Article: Wednesday, 11 November 2015
With free time now considered a luxury, anything that promises to save time is in high demand – like faster broadband connections. But there’s a catch in the trade-off between money and time, according to new research by Professor Stefano Puntoni of Rotterdam School of Management, Erasmus University (RSM) and Assistant Professor Bart de Langhe (Leeds School of Business, Colorado University). For example, when an internet connection is already fast, doubling its speed will not double the time saved. What’s more, most consumers are poor judges of this relationship between faster products and time saved, especially when faster products are marketed using technology-laden metrics such as ‘megabits per second’.
The study, published in the Journal of Marketing Research, shows almost everybody struggles to grasp the maths behind increase in speed and time saved. For internet speeds, going from 5 to 25 Megabit per second (Mbps) will save 21 minutes when downloading a 1 Gigabyte (1GB) file. But upgrading the connection to be four times faster from 25 to 100 Mbps won’t take a quarter of the time – it will only save another four minutes.
The actual time saved tends to level off, but the price increases of faster connections generally do not. Puntoni and de Langhe argue that people overvalue the time they can save with faster products and end up paying over the odds for products they might not really need.
Part of the reason why faster products are overvalued can be found in their marketing, Puntoni argues. This applies to printers and washing machines as well as internet connections; all of them are described in terms of how much they can do in a certain time – millions of bits per second, pages per minute, or rotations per minute. This research shows that such metrics for productivity make it harder for consumers to calculate how much time they save with faster versions of a product.
The study found that reversing the metric (to express ‘how-much-time-per-task’ rather than ‘how-much-task-per-time’) often creates a better understanding among consumers. For example internet speeds could be expressed as the number of minutes to download a Gigabyte. Consumers’ understanding of metrics when they are expressed like this greatly reduces their willingness to pay for higher speeds, Puntoni found.
Stefano Puntoni points out that marketing professionals may be using productivity metrics without realising how consumers misperceived the real value of the products they buy. But the new knowledge in Puntoni’s study creates an ethical dilemma for marketing departments. Should they continue marketing faster, more expensive products using productivity metrics if they know consumers are so bad at judging their real value?
The paper Productivity Metrics and Consumers' Misunderstanding of Time Savings will be published in the Journal of Marketing Research and was also featured in November in Harvard Business Review.
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Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s top-ranked business schools. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who can become a force for positive change by carrying their innovative mindset into a sustainable future. Our first-class range of bachelor, master, MBA, PhD and executive programmes encourage them to become to become critical, creative, caring and collaborative thinkers and doers.
