative to less-skilled consumers, who would be in credence situations. These definitions also permit search or experience situations to exist when the most important attributes to consumers are only simple, low-cost, extrinsic information cues, such as brand name, and they do not care about any of the intrinsic attributes of the offering. There may be no act of faith or credence involved in picking the option with the most famous brand name if all the consumer wants is an ability to show off that brand name and not some other benefits.

Another important aspect of these definitions is that they allow for the possibility that the situation faced with a particular market segment could shift over time. Once consumers in experience situations have had the opportunity to use several competing offerings in a market, it would be inappropriate to consider them still in experience situations; they would have to be considered as being in search situations. Similarly, some consumers in credence situations - who were classified this way primarily because they were unwilling to incur the costs of acquiring accurate information about important attributes, and not because they could never acquire this information - could shift into search or experience situations if information acquisition costs were somehow lowered for them.

With these definitions, it would be possible for the marketer of a complex offering, such as an automobile dealer, to face all three situations, for several different reasons, in several different segments. Search situations could be faced in marketing toward highly knowledgeable automobile enthusiasts or less skilled car consumers who pay attention to only a car's exterior appearance and price. Experience situations could be faced in marketing toward consumers for whom comfort on long trips or repair costs are the most important attributes. Finally, credence situations could be faced in marketing toward: consumers for whom "safety after a crash" is the most important attribute (where consumers may have to put their faith in the inaccurate endorsements provided by the National Highway Safety Traffic Administration crash tests); or less skilled consumers whose choice is based on brand name, price, and endorsements because they recognize that it will be too costly for them to obtain the knowledge and information to allow them to evaluate the technical features of cars in the way they wish they could. A dealer could develop different marketing programs for different situation segments, or the dealer could focus on appealing to consumers in a single situation.

Other marketers who are likely to face multiple situations across different market segments include microcomputer retailers, camera shops, banks, and professional service providers of all types. For example, a law firm that faces a credence situation with most of its clients - because they may never really be able to assess how well their lawyer has represented them - may face a search or experience situation with the highly sophisticated in-house legal counsels of potential corporate clients. Similarly, physicians may face a diverse set of situations depending on the types of services provided and the characteristics of the patients served.

The determination of the exact situations faced by a marketer would require careful marketing research on each (homogeneous) market segment's most important attributes and information acquisition behaviors. Particular care would need to be taken in distinguishing between: attributes that consumers actually focus on to make choices: attributes that consumers actually focus on to evaluate an offering after usage; and attributes consumers would like to focus on but do not study, basically because accurate information about the attributes is either not available or too expensive. As suggested above, the existence of this latter category of attributes is a necessary condition for a credence situation to exist. Traditional qualitative and quantitative techniques for identifying important attributes and information acquisition behaviors could be used (e.g. focus groups, conjoint analysis, information search studies), with special attention paid in the qualitative research to making sure all possible attributes and information sources have been identified. Although admittedly the situations faced by some market segments will be hard to categorize based on research, if a few segments can be confidently labeled as being in search, experience, or credence situations, then more effective marketing strategies may be able to be tailored for those segments.

Some propositions to guide marketing strategies

Designing marketing strategies which adapt to the differences in buying behavior that exist in each of the three situations should produce productive results. Several formal propositions about the strategies that are likely to be most effective are presented below. The logic that supports these propositions is offered, some of which is grounded on previous research on the economics of information. Table II summarizes the information in the propositions, showing the predicted effectiveness of five types of communications strategies for search, experience, and credence situations.

Search situation strategies

In search situations, consumers can identify, before purchasing, those considered options which have the most desirable configuration of attributes for them. They therefore are active in searching for information about how many important attributes the different options possess. They will use information obtained from advertising, personal selling, sales materials, packages, examination of the offering, the news media, friends, and other sources to give them an accurate picture of what each considered option can give them. All of this information will tend to be accurate because [TABULAR DATA FOR TABLE II OMITTED] consumers will have the ability to distinguish accurate from inaccurate information before making their purchases and, recognizing this, sellers will not want to risk angering consumers by presenting inaccurate information (Ford et al., 1990; Nelson, 1970).

Informing consumers

Faced with this situation, marketers should find it advantageous to put a lot of resources into informing consumers about those attributes. Among other things, transmitting extensive information to consumers should increase the chances that an offering will become a considered option in the first place. Stated more formally:

P1. Relative to experience and credence situations, it will be more effective in search situations to provide extensive amounts of information about the attributes of an offering through advertising and other communications tools.

