A Comparison of Experience and Search Goods: How Consumers Search for Information

Search and Experience Goods – An Introduction

Nelson¹ has categorized products in two categories: the search goods and the experience goods. The search goods are those for which the consumer has had the opportunity to reach about opinions and reviews prior to purchasing it. But for the experience goods the evaluation can only be formed upon purchasing and using the product. Subsequently the information on the attributes assigned to search goods is easily available, whereas for experience goods this information cannot be provided without direct experience of the product. 

Overlap of Search and Experience Goods

However with the immense penetration of the electronic commerce the gap between search and experience goods has been bridged to a large extent. Today’s consumers has access to a wide array of reviews and information on various products online as compared to the traditional consumers of brick-and-mortar businesses.

However there is an explosion of reviews and information about products from multiple sources which can be very overwhelming for the consumer. The new challenge now the online consumers face is to filter out the relevant information to make an informed purchase decision.

Role of Recommendations

The previous searches conducted by Nelson concludes that consumers follow endorsements for experience goods with greater fervor than search goods.

In such an environment recommendation agents play an important role. Chen et al ² conducted a categorized books on Amazon into best-sellers, most popular and the least popular and evaluated the role recommendations played. They arrived at the conclusion that recommendations are positively associated with sales.

Research on Search and Experience Products at Online Retail Store

Previous studies have focused primarily on a single product available at multiple stores. Basu has challenged this traditional model by focusing on buying behaviors of consumers looking at various products, categories and brands available at a single large Finnish retail store over a span of one year (March 2014- March 2016). In order to narrow down the research to specific product types, the model has used three examples:

1.       Search Goods (personal electronics like mobile phones, laptops, household appliances)

2.       Experience Goods (Health and Beauty Products)

Basu has only considered the browsing patterns of consumers who visited the online store and eventually made the purchase. When consumers are browsing through the products, the recommendation agents also provide other relevant product based on the search profiles. Prompts such as “customers who viewed this item also viewed” or “customers who bought this item also bought” or “what customers bought after viewing this item”. Thus when a consumer clicks on any of these prompts this shows the influence of recommendations for search products.

Conclusion and Findings

·         With an increase in price there is a direct relationship in search for information on search goods, this implies that the more expensive a search good is the more intensely the consumers with search for information on them. However for experience goods there is a slight inverse relationship, as the price of experience good increases the search for information decreases nominally.

·         For search goods, if consumers have prior knowledge about the products they are likely to search even more. However for experience goods, prior knowledge has no impact on information search. This is because for search goods, as they are provided with more information they uncover more product attributes which eventually increases the likelihood of purchase.

·         For search goods, the quality of recommendation that has been clicked on/followed is not significant. But for experience goods, these recommendations are highly significant.

·         The main finding of the research was that the experience goods have up to three times lower search intensities as compared to the search goods.

References

1.       Philip Nelson. Advertising as information. Journal of Political Economy, 82(4):729–54, 1974.

1.       Phillp Nelson. Information and consumer behaviour. Journal of Political Economy, 78(2):311–329, 1970.

2.       Pei-Yu Chen, Shin-yi Wu, and Jungsun Yoon. The impact of online recommendations and consumer feedback on sales. ICIS 2004 Proceedings, (58):520–541, 2004.

3.       S. Basu, Information search in the internet markets: experience versus search goods, Electronic Commerce Research and Applications (2018)