Manoj Thomas

Director, Business Simulation Laboratory

Assistant Professor of Marketing

Email: manojthomas@cornell.edu

353 Sage Hall

Samuel Curtis Johnson Graduate School of Management

Cornell University

Ithaca, NY 14853-6201

Phone: 607-255-7207

Cornell University Webpage

Heuristics in Consumer Behavior

Heuristics are decision-making rules or cognitive strategies that simplify complex decisions. We use heuristics, sometimes consciously and some unconsciously, to efficiently navigate through the complex maze of everyday decisions. We often apply heuristics inappropriately resulting in irrational decisions. My research has identified several irrational phenomena in consumer behavior – such as the left digit effect , the ease-of-computation effect , the precision effect and the credit card effect – that inform us about the heuristics that consumers often use. I use experiments to scientifically study the heuristics that underlie these effects. The insights from such experiments inform us about prevalent social trends and marketing practices. Consider the following two examples.

Why do several retailers use 9-ending rather than 0-ending prices ($2.99 instead of $3.00)? This widespread retailing practice can be attributed to the left-digit anchoring effect. The experiments designed to study the left-digit effect suggest that our magnitude judgments are anchored on the left-most digits, such that we tend to incorrectly judge the difference between 4.00 and 2.99 to be closer to 2 than to 1.

Does the proliferation of card payments in anyway contribute to the current obesity crisis? The incidence of obesity has significantly increased in the past few decades. Intriguingly, this period has also witnessed an increase in relatively painless forms of payment such as credit and debit cards. The experiments designed to study the effect of credit cards suggest that pain of payment is an important determinant of impulse control. People experience greater pain of payment when they pay in cash than when the use abstract modes of payments, such as credit and debit cards. This reduction in the psychological pain of payment can weaken impulse control.

Interestingly, the influence of heuristics is not restricted to low involvement decisions; some of these effects manifest even when purchase decisions are long drawn out and deliberative, such as house purchases, suggesting that heuristic decision making is caused by deep rooted mental processes.