Vintage consumption—that is, buying previously owned items from an earlier era—acts as a means to connect the past, present, and future. That connection across time can be reassuring, most especially in times of uncertainty. When you really want to buy a leather jacket that’s older than you are, it may be enlightening to consider the circumstances.

This vintage insight reveals itself in research by Ryan Hamilton, associate professor of marketing at Goizueta Business School. In an award-winning article titled “Stitching time: Vintage consumption connects the past, present, and future,” Hamilton—along with coauthors Gulen Sarial-Abi, Kathleen Vohs, and Aulona Ulqinaku—uncovered why we may want to turn to something old when we perceive threats to our worldviews. Notably, multiple studies have shown thoughts of death to increase the appeal of items that have already stood the test of time.

The Psychological Appeal of Thrifting

In psychology, “meaning frameworks” are how we, as human beings, interpret and understand our lives as meaningful and valuable. Threats to our meaning frameworks—i.e., the pillars propping up our worldviews—can include thoughts of death, unsettling economic upheavals, and other existential challenges.

In order to explore the effects of meaning threats on our preference for vintage, Hamilton and coauthors designed several studies. Their pilot test measured the physical health of nursing home residents. It then measured their preferences for vintage items, controlling for other variables. The results held up the researchers’ hypothesis: Vintage items—be they books, watches, bicycles, or luggage—were more strongly preferred over their modern versions by elderly participants in poorer health, presumably those most likely to have mortality on their minds.

Six subsequent studies used different variables to see if the main hypothesis continued to hold up. It did, while at the same time revealing more information about the mechanisms at work.

Death or Dental Pain

In one study, for example, researchers prompted participants with death reminders. They had to contemplate and write about their own deaths to make sure mortality was top of mind. Researchers prompted a control group with reminders of dental pain. Both groups then answered a 12-question survey about their desire for structure (e.g., set routines and practices) at that particular moment. But there was another element in this study: contemplating wearing a watch from the 1950s. As predicted by the main hypothesis, death cues were associated with participants reporting that they desired more structure. The only exceptions was for those who imagined an old watch ticking on their wrists. Vintage consumption seemed to act as a buffer against unsettling thoughts of death for them.

What is going on here? As noted above, the researchers theorize and show that vintage objects tend to connect our thoughts of the past, present, and future. These mental, intertemporal connections tend to be reassuring—“a hidden factor” in our preferences and choices, as Hamilton notes.

More than Nostalgia

One might think nostalgia—a sentimental longing for the past—could also be at work. Feeling nostalgic for one’s own past and social connections can buffer against meaning threats, as previous research has shown. But this paper was designed to tease out nostalgia. It focused on vintage’s connections across time regardless of one’s personal experiences.

“This study allowed us to clearly show that people respond differently to something they believe to be old,” as Hamilton explains. “It’s not just something that has a retro look, which was one of my favorite aspects of this project.” Hamilton and his coauthors achieved this by having participants evaluate identical items thought to be genuinely vintage or replicas. And the results were robust. Retro replicas, which can prompt nostalgia, did not have the same psychological impact as items believed to be genuinely old. For instance, 20-year-olds who find a watch from the 1950s reassuring can’t feel nostalgic about the design personally. They can, however, feel a connection across time—and that came through in the study.

Retail Therapy on the Rise?

Hamilton’s research here follows his broader interest in consumer psychology, branding, and decision-making. “When we’re buying things, we may think it’s based on strict utility maximization. However, it also might be making us feel better in some way,” says Hamilton. Shopping can serve as an emotional management strategy—for better or for worse.

Although it was outside the scope of this particular investigation (and all participants were over age 18), the insights gleaned here may help explain why 21st-century teenagers seem to be particularly avid “thrifters” these days. “I don’t want to overstate our findings. But it’s at least possible that the appeal of vintage for teenagers is boltstered by a sense of permanence and endurance that helps them during times of upheaval,” Hamilton says.

It turns out a 30-year-old leather jacket might help its new owner feel better on many levels. So is it any wonder that vintage shopping is surging in uncertain times? Fashion magazines, such as Vogue and GQ, are following the vintage craze closely in 2024. Concern for climate change and the Earth’s finite resources may present two intertwined reasons to buy old things: those two things are environmental and psychological. If tumultuous times continue amid contentious elections, wars, and other threats, it seems safe to bet on vintage.

