What is "absolute value" and why does it matter? - SmartBrief

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What is “absolute value” and why does it matter?

5 min read

Leadership

This is an excerpt from the book “Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information,” (HarperBusiness, February 2014) by  Itamar Simonson and Emanuel Rosen. The book is available at Amazon, Barnes & Noble, Books a Million and Apple. In this excerpt, the authors discuss the concept of “absolute value,” or “the experienced quality of a product.”

When we introduce the idea of absolute value to people, we get all kinds of questions, so let us briefly address the two most frequent ones (and we’ll expand on these and other questions later on).

The first question that often comes up: Is there even such a thing as absolute value? Our answer is that when we talk about absolute value, we don’t necessarily mean to say that people will find the absolute best option (assuming that an absolute best option exists), and some ambiguity about the absolute best is likely to remain, in part because our own preferences are often vague and unstable. We’re talking about a “good enough” answer or about getting closer to (but usually not reaching) the absolute value of things.

The second question we often hear: Doesn’t value depend on the individual? Isn’t it subjective? Our answer: Yes, an absolute value may very well differ from one person to another (though it may be similar for consumers who have similar tastes). Our point is that today you can more easily determine the absolute value of something to you, because you can get information from so many experts and users, some of whom may share your tastes. And even when an absolute factual answer cannot be determined, consumers usually prefer it over the answer they’ll get from a marketer.

Perhaps the simplest way to understand what we mean by “absolute” is to think about it as the opposite of “relative.” In the old days, consumers were much more susceptible to being influenced by relative things. When considering what laptop to get, Jeff made his decision relative to things like the brand name or his past experience with that brand, whereas today, with not much effort, Jeff can obtain good diagnostic information regarding his likely experience with that laptop, and thus get closer to the absolute value of that product.

We both used to believe in the currently accepted mantras regarding branding, positioning, loyalty, information overload and consumers’ “irrationality.” Relative thinking is deeply embedded in the business world and, like everyone else, we’ve heard for decades that it’s all (or mostly) about how companies frame or position things. For each of us, this book represents a major journey away from our original beliefs.

As a researcher, Itamar started with a deep conviction that consumers typically do not have real preferences, are easily malleable, tend to act irrationally, and can’t really evaluate real quality. He, in fact, made his own contributions to reinforcing these beliefs, for example by discovering the compromise effect (consumers’ tendency to select the middle option from any option set placed in front of them). The rise of the Internet didn’t change these core beliefs. If anything, it seemed that the Internet added to the information overload and made consumers even more irrational and confused than in the old days. Yet a few years ago, Itamar started having second thoughts. He published some papers that raised questions about the effect of the current information environment on the validity of his own (and others’) prior research about consumer irrationality and inability to determine product quality.

Emanuel’s journey was different. Coming from the world of advertising, he was initially an avid believer in the power of promotion, branding, and positioning. In his mind, marketing started with brand awareness so you needed to hammer the brand name into people’s minds. As he made the shift to technology marketing, he started to appreciate the power of word of mouth and interpersonal influence and he wrote extensively about the topic. Although he was one of the first authors to write about the expected rise of interpersonal influence in marketing, his discussion was still within the framework of established marketing concepts and diffusion of innovation theory (which was rooted in a world of much greater uncertainty).

In 2008 we got together to write a book about the future of marketing. It didn’t take us long to agree that as humans we’re not well equipped to predict the future. But we also recognized that even though we can’t really tell what will happen, we see enough evidence in the present to discuss some possible directions. Itamar brought insights from decision making theory and consumer psychology. Emanuel brought his practical experience and his knowledge on interpersonal influence. We felt that together, perhaps we can truly understand what is really changing in the new environment and go beyond the rhetoric of recent buzzwords such as “the newly empowered consumer.”

Over the past five years we’ve witnessed tools and platforms evolving to further enable access to absolute values: Review sites got better at sorting and summarizing information. Shopping apps on smartphones brought the trends we discuss to brick-and-mortar stores. New tools, apps, and websites kept coming and helped us realize the extent to which things are changing. That when consumers can get closer to absolute values, everything needs to be re-evaluated.

We’re sure we’ll get some things wrong, and hopefully some things right. Our objective is not to pinpoint what will happen, but to think— and provoke thinking— about the future of marketing and consumer decision making.

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