In one of the articles of the week, /Consumer Informedness and Information Strategy/ (Li et al. 2017) it was suggested that firms should adopt an information strategy that selectively provides more or withhold different types of information about their products, in order to attract a desired segment of customers. While this makes intuitive sense, I cannot help but think about what the Pieter Zwart – Founder of Coolblue said during his guest lecture.
First, a short summary: In the article, Li et al (2017) are examining how different segments of consumers respond to to being more information about products and prices.
They distinguish two different types of consumer segments and behaviors: Consumers in differentiated segment are value-sensitive and choose product based on how well those products fit their needs, whereas consumers in the commodity segment are more price-sensitive.
When provided with more information about the prices of products, both segments exhibit trading down behavior (i.e. preferred cheaper products), however the commodity segment shows stronger trading down behavior. Similarly, when provided with more product information both segments experience more trading out behavior (i.e. preferred products that meet their needs), with the differentiated segment increasing their trading out behavior.
On a strategy level, this implies that e-commerce businesses are facing a trade-off when displaying commodity segment consumers. On the one hand more comprehensive and transparent pricing information, allowing them to compare prices may increase sales but also diminishes their willingness to pay.
During his guest lecture, Pieter Zwart explained that Coolblue does not want to compete on price and thus is not aiming at the commodity segment, but the differentiated segment instead. Based on the paper, Coolblue should target and these customers by displaying more product information (or more attributes) to them, as this would increase their trading out behavior. But what if consumers in the differentiated become overwhelmed by all this information do not understand how their needs translate into product attributes? One of the examples Pieter brought up was laptopshop.nl, which addresses this by only displaying a few core attributes of each laptop and instead focusing on better explaining what specific customer needs a laptop satisfies (e.g. if can handle video editing). Interestingly, Coolblue even seems to be trying to make the decision for customers by asking customers about their needs and then suggesting laptops.
So what does this mean? Does displaying more attributes still work to encourage trading out behavior, when consumers are overwhelmed or their level of understanding of their own needs and how it translates into product attributes? Or does it maybe moderate the effect of product informedness on their trading out behavior? I don’t know.
Either way.. Coolblue seems to have figured it out.
References:
Li, T., Kauffman, R.J., van Heck, E., Vervest, P., and Dellaert, B. 2014. Consumer Informedness and Firm Information Strategy. Information Systems Research 25(2) 345-363.