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“Stitching time: Vintage consumption connects the past, present, and future” was awarded the Journal of Consumer Psychology Best Paper Award in 2020.

In his most recently published research (2024), Hamilton looked at how consumers evaluate prices—mainly from memory, similar products nearby, and impressions left by a store. Building on previous research, Hamilton provides a framework for predicting the factors likely to influence consumers’ use of each price-evaluation strategy.

Goizueta faculty apply their expertise and knowledge to solving problems that society—and the world—face. Learn more about faculty research at Goizueta. 

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Minority Board Directors Held Back by Glass Ceiling and “Myopic” Biases

Diversity remains a troubling issue in the upper echelons of U.S. business today. A stunning 81 percent of board members in top firms are white and male, according to the Standard & Poor 500 Index. So what prevents women and minority directors making it to the top? Goizueta’s Grace Pownall, professor and area coordinator of accounting,and Justin Short, assistant professor of accounting, together with Zawadi Lemayian of Washington University parsed 12 years of data on gender, ethnicity, and compensation to get insight into who holds power in U.S. board rooms. In Behavioral and Experimental Finance, research results point to two critical roadblocks that continue to stymie the career trajectory of aspiring Black, female, and minority directors: the glass ceiling effect that reduces the talent pool; and what Short et. al. call “myopic” bias entrenched in corporate America.

“The glass ceiling is a bottleneck for diverse talent,” says Short. “But we also see minority directors fail to secure promotions once they’re on the board. We conjecture that this is down to biased or myopic thinking on the part of chairs and peers.” Leaders need to be cognizant of the cut-off points that tie to ethnicity and gender in the U.S. and elsewhere, say the researchers; not least of all because of risk to innovation. “Without diversity, any organization risks deferring to group think, and sourcing creativity and ideas from the same, small pool of shared experience,” says Short. “There’s still work to be done because diversity at top levels of American business should be commonplace.”

B2B Firms Need to Smarten Up before Using AI in Procurement

Procurement, the process of buying in goods, products or services from external suppliers, is critical in the B2B market. But it’s costly, labor-intensive, and time-consuming. To speed and drive efficiencies in supply chain management, procurement managers are turning to artificial intelligence (AI). On the one hand, AI can automate the process of obtaining pricing quotes using tools like AI Assist and chat boxes. Then there’s the “smart control” that AI can leverage to identify the best potential suppliers via algorithms that collect and analyze market information.  Cut-and-dried benefits then for decision-makers? Not quite, says Goizueta’s Ruomeng Cui, assistant professor of Information Systems and Operations Management of research to appear in Manufacturing & Service Operations Management. Because unless your AI system is fitted with the smart control, you run the risk of getting higher price quotes from suppliers than you would if you used human procurement purchasers. And it’s down to how suppliers interact with automated chatbots. Together with colleagues from Rutgers University and Tianjin University, Cui ran a large-scale field experiment using China’s Alibaba trading platform and integrated chat program, Aliwangwang. What they found is that suppliers essentially “discriminate” against chatbot buyers when it comes to quoting prices. “Suppliers see chatbots as lacking expertise around their products,” says Cui. “The fact they don’t have to lower prices to build professional relationships with chatbot buyers means they tend to quote higher than they would otherwise.” This effect is mitigated, however, when buyers signal to suppliers that they also use the smart control: an AI-powered recommendation system. Caveat emptor, say Cui and her co-authors: by all means use AI in your procurement processes, just be smart about it. 

Do Multinationals Enjoy an IT Advantage in Emerging Markets?

We know that digital technology helps firms compete globally. But does IT give foreign firms the edge over local businesses for exploiting opportunities in emerging markets? Yes and no, says Goizueta George S. Craft Professor in Information Systems & Operations Management Benn Konsynski, and his co-authors. Their latest paper in Journal of Management Information Systems looks at data from a large sample of local and international businesses operating in India and reveals two key insights. First, they find that foreign players using IT to boost organizational capabilities do tend to have the advantage over incumbents when it comes to partnering with other companies – a key factor in their ability to scale operations in emerging markets. However, in areas like marketing and customer services, technology gives local firms the edge over foreign competitors, likely because of superior knowledge and understanding of local markets. Konsynski and colleagues shed authoritative new light on two critical areas: how both context and contingency shape outcomes for firms leveraging digital technologies to compete; and the perhaps unforeseen challenges that await newcomers looking to expand operations in emerging markets, which remain an attractive opportunity for international companies.