In most search situations, this will mean providing objective and easily-verifiable information about intrinsic attributes that consumers find important. Consider the extensive informational content of advertisements for computer equipment in computer magazines, automobiles in car magazines, and bicycles in biking magazines. All of these advertisements are attempting to appeal to consumers who are capable of determining exactly what they want before actually making a purchase. Heavy emphasis on information provision has also become a major part of the marketing program of retailers of consumer electronics, who are putting considerable information about product features in their newspaper and direct-mail advertisements and who use their salespeople to provide additional prepurchase information. These retailers apparently recognize that most consumers today are in search situations with respect to consumer electronics, especially since most products can actually be tried in the store before making a purchase.

However, there may be search situations where providing ample information about extrinsic attributes such as prices, brand names, or endorsements may be what is most effective. This could occur when consumers have all along only been interested in acquiring either the most expensive brands or the brands endorsed by particular celebrities, and they have been unconcerned about intrinsic attributes, or it could occur when consumers have learned all they would like to know about the intrinsic attributes of choices through past usage of offerings or past information searches. For example, people who have tasted a variety of soft drinks many times may find extrinsic attributes such as brand names and endorsements more important than intrinsic attributes, and bombarding them with advertisements that stress brand-name reminders and celebrity endorsements may be the most effective way to attract their patronage.

Experience situation strategies

In a sense, an experience situation represents a short-term credence situation in that, until an offering is actually used, consumers must temporarily put their faith or credence in how an offering stands on the less important attributes that they are able to assess before purchasing. These consumers will therefore tend to rely initially on low cost, simple information cues or signals such as brand names, prices, warranties, endorsements, or attractiveness of atmospheres to guide them in making choices. They will pay attention to advertising, but will be more inclined to examine advertising as a signal of value or quality rather than as a source of detailed information about the attributes of considered offerings. In experience situations, consumers will tend to be distrustful of attribute information in advertising, thinking that most people like them would not be swayed by advertising claims and really want to use the offering to discover its important attributes. They will more likely use the amount of advertising or the expensiveness of advertising as a signal that an offering has either good value and quality (thinking "How else could it attract enough consumers to afford to advertise like that?") or poor value and quality (thinking "They must be desperate to waste so much money on advertising like that") (Bloom and Krips, 1982; Ford et al., 1990; Kirmani and Wright, 1989; Nelson, 1970; 1974).

Given how consumers will be guided by signals in making choices in experience situations, it makes sense to propose:

P2. Relative to search situations, it will be more effective in experience situations to emphasize the development and promotion of the simple information cues or signals that consumers tend to favor.

What is being suggested here is that in most experience situations it will pay off more to invest in acquiring trusted brand names, providing attractive warranties, obtaining endorsements, improving atmospheres, or increasing advertising volume (if it is viewed as a positive signal) rather than to invest in providing more information about intrinsic attributes through advertising, personal selling, and other communication methods. Table II also suggests that impersonal signals will work even better than personal signals in experience situation markets - for reasons addressed below when discussing credence-situation strategies.

Of course, once several considered offerings have actually been used, experience situations essentially shift to search ones, where the offerings that possess the most desired configurations of important attributes, and not just the best signals, will attract the most consumers. For marketers of offerings which clearly do possess superior configurations of a market segment's most important attributes, it would make sense to seek to accelerate the shift from an experience to a search situation. This could be done by using promotional approaches that permit consumers to use the offering quickly, and at low cost and low risk. Emphasizing "test drives", offering discounts and prizes for new triers, giving away free samples, or offering mini-versions of an offering would be the types of approaches that should be effective in experience situations, especially for marketers with superior offerings. Hence, the following is proposed:

P3. Relative to search and credence situations, it will be more effective in experience situations to promote quick and inexpensive ways to test and use the offering.

The heavy use of couponing, discounts, and samples to encourage trial of new food products, restaurants, and hotels is highly consistent with this proposition. Another interesting example of an organization making effective use of the small trial as a way to deal with experience situations is the American Association of Orthodontists. It has established a system of computer imaging which allows people to see how they would look after having their teeth straightened. It has found that a very high proportion of the people who submit pictures of themselves, and then receive a computer image of how their smile would change, have followed up and made an appointment to get braces. Facial plastic surgeons are also making use of computer imaging to attract patients for nose jobs and facelifts.

Credence situation strategies

The tendency of consumers in credence situations to focus on low cost, simple, information cues or signals leads to essentially a repeat of P2.

P4. Relative to search situations, it will be more effective in credence situations to emphasize the development and promotion of the simple information cues or signals that consumers tend to favor.

