Experience Effects on Brand Choice
by Doug Bowman

How Do We Learn?

Experience is the best teacher. These are common words of wisdom. Noting this, marketing managers that enter into new markets often use exploratory research to learn about the market. Methods with roots in ethnography, such as contextual inquiry, help management learn about consumers by experiencing what they think and do in an information rich environment. These findings are then digested and the resulting insights help guide future decisions in brand management.

It turns out consumers act in quite a similar manner when making purchase decisions in a product category that is new to them. Consumers learn through experiences and their choices evolve as they become more knowledgeable about a product category. This is an important concept for managers. Knowing that consumer preferences evolve is instrumental in helping managers design offers and marketing programs that co-evolve with the customer. In addition, knowing when customers needs change helps management better understand how to value their customer base, by providing supporting information for equating lifetime customer value assessments.

Which Types of Offers Carry Experience Effects?

Not all offers are evaluated the same. It is inherently easier for consumers to discern the level of quality for some types of offers than others. Some products can be evaluated prior to purchase, whereas others cannot. Various goods can be categorized as being search goods, experience goods, or credence goods.

Search goods are products for which it we are able to observe the quality of the product through inspection. Clothing is an example, as with clothes you are able feel them, examine the colors and styles, and to try them on before buying them to see if they fit.

Experience goods require experience in use before the product quality is ascertainable. For example, it is hard to tell if you will like a song before you hear it. Even if it is described for you as to which style, how many musicians, and what types of instruments they play, it is still difficult to predict if you will really like the song before hearing it. For experience goods people will often seek "surrogate experience" - the experience of others - to understand the quality. This is why we have movie reviews in just about every major newspaper.

For credence goods the quality of the offer is difficult to distinguish even after the purchase and consumption by the customer. This is because the customer lacks the expertise to judge the quality of the outcomes. For example, if you see a doctor for an affliction it is hard to know, without medical expertise, how good the doctor's diagnosis and treatment actually is. In general there is a tendency for service goods to be more on the credence end of the spectrum than tangible goods. Noting this categorization of various offers, experience effects on brand choice are most important for experience goods.

The Evolution of Choice

In "The Evolution of Brand Preferences and Choice Behaviors of Consumers New to a Market," a paper I co-authored with Carrie Heilman (University of Virginia) and Gordon Wright (Purdue University), we found that consumers that are new to a market category will follow a three phase evolution of preference.

These phases were the Newbie Phase, the Apprentice Phase, and the Expert Phase.

When consumers are new to a market they have little knowledge to guide their purchase decision. Thus, when a consumer is in this Newbie Phase there is a tendency to look for peripheral cues about quality to reduce risk associated with the purchase. Peripheral cues are signals of an offer's quality that are not directly related to the product or service features. A major cue is to quality is the brand dominance in the category. Lacking expertise in a new category the consumer will often use this as the primary purchase criteria as the other facets that impact product quality are yet unknown. Therefore the consideration set, the brands considered in the purchase decision, are generally limited to top tier brands. The consumer perceives the purchase as high risk, as they do not know how to evaluate the quality prior to purchase, and therefore sticks with what is familiar. However, once the purchase is made the consumer gains some confidence in being able to discern quality and therefore this impacts subsequent purchase decisions.

In In the Newbie Phase, a phase with low loyalty, the consumer is bound to try a variety of offers. The first products tried are usually confined to dominant brands, however as the consumer learns from these first experiences the insights gained cause them to enter the Apprentice Phase.

In the Apprentice Phase the consumer is awakening to knowledge about the category and, as things progress, is better able to search for optimal solutions. And the search can indeed be extensive in this phase. Since the evaluative criteria are better known the perceived risk associated with the purchase declines. Because of this the consideration set is often significantly enlarged to include mid and lower tier brands.

As the consumers preferences are realized through experience, the consumer reassesses which product is best for them. Once the consumer develops enough experience they enter the last phase of choice evolution, the Expert Phase.

In the Expert Phase the consumer is very knowledgeable about the purchase criteria and the various offers on the market. At this point the consumer has optimized on her choice based on the overall price-to-performance tradeoffs. As an expert the consumer is generally less price sensitive as they have found their sweet spot with regard to product features and benefits. And the search for new solutions is minimal as the extensive search is already accomplished in the Apprentice Phase.

Business Impact and Management Implications

Understanding how consumer brand choice preferences evolve as they become more experienced is instrumental in developing a well-honed market segmentation and targeting plan. Marketing programs based on trial, repeat purchase, and loyalty can be better targeted if the manager knows when the phase handoffs occur. The price sensitivity of a consumer evolve along with choice preferences and because of that the effectiveness of price promotions also vary across the consumer's evolution.

Since needs vary across the phases, the core brand value propositions can be managed to integrate with these various phases. One application is to be aware of the preferences across the spectrum and offer various brands to meet the needs at the different stages. For example, if the Expert Phase consumer is looking for a streamlined offer then you can have an appropriate brand waiting for them. Or for packaging, Expert Phase customers may want to purchase larger quantities, since they know that they have found the best product that works for them.

And it is pertinent to remember that not all customer segments will follow this same progression. For example, my research into the baby diaper market shows that there is one market segment that stays with the leading brands over time. This group tended to contain more full-time working mothers, and the assumption is that busy mothers have less time to spend on searching for optimal solutions and therefore lacking better information stick with the less risky options.

By pairing the choice evolution model with demographic descriptors you can identify market subsegments with more homogenous preferences and price elasticities over the preference evolution phases.

The Sum of Experience

Consumer experience is an important element to consider in market segmentation. Consumer experience in a new category has an impact on the customer's price sensitivity. It also has an impact on loyalty.

When consumers are more experienced they tend to become more loyal to their preferred brand, and therefore if they have not tried your brand they are less inclined to do so in the later phase. This means trial inducement is an important program for the Newbie and Apprentice Phases.

Understanding the evolution of customer preferences allows the manager to track different consumer segments over their purchase lifecycle, and this helps determine when to develop programs that will impact the behavior of these groups. John Keats, the English poet, notes "Nothing ever becomes real till it is experienced-even a proverb is no proverb to you till your life has illustrated it." What holds true for a proverb also holds true for customers and their experiences within your product category. Their experiences affect their choices, and smart managers mirror these transformations in their marketing initiatives.

Doug Bowman is the Director of Academic Programs at the Zyman Institute of Brand Science. He is a principal liaison for the Institute's network of scholars, and the lead for managing Institute research in response models.

This article was edited by Greg Thomas, the Director of Programs for the Zyman Institute of Brand Science. Greg is passionate about driving innovation in the practice of brand management. He has worked for Fortune 500 companies, consulted to a wide array of clients, and holds an MBA from the University of Texas.

This article is based on a May 2000 article in the Journal of Market Research titled "The Evolution of Brand Preferences and Choice Behaviors of Consumers New to a Market." The article was authored by Carrie M. Heilman, Douglas Bowman, and Gordon P. Wright.