If PPP Relief is so Attractive, why are so few Small Firms Taking it up?

The Paycheck Protection Program (PPP), part of the U.S. Government’s CARES Act, is a relief package that offers highly subsidized financing to small businesses. With anescalating value, PPP reaches deep into the pockets of Federal Reserve with the aim of helping corporate America weather the economic contraction and job losses due to the pandemic. Yet, despite the “positive shock” it represents to struggling firms, PPP uptake has been far from universal. Not only that, but a significant proportion of firms applying for PPP actually return them to the government without using them. So what’s going on? It has to do with the indirect costs imposed on borrowers, says Goizueta’s Tetyana Balyuk, assistant professor of finance, in the National Bureau of Economic Research: Working Paper. She and colleagues from Johns Hopkins Carey and Fuqua School of Business looked at publicly listed firms that applied for PPP funds using databases maintained by the Securities and Exchange Commission. “These firms are worried about ex-post audits and investigations into recipients of these PPP funds, which are conducted by the government. Specifically they’re worried about subjectivity of these types of audits, and the broad powers the government has to pursue litigation.” The solution to this, she says, is to focus on the objective standards for PPP eligibility, and similarly objective standards for the conduct of ex-post audits. “Among other measures, policy-makers might want to look at delineating safe harbors to circumscribe litigation, which has been a standard practice in securities law since the 1930s.”

What are the Costs – and Opportunities – to Retailers in Returned Merchandise?

In 2018, a staggering 10% of all retail sales –around $369 billion – were returned to the original seller. For retailers, this is vastly challenging. First there’s figuring out how to respond; then there’s the huge financial loss from returned stock. And then there’s simply trying to work out what to do with unwanted merchandise and how to absorb it back into the inventory. But is there an opportunity here for retailers, too? Goizueta’s Ryan Hamilton, associate professor of marketing, and Sandy D. Jap, Sarah Beth Brown professor of marketing,believe so. Together with Wharton Professor and former dean of Goizueta Business School, Thomas S. Robertson, they’ve published their research in Journal of Retailing.

The researchers dive into literature surrounding the returns market – a market so valuable it is “ripe for more research” – and found that returns policies can build reputation, drive customer loyalty, and secure competitive advantage. “Consumers today increasingly expect to be able to return goods easily,” says Jap, “and it’s a burden for retailers. But also an opportunity to deliver a customer experience that drives brand loyalty.” For those retailers, returns provide the chance to exchange goods, or even cross or upsell to customers who return to stores or sites to bring back original purchases. The trick, says Jap, is to “get it right.”An easy returns policy may build erputation for great customer service; too lax a policy and you might end up “training” customers to make returns, she says. There’s the risk to reputation, too, in how retailers absorb or dispose of returned goods: are their policies sustainable and environmentally friendly? More to explore in the potential trade-offs here, says Jap, and she and her co-authors call for more research into this evolving stage in the purchase journey.

Achievement? It’s All in the Eye of the Beholder

There is a well-documented gap in achievement between U.S. social classes  that hurts the perception of, standing, and prospects for people from lower-class, high-school educated backgrounds, vis a vis their higher-class counterparts with college degrees. One way of attenuating this gap might be to rethink the way society measures achievement, says Goizueta Assistant Professor of Organization and Management, Andrea Dittmann. Instead of assessing people’s skills and aptitudes through the lens of individual achievement, might it not be just as helpful to measure ability based on how well people work together, as a part of a team? Together with Nicole Stephens of Kellogg and USC Marshall’s Sarah Townsend, Dittman ran four studies of outcomes for students working alone or in groups. The work published in Journal of Personality and Social Psychology portrayed consistent results: when working individually, higher-class students are better able to showcase their strengths. But in groups, this advantage disappears. In fact, when people from lower-class contexts work in teams, they demonstrate unique strengths that can set them apart from more privileged counterparts. Dittman and co-authors call for gateway institutions – institutes of higher education and workplaces – to integrate these findings into practices and procedures that reflect that one style of achievement is not superior to the other, but simply different.

