Consumer free rider advice: conceptual development and empirical evaluation in Germany.

• Author: Wendlandt, Mark
• Position: Report

1. INTRODUCTION

   Traditional retail business has been challenged by two major developments in the last decade. One is the maturing of the internet and consumers' switching from brick and mortar stores to the online channel. The other is the ongoing success of the discount concept broadening from grocery stores to a broad range of industries such as clothing, consumer electronics, or banking. Furthermore, discount stores are increasingly transferring the basic concept of lowest prices through economies of scale and a lack of advice to higher value products and thus putting substantial pressure on traditional retailers. For consumers, discount stores and online purchases often offer the opportunity to realize substantial savings compared to traditional channels. However, they create a new need for product advice and in the case of online shopping for looking at the product and testing it. In this context, many consumers may use the resources of traditional specialty stores to look at the product or to collect some advice on certain products and brands in order to prepare their purchase in a low price channel. In the current paper we discuss the roots and consequences of such behavior and conceptualize the construct of free rider advice. To make the concept meaningful, we conceptually connect free rider advice to an economic and moral perspective of consumer purchasing, namely to information seeking and to price fairness attitudes. We establish the free rider advice measure and test the developed hypotheses against data from 159 German consumers on their consumer electronics purchases. We discuss the results and their implications for future research, for companies and for consumers.

2. FREE RIDER ADVICE

   We conceptualize free rider advice (FRA) as the deliberate demanding of free product advice by consumers from a specialty store, in order to be able to capitalize on price advantages in internet stores or in low-service retail outlets where no product advice is offered. In business practice, this phenomenon has attracted a great deal of attention and has been discussed as "advice theft" (German: "Beratungsklau", Stern Media Business 2004: p.3). However, this term appears to be misleading as the behavior does not describe a legal category. While scientific consideration of the FRA phenomenon is yet lacking, its consideration under economic and moral perspectives appears to be promising. Accordingly we subsequently discuss economic concerns that may result from the behavior's tendency to undermine free product advice as informational source (e.g. Nelson 1970)--comparably to free rider phenomena using public goods--and the potential disappearance of retail stores offering advice in the long run. Moreover, we investigate moral concerns that may be based on perceptions of equitable norms (Homans 1961).

   Economically, free product advice can be considered to be a public good that is provided by the sales personnel of specialty retail stores and that can be accessed for free by basically anyone who is asking for it in the store. Comparable to when consuming other public goods, FRA may induce social or moral cost but is not attached to any monetary payment. Such social and moral cost can become relevant, as shown in numerous public goods experiments where people usually contributed more to the public good than can be easily explained by pure self-interest (Fischbacher and Gachter 2010). However, it has been shown that subjects learn to profit from free riding opportunities (Ledyard 1995) and contributions to the public good are reduced to a minimum, creating a "warm glow" from serving altruistic motives that assure moral freedom (e.g., Palfrey and Prisbrey 1996; 1997; Houser and Kurzban 2002; Binmore 2005). Accordingly, most individuals--at least experimentally--use free rides to optimize their personal outcomes. However, other researchers conclude from their results that social preferences and related moral concerns need to be attributed substantial behavioral relevance when aiming to explain consumers' likeliness to explore free riding opportunities (e.g., Andreoni 1995; Keser and van Winden 2000; Brandts and Schram 2001; Ashley, Ball and Eckel 2010).

   Morally, equity theory (Adams 1965; Homans 1961) can be used to raise doubt regarding FRA. Equity theory integrates the economic exchange principle with consistency theories (Festinger 1957; Heider 1958) and thus suggests that any contribution in a relationship should be equalized by a corresponding contribution by the other party. Hence, both sides are expected to provide an equivalent input (Walster, Walster and Berscheid 1978). In the case of FRA, a store's contribution to the equitable advice relationship is the knowledge and time spent on delivering competent advice to the consumer. In return, an equivalent contribution from the consumer could be to honestly consider the store in his evoked set of potential suppliers when buying the product. Perhaps, one might even expect from the consumer not to consider low price providers when approaching a higher price provider for advice, except for the case where the relevant product is not available. For supporting criterion validity, we relate the FRA concept to consumer information seeking as an economic determinant ("smart shopping") and to consumer price fairness attitudes as a moral determinant.

3. HYPOTHESES DEVELOPMENT

   3.1 FRA and consumer information seeking

   Achieving smart deals and most value for one's money requires substantial planning, searching and comparing activities. As such smart deals and offers are often available in discount stores that do not offer advice, or on the internet, consumers need to collect information elsewhere. While the internet is a valuable source for all kind of product information (Monsuwe, Dellaert, Benedict and de Ruyter 2004), the perceived credibility is still limited for many consumers (Metzger 2004) and in-store advice is often...