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Bad news? Send an AI. Good news? Send a human

For a marketer who is about to deliver bad news to a customer, an AI representative will improve that customer’s response. This would be the best approach for negative situations such as unexpectedly high price offers, cancellations, delays, negative evaluations, status changes, product defects, rejections, service failures, and stockouts. However, good news is best delivered by a human.

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Photo by Alex Knight from Unsplash.com

Researchers from University of Kentucky, University of Technology Sydney, and University of Illinois-Chicago published a new paper in the Journal of Marketing that examines the customer response and satisfaction implications of using AI agents versus human agents.

The study, appearing in the Journal of Marketing, is titled “Bad News? Send an AI. Good News? Send a Human” and is authored by Aaron Garvey, TaeWoo Kim, Adam Duhachek.

Are we more forgiving of an artificial intelligence (AI) agent than a human when we are let down? Less appreciative of an AI bot than a human when we are helped? New research examines these questions and discovers that consumers respond differently to favorable and unfavorable treatment at the hands of an AI agent versus another human.

Consumers and marketing managers currently are in a period of technological transition where AI agents are increasingly replacing human representatives. AI agents have been adopted across a broad range of consumer domains to handle customer transactions, including traditional retail, travel, ride and residence sharing, and even legal and medical services. Given AI agents’ advanced information processing capabilities and labor cost advantages, the transition away from human representatives for administering product and services is expected to continue. However, what are the implications for customer response and satisfaction? 

The researchers find that when a product or service offer is worse than expected, consumers respond better when dealing with an AI agent. In contrast, for an offer that is better than expected, consumers respond more favorably to a human agent. Garvey explains that “This happens because AI agents, compared to human agents, are perceived to have weaker personal intentions when making decisions. That is, since an AI agent is a non-human machine, consumers typically do not believe that an AI agent’s behavior is driven by underlying selfishness or kindness.” As a result, consumers believe that AI agents lack selfish intentions (which would typically be punished) in the case of an unfavorable offer and lack benevolent intentions (which would typically be rewarded) in the case of a favorable offer. 

Designing an AI agent to appear more humanlike can change consumer response. For example, a service robot that appears more humanlike (e.g., with human body structure and facial features) elicits more favorable responses to a better-than-expected offer than a more machinelike AI agent without human features. This occurs because AI agents that are more humanlike are perceived to have stronger intentions when making the offer. 

What does this mean for marketing managers? Kim says, “For a marketer who is about to deliver bad news to a customer, an AI representative will improve that customer’s response. This would be the best approach for negative situations such as unexpectedly high price offers, cancellations, delays, negative evaluations, status changes, product defects, rejections, service failures, and stockouts. However, good news is best delivered by a human. Unexpectedly positive outcomes could include expedited deliveries, rebates, upgrades, service bundles, exclusive offers, loyalty rewards and customer promotions.”

Managers can apply our findings to prioritize (vs. postpone) human to AI role transitions in situations where negative (vs. positive) interactions are more frequent. Moreover, even when a role transition is not entirely passed to an AI agent, the selective recruitment of an AI agent to disclose certain negative information could still be advantageous. Firms that have already transitioned to consumer-facing AI agents, including the multitude of online and mobile applications that use AI-based algorithms to create and administer offers, also stand to benefit from our findings. Our research reveals that AI agents should be selectively made to appear more or less humanlike depending upon the situation. 

For consumers, these findings reveal a “blind spot” when dealing with AI agents, particularly when considering offers that fall short of expectations. Indeed, the research reveals an ethical dilemma around the use of AI agents – is it appropriate to use AI to bypass consumer resistance to poor offers?

“We hope that making consumers aware of this phenomenon will improve their decision quality when dealing with AI agents, while also providing marketing managers techniques, such as making AI more humanlike in certain contexts, for managing this dilemma,” says Duhachek.

Strategies

Consumer openness to smoke-impacted wines, offering new market opportunities

Consumers, particularly those that like smokey flavors in food and beverages, are open to drinking smoke-impacted wines. Also, the type of information on the label can modulate consumer acceptance.