Is There a Case for Sharing Less Information in Financial Statements?

There’s broad consensus in the world of finance. Disaggregation – the practice of breaking down different components or sources of earnings in a financial statement – is good. After all, for investors looking to predict a company’s earnings from one year to the next, all information is good information, right? Not necessarily, says Goizueta Professor of Finance, Teri Yohn; it all depends on what type of information is being shared. Together with colleagues from Colorado, Indiana, and OSU, Yohn hypothesized that not all disaggregated components in earnings statements are heterogeneous. Not all information might be specific to one year, and that’s problematic. “Investors assume that disaggregation highlights one-off specificities that impact earnings – things like restructuring costs– but won’t have a de facto impact on the future earnings of a company,” says Yohn. However, her research, published in The Journal of Accounting Studies, shows that disaggregation also trawls up homogeneous things – the same components that impact earnings year over year. This can lead to confusion on the part of investors, and actual mistakes in forecasting future earnings. “Our paper has two clear takeaways,” Yohn says “For investors: don’t assume that disaggregation only highlights the one-offs in earnings specific to a given timeframe.” For regulators and standard-setters who have pushed for more disaggregation in recent years, Yohn and her co-authors urge deeper reflection about what type of disaggregation should be included in financial statements, or not.

Learn more about our Goizueta Business School faculty, their research, specialties, and areas of interest. #GoizuetaKnows

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In December 2020, Linne Fulcher, vice president, customer strategy, science and journeys at Walmart U.S., published a blog post that outlined Walmart’s new return policy. Dubbed “Carrier Pickup by FedEx,” the service was just in time for the holidays, free, and “here to stay,” Fulcher wrote. He described the policy as “an incredibly convenient way to make that unwanted gift ‘magically’ disappear,” whether customers bought items in a store, online, or from a third party vendor. “We want the returns experience to be easy, safe and seamless,” he added.

Returns are big business. According to the National Retail Federation (NRF), U.S. consumers returned an estimated $428 billion worth of merchandise last year—approximately 10.6 percent of total U.S. retail sales. The numbers for ecommerce are even more startling: online shopping accounted for roughly $565 billion of 2020 retail sales, of which $102 billion in merchandise—about 18 percent—was returned. However, retail advisory firm Optoro noted in 2019 that of 117 top retailers, not even a third of them quantify the full cost of returns.

Even before the pandemic hit, Sandy Jap, Sarah Beth Brown professor in marketing, Ryan Hamilton, associate professor of marketing, and former Goizueta Business School dean, Tom Robertson, were perplexed at how little academic research existed regarding returns. “Instead of viewing returns as a nuisance and an added cost, they are an opportunity to engage with customers and build brand loyalty,” explained Robertson, currently the Joshua J. Harris professor and professor of marketing at the Wharton School of the University of Pennsylvania, academic director, Jay H. Baker Retailing Center at Wharton, and the executive director of the Wharton-INSEAD Alliance. “Returns are part and parcel of the new retail landscape. This has been exacerbated by the strong uptick in online.”

To help retailers identify opportunities, Jap, Hamilton and Robertson wrote “Many (Un)happy Returns? The Changing Nature of Retail Product Returns and Future Research Directions,” published in Journal of Retailing last year. The article is essentially a researcher’s road map for exploring this “strategically important area,” said Jap.

Some retailers, such as Warby Parker and Stitch Fix, have built returns into their business models. Others, like Zappos and Nordstrom, have made consumer-generated returns easy, assuming that doing so engenders brand loyalty and repeat business. Yet most retailers seem “to lack a coherent philosophy” on returns and “appear not to have built return rates into their business models at all,” the trio state in their paper.

“There are so many interesting and important questions to be answered around product returns,” said Hamilton. “Important as returns are, the academic marketing research has barely scratched the surface.”

“Many (Un)happy Returns” highlights five specific areas where advancements in theory and practice would provide opportunity for greater understanding:

1. How product returns transform the customer journey
2. The “dark side” of returns—exploring the gray area between justified returns and outright fraud
3. The effects of returns on traditional retailer supply chains
4. Customer response to easy product returns and practices
5. The effect of retailers’ product return practices on their reputation

“These questions represent a range of important directions for assembling a body of work on retailer-initiated and customer-initiated return behaviors and processes,” they write. “Ultimately, these might serve to improve the performance of return forecasting models, illuminate optimal go-to-market strategies and distribution processes in the evolving, technology-oriented marketplace that characterizes retailing today.”

