A Good Reputation Pays Off by Making Consumers Think Less

George Bush: When a bad reputation meets not thinking.

In a study entitled Surcharges and Seller Reputation, Professor of Marketing Amar Cheema found out that customers spend more time reading the fine print when considering purchases from companies without a prominent reputation:

We propose that consumers buying from low- (vs. high-) reputation sellers pay greater attention to surcharges. Data from eBay show that consumers adjust bids to account for surcharges when buying from low-reputation sellers but not when buying from high-reputation sellers (study 1). Study 3 reveals that consumers take longer to make purchasing decisions when buying from low-reputation sellers and that response times mediate the moderating role of reputation. Furthermore, the effect of surcharges levied by low-reputation sellers is attenuated for consumers with low (vs. high) need for cognition (study 4).

A good reputation, it seems, stops consumers from thinking as hard about the product itself.

Interesting conclusions:
–Sellers with a good reputation could get away with slipping in a couple of shoddy products, like the Pontiac Aztec.
–It literally pays in the long run to invest time into reputation-building. It takes patience, discipline, and a sense of humor to grow a reputation. Cheema’s research shows how these skills can translate into money.
–What if a seller acquires a good reputation through good service rather than a good product? Does that compensate for a mediocre product? If you have a quality product with no reputation, what’s the best course of action to build a reputation?