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Certain groups of consumers appear to be open to drinking smoke-impacted wines, a finding in a new study that could provide market opportunities for winemakers increasingly dealing with the effects of wildfire smoke on grapes.

The study by researchers at Oregon State University and in New Zealand found that consumers, particularly those that like smokey flavors in food and beverages, are open to drinking smoke-impacted wines. They also found that the type of information on the label can modulate consumer acceptance.

“This research provides vital information for the wine industry,” said Elizabeth Tomasino, a professor of enology at Oregon State. “It demonstrates that with certain wine drinkers there is a potential market for these smoke-impacted wines.”

As the number and size of wildfires grow globally, the wine industry has been heavily impacted. For example, an economic analysis of the 2020 wildfires on the West Coast of the United States estimated wine industry losses up to $3.7 billion.

Following the 2020 fires, a research team, led by Oregon State scientists, received a $7.65 million grant from the U.S. Department of Agriculture to study the impact of smoke on wine.

Since then, the researchers have made several key advances. They discovered a class of compounds that contribute to smoke impact in grapes. They also developed spray-on coatings for grapes that have shown promise in preventing off flavors in wines that result from contact with wildfire smoke.

The latest research, published in the journal Food Research International, focuses on consumer attitudes toward smoke-impacted wine, a topic that has received very little attention.

For the study, Tomasino and Jenna Fryer, a doctoral student in her lab, sent smoke-impacted and non-smoke wine made from Oregon pinot noir grapes to New Zealand. There, working with Amanda Dupas de Matos and Joanne Hort at Massey University, they recruited 197 participants for the study.

They conducted the research in New Zealand, a region where winemaking has not been significantly impacted by wildfire, because they were interested in how people would respond to the wines. Future research will compare the results from New Zealand to findings from tasting panels in Oregon and Ohio.

With the research in New Zealand, two clusters of consumers were identified, one that liked the smoke-impacted wine (110 people) and the other that disliked it (87 people).

Findings of the study included:

  • The smoke-liking group had an average liking score of 6.86 out of a nine-point scale.
  • The smoke-disliking group had an average score of 3.26.
  • The introduction of labels, versus unlabeled wine, increased liking of the smoke-impacted wines for the smoke-dislikers from just over three to more than five on the nine-point scale. One of the labels overtly referenced wildfires with the words “Smoke Stack, experience the 2020 vintage with this unique, lightly smokey wine.”
  • The different labels didn’t have much of an impact on the smoke-likers, but their average scores were still above six, outpacing the dislikers.

The findings indicate that there are potential tools winemakers can use to make a smoke-impacted wine viable for the market, the researchers say. One option is blending, a common winemaking technique that in this case could involve mixing a smoke-impacted wine with a non-impacted wine. Winemakers can also take different approaches to labeling and marketing to specifically target the smoke-liking group.

“Our findings indicate that there is more forgiveness among consumers for these smokey wines than winemakers think,” Tomasino said. “It seems winemakers have a lot more options if they want to sell wine made with these grapes.”

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BizNews

Women more likely to choose wine with feminine labels

The more strongly the participants identified with other women, a phenomenon called “in-group identification,” the greater this effect was. A feminine label also influenced their expectation that they would like the wine better.

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To appeal to the majority of consumers, winemakers may want to pay as much attention to what’s on the bottle as what’s in it.

A three-part experimental study led by Washington State University researchers found that women were more inclined to purchase wine that had labels with feminine gender cues. The more strongly the participants identified with other women, a phenomenon called “in-group identification,” the greater this effect was. A feminine label also influenced their expectation that they would like the wine better.

With women representing 59% of U.S. wine consumers, the male-dominated field of winemaking might want to pay attention to the perceptions of this understudied group, said Ruiying Cai, lead author of the paper in the International Journal of Hospitality Management.  