Returns and the customer journey

According to eMarketer, 70 percent of consumers make purchase decisions based on a retailer’s return policies. Consumers tend to use returns strategically, especially online, where they often buy multiple sizes or styles with the expectation that they’ll keep only a portion of what they ordered and return the rest. “Too often, product returns are treated strictly as an operations problem,” Hamilton explained. “But they are increasingly an integral part of the customer journey and something that marketers need to account for in their business model.”

Jap would like to see retailers “rethink the purchase process from the user’s point of view,” she said. With the use of technology and data, returns can be a source of information gathering, she explained. Does the return lead to an exchange and to a happy customer? Does the customer abandon the retailer and start a journey with another one?

The dark side of returns

According to the NRF, nearly six percent of total returns in 2020 were fraudulent. Jap, Hamilton and Robertson admit that there is a needle to thread when deciphering what is and isn’t a fraudulent return. They contend that regarding returns, retailers will likely need to choose between a strict approach (perhaps not granting returns to those who have genuine claims) or a lenient one (possibly granting returns to those who do not warrant them) based on their overall customer strategy.

Research in this area could help retailers identify conditions that minimize rewarding fraudulent returns or punishing legitimate ones. Research would also help retailers develop customer “risk scores” based on return behavior. Some retailers, like Amazon, already analyze customer data to weed out excessive returners.

Returns and supply chain

“Retailers aren’t used to processing a lot of returns and they don’t necessarily have good or effective processes to handle them,” explained Jap. Returned items need to be inspected, sorted, restocked, or disposed of, all factors that increase operational costs. “Customers now expect generous returns policies, but unless businesses plan well, the way they handle those returns can eat up all the profit they make on sales—and more,” added Hamilton.

“Research is needed on the optimal resolution and handling of risk allocation, inventory management, and product handling practices that arise from increased returns at retail,” the authors write.

Are we training consumers to return?

While it’s likely true that ease of customer returns leads to future sales and brand loyalty, “it is also true that easy customer returns almost certainly encourage more returns,” the authors state in their paper. Companies with easy return policies are effectively training shoppers to expect similar policies from other retailers. “Research could investigate the factors that speed or inhibit the changing of customer returns behavior,” Jap, Hamilton and Robertston write. “What are the best ways for a retailer in a return-friendly marketplace to reduce returns without damaging the brand or evoking customer backlash?”

The effects of return policies on a retailer’s brand.

Each year, an estimated 5 billion pounds of landfill waste is attributed to returns that can’t be restocked or sold to off-price outlets. Prestige brands such as Burberry, whose customers expect exclusivity and quality, have come under fire for destroying millions of dollars of returned and/or unsold apparel. “From this perspective, return policies may be an important part of brand image management,” the professors note in their article. They suggest that research would help retailers determine how best to balance “competing image concerns.”

Fulcher addressed the issue of items “going to waste,” in her blog post to customers. Last year, through its various recycling programs, Walmart was able to recycle enough of its returned products to produce approximately 1.9 million pounds of plastic resin that the retailer will use to manufacture more than 9.2 million products. “These are all things retailers should think about,” said Jap. “They are opportunities, not problems.”

The new normal and a call to action

“Enlightened retailers are recognizing that returns are a key component of their business model,” explained Robertson. Academic research would help retailers tailor insightful return policies that help their bottomline and engage customers. “Customer expectations, norms, and behavior have shifted dramatically in a short period of time,” the authors write. “The dynamism of retailer innovations in handling customer returns has not—yet—been matched by academic research as to the questions these new practices have raised.”

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BBA Distinguished Educator: Allison Burdette

Full-Time MBA Best New Educator: Renee Dye

Full-Time MBA Best Classic Educator: Ray Hill

Full-Time MBA “Last Lecturer”: Ryan Hamilton

WEMBA Distinguished Educator (Core): JB Kurish

WEMBA Distinguished Educator (Elective): Kevin Crowley

Evening MBA Distinguished Educator (Core): Usha Rackliffe

Evening MBA Distinguished Educator (Elective): Doug Bowman

MEMBA Distinguished Educator: Shehzad Mian

MSBA Distinguished Educator (Core): George Easton

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A groundbreaking new convenience store concept recently launched by Amazon is set to test the trajectory of how technology will be integrated in the retail industry going forward. 

