iPhone pricing, zero-sum heuristics, laundry detergent, all-in-ones, and Apple’s uniqueness

“A study to be published next month in the Journal of Consumer Research found that consumers perceive products that emphasize a single attribute–like, say, a laundry detergent’s ‘powerful stain removal’–as superior on that attribute to all-in-one alternatives. A product promising both ‘powerful stain removal’ and another attribute, like ‘protection against fading,’ is seen as inferior if priced the same as the specialty product,” Elisabeth Eaves reports for Forbes.

Eaves reports, “Marketing Professor Alexander Chernev of Northwestern University’s Kellogg School of Management asked subjects only about buying laundry detergent, toothpaste, shaving cream, cold relief medicine and vitamin supplements. But his conclusion that ‘people perceive products that emphasize a single feature to be more effective than products with multiple features’ also seemed to bode ill for the latest all-in-one tech gadgets–notably the much-anticipated iPhone from Apple, expected to be released in July, and similar Nokia and Motorola devices. Apple’s iPhone, for instance, will play music and videos as well as serving as a Web browser, telephone, calendar and camera.”

Eaves reports, “In a telephone interview Chernev speculated about whether the conclusions of his study might apply to tech gadgets. ‘People may have a tendency to believe that something that is a phone plus many other things may not work so well as a phone,’ he said. But he added that he would be careful about applying the principle to Apple, because of its unique track record at creating whole new classes of products in people’s minds–the iPod music player being the most recent example. “Apple has been great at introducing new product categories that didn’t exist before,’ he said.”

“iPhones aside, why do we mistrust the all-in-one? Shoppers apply what Chernev calls a ‘zero-sum heuristic’ to their buying decisions… this means that consumers may be willing to believe a detergent is great at stain removal–but they account for this excellence by assuming it’s not-so-good at other things. The exception, Chernev discovered, was that consumers were willing to believe an all-in-one product could perform just as well as a specialized product if the all-in-one cost more. ‘If you price it more expensively, then this inference that all-in-one products might be inferior tends to go away,’ he said. ‘The findings reported in this research also imply that the widely used strategy of pricing specialized and all-in-one options at parity might, in fact, be suboptimal.'”

Much more in the interesting full article here.
Nokia and Motorola are never going to be able to compete with a phone that does your laundry. Period.

34 Comments

  1. This is a bunch of nonsense.

    The whole point of the detergent market is that all the detergent is so close to being identical that the “brand loyalty” or “brand preference” is some kind of subtle psychological game. Preferring “Tide” over “Bold” is as meaningless as those names, and everyone pretty much knows it. Most of the products that we use are merely adequate (or, if we put them in our mouths like toothpase, reasonably good-tasting).

    Technology is completely different. Nobody buys a car or a camera or a computer or a phone the wya they buy detergent. There are no magazines and buying guides about detergent. There is no “Consumer Reports” for buying detergent. You cannot put star ratings on detergent. (“I gave ‘Tide’ another half a star, but I may be pushing it.”)

    Of course people have “brand loyalty” with technology, but it’s a far more sophisticated phenomenon

  2. Misses the point. Apple’s single feature is “The Best,” period. $4100 per square foot retail, higher than Tiffany’s. The Best.

    This guy is also comparing commodity products that have no real differentiation to Apple.

    Mistake.

  3. So what this guy is saying is that a company like Apple should not just slam a lot of technologies together and market it as a do-all solution but should in fact focus on one quality – say user-friendliness.
    And then price appropiately.

    I guess that’s exactly what Apple’s doing.

  4. I agree,
    I rather a super phone than one that does laundry and plays videos.
    Having said that I welcome the iPhone but that is just brand loyalty.
    It would be ideal if there was a phone that comunicates no matter where you are; offshore, foreing lands Etc, a combination cell, wifi and sattelitte phone of sorts. if multi-use is to be the issue I woulfd prefer if it double as my car clicker than my iPod

  5. I wouldn’t say he’s wrong. I would say that customers in the past, especially with technology, have found what he is saying to be true. If it wasn’t true, then the iPhone would be going into a market full of great competing products and fighting for market share.

    The complaint many people have with phones, mp3 players, computers, etc. are that they try to do a lot of things, do them all alright, but don’t really shine in any area. It is the reason why so many “video mp3 players” failed in the start, companies packed them with features, but they didn’t really do those things well.

    Apple has has success at this where others have failed. I wouldn’t say things guy is wrong, but I would say that Apple’s products typically use this mind set to evaluate which markets they should enter.

  6. I agree with Fred. These academics get so excited with their own “intellect” that they miss the bigger picture.

    Try some common sense prof, get out a bit more.

    I attended Babson College in Wellesley MA (all business) where they require the professors to get out in the real world of business so they don’t become a shut in like this guy.

    Writing text books does not make one capable of meaningful research.

  7. If it wasn’t true, then the iPhone would be going into a market full of great competing products and fighting for market share.

    No, this is a common misconception. You can’t make an iPhone without OS X. (That seems reasonably clear.) The fact that the market isn’t already filled with iPhone-type products does not prove the point of the “detergent” article. It proves that THINKING UP a product and ACTUALLY PRODUCING A WORKING, SHIPPING product are very different. Apple isn’t the first company to THINK of this; they’re the first company to succeed at making it work, which is a software issue primarily. Remember that Jobs quoted Alan Kay: “If you’re serious about software, you’ve got to make your own hardware.”

    Apple is very serious about software. The software is the key to the whole puzzle: WebObjects gives you iTunes; QuickTime gives you FinalCutPro and iMovie; Quartz Extreme gives you Time Machine and Expose. It also gives you five OS upgrades in the time Microsoft takes to make one.

    The iPhone is a great idea and a great design, but it’s just a pretty toy without the software. The software renders the whole “do one thing well/do several things badly” detergent argument completely moot.

  8. Actually, I find this to be a fascinating theory. Anyone who has studied marketing knows that logic seldom prevails and that good marketing takes into account the way the human brain operates – human nature.

    The author of this article makes two points:

    1) People do not believe that an all-in-one product priced the same as a specialized product can be as good.

    If you give that some thought, it appears to make sense.

    The second point is interesting too:

    2) People WILL believe that the all-in-one product is superior to the specialized product if it is PRICED MORE.

    And isn’t this what Apple is doing? People have been criticizing the high price of the Apple iphone. But what apple is communicating via it’s price is: “Hey, this is a SUPERIOR multi-function device and we’re charging accordingly.

    The article, in my opinion, appeas to support Apple’s strategy. And to provide some very interesting marketing advice for the rest of us.

  9. Well, your Swiss Army Knife is a prime candidate for a multifunction product that does many things – neither of which particularly well – but that’s okay as it’s not meant to be a substitute for the best tools. And yes, the main argument of the article is valid for a commodity product like laundry detergent, but silly when applied to the iPhone.

    I assume most cell phones meet some minimum standard when it comes to making calls – I can’t imagine someone making a buying decision based on the fact that “it calls great.”

  10. They may have a point here. I have found that the Clorox Clean-Ups are not very good at all for “personal hygiene” or furniture restoration.
    Also, never leave the super glue on the night stand by the eye drops…

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