'Action Speaks Louder than Words' - we all learnt it early on.
But the implications are very real in the business world. A few days back while brainstorming on the Marketing Strategy for a client, we started discussing the Declared Preference v/s Revealed Preference of a consumer (thankfully I still remember from my b-school 'Consumer Behavior' notes)
Declared Preferences refer to what consumers say they prefer. These preferences are often gathered through surveys , feedback forms, or direct inquiries. This is when shoppers tell us, “Yeah, I love eco-friendly products!” through surveys or feedback. But here’s the kicker – only about 30% of consumers who claim they'll pay more for sustainability actually do it when it comes time to checkout. Talk about a plot twist!
On the flip side, Revealed Preferences are inferred from consumers' actual behavior. This concept, introduced by economist Paul Samuelson, suggests that the true preference of consumers is revealed through their purchasing decisions. This is where the action is! It’s like detective work, but for consumer choices. Amazon, Netflix, Spotify – they’re all playing the sleuth by watching what you actually click, watch, or buy. Real-life choices revealing real preferences.
Real-World Implication
The distinction between declared and revealed preferences is crucial for ecommerce brands. Going to our last example - the rise of sustainable fashion. While many consumers declare a preference for sustainable practices, sales data often reveals a stronger preference for lower prices, convenience or faster delivery, challenging brands to find a balance between ethical production and consumer demand.
And there we discovered the game-changer: A/B Testing.
Specially for vendors and sellers Amazon offers A/B Testing for content, communication or advertising and you can observe how small changes, can drive consumer purchases. This in turn reveals the real consumer preference.
So we set out to create multiple 'Communication Creatives' and analyzed consumer preferences for a beauty brand. Ad creative calling out product claims 'such as acne reduction in X days' had much higher click through than 'cruelty free or organic' claims.
Moral of the story: In the digital shopping world, the best stories are told by the shopping cart, not the wish list. So, let’s get real with those preferences and make e-commerce work smarter!
留言