While one store has opened in Seattle, the question remains how widespread, and in what direction, the model will grow across the country. 

Amazon Go is a store without cashiers, registers or cash, where shoppers buy any number of traditional grocery items, from milk to chips and ready-to-eat salads, off the shelves and walk out. Entry is by scanning a smartphone app through a subway-style turnstile entrance, and items are added to a virtual cart as customers move through the store. 

Three Goizueta Business School professors have said this is a sign of a changing landscape in the grocery and retail industry. It’s a signal that not only is the way people shop changing, but companies like Amazon are increasingly looking for ways to offer products and services based on consumer behavior. Late adopters and psychological hurdles tied to technology are among the growing pains, but those barriers can be overcome.

The Amazon Go model is a sort of beta test to the market, and the company, for more than a year, has piloted a store for its employees at the Seattle headquarters. There are several directions Amazon could pivot depending on the success of, and how consumers react to, the new concept. 

“We see a range of radical transitions in retail,” said Benn Konsynski, the George S. Craft Distinguished University Professor of Information Systems and Operations Management. “Those directions relate to the home, or the place you drive by. Where I drive by is as important as where I live, and in fact sometimes may be more convenient.”

It’s the latest example that shows Amazon is not afraid to do an experiment to test a market. 

“We should not look on these things as determined, committed strategies as much as investments in understanding where they might go,” Konsynski said.

In recent months, Amazon has opened more than a dozen bookstores, bought Whole Foods, which accounts for 470 grocery stores, and added a presence in some Kohl’s department stores. But this specific model has drawn comparisons to the most recent technological addition to grocery stores: self-checkout.

“We saw there that there were a group of people who loved it, who were happy that it was faster, who actually liked having more control over the process. It was more convenient,” said Ryan Hamilton, associate professor of marketing at Goizueta. “There were a lot of customers who complained about it a lot. They liked being able to interact with someone, they appreciated that part of it. They felt like they were doing the work themselves now. I imagine it’ll be something similar here. I think that there will be some customers who love this, and love the efficiency, and think it’s fantastic. There will be others who really feel like they’re missing something important by not being able to interact with cashiers like they’ve been able to.” 

Hamilton added that the primary benefit to the customer would be to make the shopping trip more efficient by removing the slowest part of the experience, the check out. 

“There are many initiatives in retail transformation — online selection, home delivery, showrooming, increasing product knowledge on the shelves, dealing with fewer staff in store, consumer preference profiling, intelligent supply chains and rapid checkout,” Konsynski said. “It is one element in a step toward evolution where there is more and more responsibility of putting the customer to work — to their convenience.”

Hamilton explained that there are two theories for why Amazon is pursuing this model. One is that it’s looking to enter the grocery space. The other is that this is a way to test and refine the technology to possibly lease to other retailers. Either is viable from Amazon’s standpoint, Hamilton said. 

“The advantage for Amazon is that it allows them to test out this technology in a really manageable way,” Hamilton said. “So it’s possible that the next stage is to move it into Whole Foods, but I got to say, I would question whether that’s a good fit. Whole Foods brand positioning is very much around high service, high quality and that typically involves a lot of person-to-person interaction.” 

Algorithms between the customer and the Amazon Go store are built to tailor the experience and shopping history personally. 

“I have a concept that this is my store, not everybody’s store,” Konsynski said. “That when I’m entering, it becomes my shop. I might expect that items that I purchased before would be ‘reminded’ to me when I’m in the store. Items that I’ve purchased before or considered, especially if I’ve picked something off the shelf, put it back. All those elements of history. What I bought and what I almost bought is a part of the package here. Next time I go by there, I would not be surprised if I get a discount. ‘Hey, while you’re here, get this. You bought it before, or almost did so. Or get this with a discount portion.’ Or that it’s based on my profile of other things I purchased, that when I approach it, it contacts me.”

With a reputation as a disrupter in any market it enters, Amazon has also developed brand trust with consumers, and that gives the company a leg up on making this launch successful on a larger scale, according to Morgan Ward, assistant professor of marketing at Goizueta. The offering must always match the customer base, and in this case, one targeted group that would buy in early are millennial customers who aren’t typically as fluent with recipe creation and cooking. 

