Consumer Expectations

Bryan Caplan writes an argument about insurer reputation that starts with bad drivers and passes very close to our subject area:

[Many dissatisfied people] have unreasonably high expectations about the kind of treatment other people owe them. The clash between their inflated expectations and reality is the cause of their bitterness.

When people scoff at the power of reputation to constrain business behavior, they’re basically making the same mistake. If you think that paying the standard market rate entitles you to top-of-the-line quality, businesses will constantly disappoint you. I call this the Law of Inflated Expectations: The main cause of cynicism about business is consumer narcissism.

50 cents a day, and that’s without the discount plans. Maybe I can argue that the world owes me something for my $50 up front. Maybe I can see that premium game someday, charging $30+ a month and having high quality for a small population. Maybe I can keep whining.

On another note, if you require 1 hour of CSR time per month, that wipes out the profits from having you as a customer.

: Zubon

7 thoughts on “Consumer Expectations”

  1. His point really isn’t that valid, because compensation isn’t always linked to quality; sometimes prices are set not because the actual product or service is markedly better, but to capture a demographic and place themselves in a specific market.

    A lot of times the pricier service is actually worse in terms of value to money spent; you see it with rents in metropolitan areas versus rents in suburbs or rural ones. Usually its just intangibles that drive paying premiums-a $2000 chair really doesn’t offer a better sitting experience (and may even offer a worse one) but it shows you are the kind of person that can afford a $2000 dollar chair.

    For MMO’s, its somewhat different, as premium pricing would have to be linked to a definitively better experience, but I think the row over microtransactions shows how hard it can be. They can’t really rely on intangibles as much, because gamers are too savvy. they won’t pay a higher price just for cachet or image, but often demand value. I don’t know if anyone should expect mediocre service for the given price though, because it isn’t mediocre, but an industry standard, more or less.

  2. I’m going out on the limb that the professor of economics has heard of conspicuous consumption and both supply and demand, the latter of which you seem to argue does not “really” count. Far more people want that Manhattan apartment than the Kansas ranch, and “gets to live in Manhattan” is a very tangible benefit for those so inclined to pay for it. See also gate communities and a large literature on status-seeking. And “we’re too savvy to do things the entire species does but I don’t like” is rather humorous.

  3. He’s absolutely right, but economics is a way of thinking that a lot of common people will never grasp. Not because they are “dumb”, but because it takes years of logical problem solving with real economic data to understand. That’s why I refer people to Freakonomics :P

    A major industry we see this behavior in is ISP and telecom. People pay a paltry $30-$60 a month for massive bandwidth to their home and expect business level reliability and support (there is a reason business’s pay $500-$1000 a month for their services).

    It drives me bat-shit crazy. $30-$60 is for a best effort service and the support is going to be minimal at best, because that’s what they are paying for.

    And that’s the lesson. You DO get what you pay for. You’re not a special case, so stop demanding that you are.

  4. “SoE did it with a special server for EQ for a while, where you paid something like three times the regular fee and got a higher ratio of GMs to players, additional content and so forth. I forget the name of the server, but it’s gone now. Never really took off and they didn’t repeat it.” – Bhagpuss

    You refer to the Legends Server on EQ. It actually was fairly popular but by no means for the “casual” gamer. Later, the Legends servers morphed into the Progression Servers (which had no extra fees).

    The issue was less that the concept wasn’t solid, but that EQ was already on the decline. No company can maintain a premium service like that without constant fresh material and Legends (mostly) only supported Legends, not the entire infrastructure of EQ expansion design.

  5. Zubon:

    But would you say that living in kansas is really mediocre value for a mediocre price? A kansas ranch may have higher tangible benefits than a manhattan apartment in terms of price, square footage, quality of schools, taxes, land available, and crime. When you start to factor in closeness to major metropolitan areas-say closeness to Charlotte for NC, NYC looks very poor indeed.

    People want the manhattan apartment for intangibles mostly, if you sit down and crunch numbers, it’s very poor value for price, even for the people most likely to want to live there, childless couples and singles. That’s why I think he is wrong, because price isn’t always relative to service or value, and few people really do expect it.

    we are too savvy zubon-You never see anything like the row over champions online using MT for something like a television, because we are much more educated and understanding of value offered. MMO gamers are much more expert consumers in their field when they purchase new options.


    they don’t actually, they want mostly a level of consumer service, the problem is most broadband companies fail to provide even that. If you are going to have the mindset of minimal support, your company really is easy prey for an entrepreneur who will snap up your disaffected customers and eat away at your market share.

    I mean, you have that mindset in an MMO, people will leave. I hate to beat a dead horse, but SE had that mindset with FFXI and alienated so many people that a lot of the people who actually played it vowed never again and never resubbed when they had to deal with it on legit issues, like account theft or banning.

  6. Repeatedly failing to understand an argument is not a refutation. I think we’ve been over that before.

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