Weighing the Options

From deciding on which products to buy, which job applicants to hire, or which presidential candidates to elect, evaluating options is part of everyday life. However, are there situations when evaluating multiple options concurrently does more harm than good?

In the recent study, "Will Products Look More Attractive When Presented Separately or Together?," University of Chicago Graduate School of Business professors Christopher K. Hsee and France Leclerc use the following example to introduce the issue of forms of product evaluation.

Suppose there are three local appliance stores that sell coffeemakers. The first store sells two brands of comparable quality, Braun and Krups. The second store sells only Braun. The third store sells only Krups. Will consumers who visit the first store, with two brands to choose from, value the two brands differently than those who go to the second and third stores, and evaluate Braun and Krups independently? If so, in which store will these brands be valued more highly, and therefore purchased more?

This example illustrates different "evaluation modes." In what is referred to as "joint evaluation mode," two products are evaluated side by side. In "separate evaluation mode," each product is presented alone and evaluated independently. The authors find that for products of comparable quality, customers respond differently to different evaluation modes.

Hsee argues that all evaluations are performed using joint evaluation, separate evaluation, or some combination of the two. For example, in a presidential election, people will use joint evaluation to decide between the two candidates. Once the president is elected, however, people will use separate evaluation to judge his performance.

Examining how judgments and decisions differ between these two basic modes of evaluation offers insight into how evaluations are formed and what factors influence this process.

"We wanted to see if it was possible to create conditions under which we could predict whether products would be more favorably evaluated in joint or separate evaluation," says Leclerc. "It turns out that one of these conditions is whether the products are considered better than average or worse than average."

Through six experiments studying judgment and choice, the authors find that if the products are already considered to be better than the average product in the same category, then subjecting the products to joint evaluation will make them seem less attractive to consumers. If the products are considered to be inferior to the average, then subjecting them to joint evaluation will make the products more appealing to consumers.

The authors recommend that managers should be aware of the significant and highly predictable effect of evaluation mode on consumer judgment and choice. Good products will be hurt in joint comparison, and should be presented separately. Lesser products will be enhanced through comparison, and should be presented together.

Reference Points

The authors rely upon two underlying assumptions in the study. First, when evaluating something, people compare that option to whatever reference information is available at the time. For example, when assessing the worth of a house, prospective home buyers will use some point of reference, and make their assessment by comparing the current house against that reference. This reference information can be concrete, such as a house owned by a prospective buyer's friend, or it can be based on abstract information such as the "average house" or "most other houses" in the given region. This abstract information is referred to as a "natural" reference, which is what comes to mind as the average for a given product category, and is commonly used in situations of separate evaluation.

The second underlying assumption is that when evaluating two options jointly, people rely less on this "natural" reference information and make their evaluation by comparing one option against the other. If a home buyer is shown two houses, the buyer will be less likely to think of a friend's house or the average house, and instead will compare the two houses against each other. In joint evaluation, the reference is the other product.

"When people are evaluating something, they compare it to a reference point," says Hsee. "For example, if I offer you a job for $60,000 a year, whether you are happy with that number depends on what you are using as your reference point, whether it is your salary expectations or your previous salary. Your reference point plays a crucial role in any evaluation."

Consistent Patterns

Hsee and Leclerc's study included six experiments that tapped into different product categories, types of reference information, and other variables. Their experiments yielded a consistent pattern of results: when the products are better than a natural reference point, the products will look more attractive and are more likely to be purchased when they are presented separately. If the products are inferior to a natural reference point, they will be perceived more favorably and will more likely be chosen when presented jointly.

The two variables in the experiments were: 1) joint versus separate evaluation; and 2) whether the products were considered better than average or worse than average.

Real-life situations may involve more options, more attributes, and multiple references, but the authors argue that these basic principles will still hold.

Why does joint evaluation negatively impact a consumer's impression of high quality products?

"Consider two company-paid vacations, one to Paris and one to Hawaii," says Hsee. "You would probably be happy with either vacation. However, if you are given a choice between the two vacations, you may find relative deficiencies in each-Paris lacks Waikiki Beach and Hawaii lacks the Eiffel Tower. As a result, you may evaluate each option less favorably than if you were presented with either option alone."

Conversely, the results show that joint evaluation benefits lower-quality products. If option A and option B are both worse than average, they will not be perceived favorably when evaluated on their own. However, when compared to each other, people may see the relative merits of each of these below-average options, and may like them more.

"Standard rational choice models assume that people's preferences are stable and will not be influenced by external factors such as context," says Hsee. "Our results show this is not true. People's preferences are not necessarily well defined or stable, and can be influenced by the context of the decision-making; for example, whether the evaluation mode is joint evaluation or separate evaluation."

Choosing the Right Evaluation Mode

"One myth in marketing is that more options are always better," says Hsee. "Our research indicates that it's not always the best strategy to present consumers with many options in a given product category. If your product is good, then making it easy for people to compare it to similar products will actually decrease the likelihood that people will buy it. For good products, just present one option, and don't confuse your customers."

Hsee and Leclerc's findings can help retailers decide whether to carry multiple models or brands of a certain product category, or limit themselves to one model or brand.

For example, luxury car dealerships will be better off carrying only one make. For car dealers who sell lower-end cars, carrying multiple makes would be a better strategy.

The effect of joint versus separate evaluation is not only limited to product display. It can impact consumer decision-making in a number of marketing activities. For example, in product concept testing, if consumers are provided with descriptions of product concepts to evaluate, marketing managers should be aware that responses may be biased by whether consumers evaluate one or more concepts at the same time, and whether these new concepts are improvements over average existing products. If these concepts are improvements, evaluating multiple concepts simultaneously will lead to less positive responses than if the concepts were evaluated independently.

Their findings also apply to the placement of advertisements in media and catalogs, including the effectiveness of coupons in newspaper inserts. When coupons for brands of the same product category were presented on the same page, previous studies have shown that they were significantly less effective than when placed on different pages.

Hsee and Leclerc's findings are also useful for developing marketing strategies for new product launches.

"Say a company is manufacturing two comparable digital cameras," says Hsee. "Should the cameras be launched at the same time in the same markets or at different times in different markets? If the goal is to sell as many cameras as possible, we would advise that if the two cameras are both better than average, they should be launched separately. If the two cameras are worse than average, they should be launched together."

"The Internet has made it much easier to engage in joint evaluation of products, which makes our theory even more relevant," says Leclerc. "Marketers should be aware that this digital ease of comparison can help or hurt the evaluation of their products depending on whether these products are high-end or low-end."