“I think the upside for Amazon is that people are already so enmeshed in the brand and their default in a lot of cases now is to purchase from Amazon,” Ward said. “That bodes well for Amazon because I think people already have so much trust and experience with the brand. If anyone is going to successfully disrupt this market and make these kinds of technological jumps, and consumers are going to accept them, I do believe that Amazon’s capable of that.”

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Don’t assume to know what your customer is thinking. You need to understand how different purchasing “mindsets” influence decisions, then market accordingly. The data is all there and  Goizueta’s Ryan Hamilton has turned it into a framework that can take the guessing out of customer intelligence.

Back in 2011, retailer JC Penny was being squeezed out of the market by Gap, Wal-Mart and other mid-priced apparel stores.

Hoping for radical change, the firm brought on Ron Johnson, the creative mind behind Apple’s massively successful venture into brick-and-mortar retailing.

Business pundits watched with interest as Johnson dismantled hi-low pricing structures, which revolved around coupons and deals, and introduced everyday low pricing. “Enough. Is. Enough” trumpeted a new slogan.

The result, as any business school MBA will tell you, was an unmitigated disaster.

The new pricing strategy saw the firm hemorrhage first its customers, then its cash. In less than a year Johnson was out and the “epic” rebranding mistake became a cynosure for the press and academic communities.

Quit Making Assumptions

It’s likely Johnson made some implicit assumptions about JC Penny customers based on his previous successes. Making inaccurate assumptions about customers – and about how they make decisions – can lead to costly wrong turns.

Success in business comes with understanding how people – customers, investors or employees – make decisions. Using that knowledge to anticipate the choices they’ll make, helps nudge them toward one option over another.

Fortunately, science throws marketing professionals a lifeline. There are decades worth of research into how people make choices. Unfortunately, theories can be hard to understand.

And harder still to implement. But Goizueta Business School Associate Professor of Marketing Ryan Hamilton and Uma R. Karmarkar of Harvard Business School did some legwork to make theories more practical for corporate decision makers. The duo processed five decades of decision science research and found four broad approaches customers take when deciding to make a purchase. The result is a practical framework that maps each customer approach to a particular situation or purchasing prototype.

[highlight]The Ideal Point Customer knows exactly what they want. A Market Comparison Customer will broadly review options, while the Local Comparison Customer considers what’s right in front of them. The Image Customer has a clear opinion or attitude of your brand and/or reputation.[/highlight] 

Marketers can use this framework to segment, target and persuade customers more intelligently while optimizing your brand positioning.

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Say you’re selling a TV to an Ideal Point customer. You’ll need to do market research because the consumer will know exactly what they want – and expect. If your customers are image mind shoppers, tactics like lowering prices or stocking lesser-known brands are unlikely to be effective. And for your Local Comparison customer, your best marketing might be embracing categories like “good,” “better” and “best.”

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Take the time to figure out which mindset best describes your actual customer base. Designer home goods retailer, PIRCH, found its customers were using an Ideal Point approach. They designed stores to match this mindset, encouraging shoppers to imagine an ideal kitchen, for instance, and make purchasing decisions based on the vision. It worked.

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Like PIRCH, you can use the framework to identify a customer segment and position the value of your product or service to that mindset. A good example is INTEL. The firm found over time customers were moving from a Market Comparison mindset to an Image relationship with the brand. So a shift was made from technical functionality to what technology can facilitate in customers’ lives. This built a strong emotional connection with the customer base and benefited the bottom line.

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It goes without saying your marketing efforts will be more successful if you match your messages with your customer’s mindset. Understanding the approach that your target segments adopt is key to getting your messaging right. 

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No Avoiding the Theory

At JC Penney, Johnson’s decisions weren’t necessarily inaccurate or inappropriate per se, says Hamilton. Leadership just pitched at the wrong mindset.

“Johnson’s problems started when he assumed JCP customers used the same Image-based strategies as Apple customers, where in reality they appear to have been predominantly Local Comparison-style deal-seekers,” the authors note. “By replacing markdowns on products with everyday low pricing, he took away their option to find a bargain. And lost them in droves.”

About the Expert

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