Slight Is Right?

by Dish Staff

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Research suggests that people are willing to pay a premium to support small businesses:

In one experiment, the researchers gave subjects a $5-off coupon upon entering a local bookstore. Some of the coupons had short blurbs explaining that the store was in direct competition with a store on the scale of Barnes and Noble, and some explained that the store was competing with another mom-and-pop bookstore. (A control group was given coupons without any text like this.) Those who received the large-competitor coupon were far more likely to make a purchase than those who got small-competitor coupons—even though the coupons made no comments on the store’s superior quality.

Proximity also matters. The researchers analyzed Yelp reviews of local coffee shops, and found that, in general, the closer a shop was to the nearest Starbucks, the higher its rating was on Yelp.

Firms may already be aware that the narrative of the underdog carries immense sway with consumers—researchers suspect people are drawn to companies whose stories they perceive to mirror their own experiences. But this study expands that: “Consumers may want to punish stronger competitors…[and watch] them fail,” the study’s authors write. And this doesn’t just have to do with products, like coffee, that benefit from being seen as authentic; a local electronics store could theoretically sell more batteries by simply playing up its stiff competition with Radioshack.