Tuesday, October 07, 2008

Consumers’ over-confidence in their knowledge: Implications for brand management

At the Asia Brand Congress 2008, I shared the platform with Kishore Gopalakrishna Pillai, a lecturer in marketing at the Leeds University Business School, UK.

Here is a summary of his talk on consumers’ over-confidence.

In his presentation, Professor Pillai examines the issue of consumers’ confidence in their knowledge. It poses two simple questions –
(a) Do consumers know what they think they know?
(b) So what?

Consumer knowledge is defined as the body of facts and principles relevant to the product. It has several facets such as product class knowledge, price knowledge etc. Confidence in knowledge is defined as the consumer’s estimation of the likelihood that he or she has accurate knowledge.

Several research studies have shown that people are overconfident.
• When confidence exceeds accuracy
• A pervasive phenomenon
• A stylized fact of human cognition
• Knowledge calibration (correspondence between accuracy and confidence)

The phenomenon of overconfidence has been recorded across a wide variety of contexts. Quite possibly, it applies to the consumer domain as well.

Among the factors that lead to overconfidence in knowledge are:
• cognitive biases
• feeling of knowing
• memory lapses, and
• excessive pride

In turn, overconfidence in knowledge leads to inadequate information search and, consequently, suboptimal decision making. This can have consequences to the company or brand as it leads to low satisfaction, regret and negative word of mouth.

Based on extant research, Professor Pillai’s presentation offered some methods – such as promoting involvement and providing feedback – to manage the issue of overconfidence in knowledge. The selection of methods depends on product category.

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