Stated Versus Revealed Preference

Posted on July 9, 2013  Comments (4)

My father provided me a good example of the flawed thinking of relying on stated preference when I was growing up. Stated preference is, as you might deduce, the preferences voiced by customers when you ask. This is certainly useful but people’s stated preference often do not match there actions. And for a business, actions that lead to customers are more important than claims potential customers make about what will make them customers.

His example was that if you ask people if clean bathrooms in a restroom is required for a restaurant they will say yes. Potential customers will say this is non-negotiable, it is required. But if you eat at many “ethnic restaurants,” as we always did growing up, you would see many popular restaurants did not have clean restrooms. If the food at atmosphere was good enough clean restrooms were negotiable, even if customers stated they were not.

Now I think clean restrooms is a wise move for restaurants to make; it matters to people. Instead of creating a barrier to repeat customers that has to be overcome with much better food and atmosphere it is wiser to give yourself every advantage by giving the customers what they want. But I think the example is a simple example of stated versus revealed preferences.

McDonald’s gets a great deal of success by doing certain things well, including clean bathrooms, even if they miss on things some people think are important for a restaurant. McDonald’s really gets a fair amount of business for people driving a long distance that really want a clean bathroom and a quick stretch of their legs and quick food. This is a small percentage of McDonald’s customer visits but still a very large number of visits each day I am sure. Understanding, and catering to, the problem your customers are trying to solve is important.

The point to remember is what your potential customers say they will do is different than what they do. It is sensible to listen to stated preferences of customers just understand them for what they are.

We need to pay more attention to revealed preferences. Doing so can require putting in a bit more thinking than just asking customers to fill out a questionnaire. But it is worth the effort. A simple restaurant based example would be to have wait staff pay attention to what people leave on their plate. If you notice certain side dishes are not eaten more often, look into that and see what can be done (improving how it is prepared, substituting something else…).

Related: Voice of the CustomerThe Customer is the Purpose of Our WorkCustomers Are Often IrrationalPackaging Affects Our Perception of TasteBe Careful What You Measure

4 Responses to “Stated Versus Revealed Preference”

  1. Julia Rurane
    July 10th, 2013 @ 1:43 am

    You’ve hit on a key point there – observation. It is very easy to get so involved in what you’re doing in business that you forget to ‘look up’ and see it from another’s point of view.

    I love the idea of looking to see what diners have left on their plates. It empowers the waiting staff, provides great feedback and results in a better experience for the customer. All because you’ve opened up new ‘eyes’ by thinking about things from a different perspective then getting the middleman to observe so that you don’t get in the way of what the research tells you with your own preconceived ideas (I can imagine a chef being more irate at people’s obviously bad taste in food rather than shifting what is made to suit their tastes!).

    Something for us all to consider.

  2. Del Kimbler
    July 11th, 2013 @ 1:32 pm

    I relate these to Kano’s delighting or attractive quality level, the level of a characteristic that is not stated as required, but is appreciated when achieved. The dilemma of achieving quality in a system based on something unstated by the customer is a challenge, but your example shows one way to learn about it. A survey of customers about their travel would be both costly and intrusive, but a question about travel (“Is this your first time here?”, “Are you traveling far today?”) offered by the sales associate to a randomly and infrequently selected customer could provide insight. So could a periodic auto license plate census.

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