The problem with experience goods
Supplements and cosmetics are ‘experience goods’, which basically means that they are products that need to be consumed in order to judge their quality.
Other popular experience goods include restaurants, wine, and movies. It’s no surprise that we turn to the experts at Zagat and Wine Spectator to point us to the best buys. In the case of movies, we even prefer meta-studies of expert opinion, surveying hundreds of reviewers at once at Rotten Tomatoes and Metacritic.
The scary truth is that markets like dietary supplements have a more desperate need for expert ratings and reviews. Getting stuck with a poor product in one of those other industries will simply leave a bad taste in your mouth. In an industry like dietary supplements, consumers also risk the daily consumption of a contaminated product or the increased chance of drug-supplement interactions. Uncertainty causes fear, which leads to indecision at the purchasing point.
An opportunity for supplement retailers
In these other industries, research shows that adding expert rating labels in a retail setting significantly increases consumer demand and decreases price sensitivity.
Three research studies have attempted to isolate the impact of expert reviews vs. product quality on consumer behavior, specifically in the wine retail market.
The most recent study found that adding an expert label increased overall consumer demand by 25%. (Hilger, et. al., 2010)
Using a 100-point rating scale, they found that products scoring an 81 or higher received higher consumer demand and those scoring 80 or fewer points saw decreased consumer demand.
The overall sales increase of 25% came from a 32% increase in sales of highly-rated products vs. a 7% decrease in sales of lower-rated products.
Researchers also found a statistically significant decrease in price sensitivity in retail stores while the expert rating labels were present.
Simply presented, giving consumers product quality information can significantly increase sales and margins.
Why this is great for consumers
Thankfully, consumers are smart, and stores that added expert opinion labels actually saw decreased sales in the lower-rated products.
The overall increase in sales came from the overwhelming increase in purchases of highly-rated products. Consumers in these studies have shown that they are happy to spend more money if they know they’re receiving a high-quality product.
We all know the dietary supplement industry is broken. A 2010 Thomson Reuters study found that 62.3% of respondents had seen at least one dietary supplement advertisement in the past six months; however, only 11.5% reported that the ad influenced them to purchase a product. Why? Because only 10.2% of them labeled the “claims made by dietary/nutritional supplement manufacturers” as “trustworthy.”
Imagine that. Facts work. Ads don’t. Consumers have spoken. Retailers – take notice.
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- Header Image: C. Muffins