If you're reading this on a shiny new iPhone 7, new research suggests you might not have given your old phone its due before trading up.
Decades of research support the theory that people tend to rely on comparisons when making decisions. But when one of their options is a perceived upgrade over the status quo, consumers' rationality disappears, according to new research by University of Florida marketing professor Aner Sela.
Sela and Robyn LeBoeuf of Washington University examined the phenomenon of "comparison neglect," where people favor an upgraded product without evaluating the product they already own.
In Sela's work, 78 percent of consumers in one study readily admit that "comparing the upgrade to the status quo option is a necessary component in the decision," and 95 percent agreed that comparisons were important.
Yet, when faced with that decision, consumers fail to practice what they preach.
"We don't do as well as we know we should," Sela said. "People know this is important; there's a consensus about it. But, in the moment of truth, we're susceptible to these biases. That's the striking thing: Knowing is not enough."
The researchers conducted a series of five studies of more than 1,000 smartphone users from age 18 to 78. When consumers were asked to select the status quo or an upgraded smartphone or app -- even when they were supplied with a list of features of both products--the majority chose the upgrade.
Only when consumers were explicitly reminded to compare the status quo's existing features with the upgrade's features did the likelihood of upgrading decrease.
Considering people's tendency to use comparisons--and the high value people place on the status quo--Sela said the study's findings were unexpected.
"We were not asking people to recall existing features from memory," Sela said. "We put them in front of people side-by-side. But unless we tell them to compare, they don't do it. They don't use the information in the way they themselves say they should be using it. That's what makes this so surprising."
Sela noted that comparison neglect only occurs when a perceived upgrade is one of the options. When the same decision is perceived as a "choice" between two options--one more advanced than the other -- comparison neglect isn't influential.
Overcoming comparison neglect is a difficult hurdle for consumers, Sela said. Therefore, companies bear an ethical responsibility to market their products accurately -- an unlikely outcome, Sela said, considering the financial boon they receive from consumers paying for unnecessary upgrades.
Sela's work, "Comparison Neglect in Upgrade Decisions," has been accepted for publication in the Journal of Marketing Research.