However, a basic difference between experience and credence situations is that consumers recognize that in relying on signals in experience situations they only have to take a short-term "leap of faith", whereas in credence situations they may have to "leap" forever. Consumers in experience situations know that they should be able to verify the accuracy of signals as soon as the offerings have been used. They may also recognize that sellers would have few incentives to transmit signals that are not reliable indicators of the true important attributes of offerings, since detection of unreliable signals can be done in the short run by consumers (followed, perhaps, by bad word-of-mouth and no repeat purchases). Hence, consumers in experience situations should be less distrustful about a variety of signals than consumers in credence situations. Consumers in experience situations should therefore respond more positively to most signals than consumers in credence situations. On the other hand, consumers in credence situations should be more inclined to respond positively to personal endorsement signals from people they perceive to be trustworthy and likeable. What is seen and heard from trusted, liked, personal sources of information should be more persuasive to people "on their guard" in credence situations than what is seen and heard from impersonal signals. This assertion tends to be consistent with the findings of a recent study by Murray (1991), who found that consumers have greater confidence in personal sources of information for services than for goods. The propositions stemming from this logic are:

P5. Relative to experience situations, impersonal, simple information cues or signals will tend to be less effective in credence situations.

P6.Relative to experience situations, personal, simple information cues that emerge from people who are perceived as trustworthy and likeable will tend to be more effective in credence situations.

Heavy users of impersonal, simple information cues and signals include insurance companies, banks, airlines, hotel chains, long-distance telephone companies, and many other service providers which seek consumers facing experience situations. These marketers tend to advertise heavily, build expensive and impressively-decorated buildings, use service guarantees or warranties, and stress their brand names.

On the other hand, marketers of professional services, whose consumers tend to be more in credence situations, seem to invest more heavily in trying to supply personal, simple information cues. Many law, accounting, architectural, and consulting firms build a major portion of their marketing programs around having their professionals appear competent, likeable, and trustworthy to prospective clients, particularly during presentations or "pitches" for jobs or projects. They also emphasize building relationships with referral sources in the hope of generating word-of-mouth recommendations. This latter approach is a particular emphasis of surgeons and physician specialists, who often work hard at cultivating good relationships with referring primary care physicians. The exception to this seems to be with cosmetic surgeons, who have apparently had considerable success with heavy advertising aimed directly at consumers - based on a recent survey completed by the authors (Bloom and Pailin, 1992). Perhaps this is because the buying of cosmetic surgery puts consumers essentially in an experience situation, rather than a credence one. Unlike other forms of surgery which patients have difficulty assessing after it has been completed, the results of cosmetic surgery can be assessed quite easily after going through the "experience".

Additionally, since some credence situations can develop because consumers find it too costly to obtain desired information, marketers might find a useful long-term strategy one that helps to lower the cost of information acquisition for consumers. Educational efforts by marketers - teaching what attributes to study, where to find accurate information about those attributes, and how to interpret this information correctly - could make the acquisition of accurate information appear less imposing to many consumers. Tools that could be used include seminars, manuals, and consultative selling. Use of these educational tools could help to shift consumers into search or experience situations, enhancing the fortunes of those marketers whose offerings possess superior configurations of a market segment's most important attributes. Thus, the following final proposition is offered:

P7. Relative to search and experience situations, it will be more effective in credence situations to use promotional approaches that seek to educate consumers about how to improve their skills at acquiring accurate information about the offering.

Some professional service providers, as well as other marketers of highly sophisticated and complicated offerings, make frequent use of educational promotional approaches. Seminars on the intricacies of a specialized service, designed to help prospective clients gain a better appreciation of what to look for, have become commonplace in law, accounting, and consulting firms. The benefit of this approach may be to move prospects from being in credence situations to being in more search-like situations, where the more intrinsic attributes of services are evaluated before making purchases.

To summarize, the propositions suggest that extensive informational advertising and promotion will work best in search situations, frequent promotion of free or inexpensive trials will work best in experience situations, heavy reliance on signals will work best in experience and credence situations (with impersonal signals working better in experience and personal signals working better in credence), and strong efforts to educate consumers will work best in credence situations.

Conclusions

Consideration of the information situation faced by members of targeted markets has the potential of providing valuable guidance in the formulation of marketing strategies. Depending on the extent to which an organization is targeting consumers in search, experience, or credence situations, a very different marketing program is likely to be most appropriate. Those organizations doing primarily "search-situation" marketing should find it most effective to emphasize the use of informative advertising and promotion. Those doing primarily "experience-situation" marketing should, instead, emphasize inexpensive trials and impersonal information cues and signals, and those doing primarily "credence-situation" marketing should emphasize educational promotional approaches and personal information cues and signals. Those marketers facing a combination of situations in different market segments will need to develop an appropriate blend of marketing approaches. Careful research to identify the information situations faced by targeted consumers is a necessary prelude to designing effective marketing programs. Good research and good strategic thinking about information situations should lead to more efficient and productive marketing of all types of goods and services.

References

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Paul N. Bloom is Professor of Marketing at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, and James E. Pailin Jr is on the marketing faculty at the Owen Graduate School of Management of Vanderbilt University, Nashville, Tennessee, USA.
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Author:Bloom, Paul N.; Pailin, James E., Jr.
Publication:Journal of Consumer Marketing
Date:Mar 22, 1995
Words:4399
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