Shoppers are likely to make costly mistakes when descriptions of products force them to think about too many things at once.
According to a report from the ESRI, once consumers have to take into account more than two or three factors at the same time, they struggle to spot good deals and often made mistakes.
The study is the first from the ESRI’s Price Lab — which conducts consumer experiments with consumers. The lab uses computerised experiments to study what consumers are capable of and what they are not.
The first series of experiments tested how accurately consumers could distinguish good deals from bad deals. The results showed that once consumers had to take into account more than two or three factors at the same time, they struggled to spot good deals and often made mistakes.
The ESRI study also revealed systematic biases in consumers’ choices. For example, across multiple experiments, consumers tended to think that deals closer to the top of the product range were good value while deals closer to the bottom were bad. This occurred even when the high-end products were expensive for what they were and the low-end products were good value at the price listed.
“In short, consumers may make costly mistakes,” said the report. “Research has indeed documented that in several key consumer markets, including financial services, utilities, and telecommunications, many consumers struggle to choose the best products for themselves.”
The report examines the potential implications of the results for consumer protection, stating that consumers can benefit “if product ranges and descriptions are kept simple”.
“Where companies instead market products in an unnecessarily complex fashion, with multiple characteristics and price components, consumers will be more likely to make mistakes,” states the report. “In markets where consumers struggle with the volume or complexity of product information, comprehensive, independent price comparison sites can play an important role, by helping consumers to integrate the information or by drawing consumers’ attention to the most important product features.”
The ESRI outlines a range of “potential policies” — versions of which exist in various forms — which may help consumers into the future. These include the provision and endorsement of independent, transparent price comparison websites and other choice engines, the provision of high-quality independent consumer advice.
It also called for “mandated simplification”, where regulations stipulate that providers must present product information in a simplified and standardised format and “more strident interventions” such as rules and regulations in relation to permissible product descriptions, product features or price structures.
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