“When you look at the market segments, women are actually purchasing a lot of wine. They are a large group,” said Cai, an assistant professor with WSU’s Carson College of Business. “We found that feminine cues speak to women consumers. They have more favorable attitudes toward the label and the wine itself. They were also expecting their overall sensory experience to be better, and they were more likely to purchase the wine.”

Gender cues often rely on stereotypes, and in initial tests for this research, a group of 90 women rated wine labels as more masculine when they featured rugged animals like wolves and stags as well as portraits of men. They designated labels as feminine that had cute animals, flowers and female portraits. Labels with castles and bunches of grapes were seen as neutral.

In two online experiments, a total of 324 women were shown fictitious wines with labels designed with these gendered cues. The participants showed higher intention to buy wines with a feminine label, such as a woman holding flowers, as opposed to a wine with a masculine label, such as a bulldog in a spiked collar. When asked about the expected sensory experience, they rated their liking of every sensory aspect higher, including the color, taste, aroma and aftertaste.

The participant’s level of wine expertise moderated their taste expectations but surprisingly, not their purchase intentions.

“Whether they were knowledgeable or less knowledgeable about wine, when they saw those feminine cues, they had a higher intention to buy the wine. The gender cue influence was so strong, it trumped the effect of that knowledge,” said co-author Christina Chi, a professor at WSU’s Carson College of Business.

A third experiment with another set of 138 women involved a taste test—also with a surprising finding. Researchers gave bottles of the same red wine with one of the gendered labels. More women who tasted the feminine-labeled wine ranked it higher in fruit flavors such as red current and blueberry than those who tasted the same wine with a masculine-cued label—and despite the fact those flavors were not dominant components in that particular wine. Women connected more mineral flavors with the masculine-labelled wine.

However, the participants who tasted the feminine-labelled wine reported liking it less than the women who tasted the masculine-labelled wines. The authors said this could be a result of the incongruence between the expected flavor influenced by the feminine label and the actual taste of the wine sample, which had a medium body, tannin and alcohol level.

Few studies have focused on the perceptions of women wine consumers in a field where 82% of the winemakers are men. That lack of perspective is very apparent on wine aisles, said Chi, noting that many vintners seem to favor masculine imagery like stallions, bulls and roosters–and one brand even features a prisoner in a jail cell.

“When designing the labels, winemakers should involve more women in the process, and it’s highly advisable to pilot test the labels among consumers for gender cues,” she said.

In addition to Cai and Chi, co-authors on this study include recent WSU graduate Demi Deng now at Auburn University and Robert Harrington of WSU.

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Strategies

Tips that businesses should consider during the holiday shopping season

Highlight your strengths—whether it’s one-of-a-kind products, exceptional offerings, or a strong local connection. Design your holiday strategy around what sets you apart and amplify these messages through social media and your marketing materials.

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As the holiday shopping season approaches, small businesses are gearing up for one of the busiest times of the year, from Black Friday to Small Business Saturday and beyond. 

SCORE, America’s largest network of volunteer, expert business mentors, offers entrepreneurs practical advice to make the most of the season.

Plan for the Holiday Rush

Reflect on last year’s performance. Did you meet your sales goals? Use your previous data to forecast sales, set promotional strategies and manage staffing needs to provide for outstanding customer care.

“It’s about more than just sales; it’s a powerful opportunity to connect with your community, attract new customers and reinforce relationships with loyal ones,” explains SCORE mentor Lizz Smoak.

If you plan on extending store hours during the holidays, communicate these updates with your team early so you are prepared to handle increased sales traffic. Ensure that employees are aware of the holiday schedule and have submitted any time-off requests to avoid last-minute scheduling conflicts. 

Create an Experience for Customers

“Engagement is key when customer traffic spikes during the holiday season,” notes SCORE mentor Christy Jones. “Consider offering curated gift guides or exclusive bundles to simplify decision-making for your customers, especially as you compete against large retailers like Amazon.” Plan a special event or connect with other local businesses to promote shopping small.

Stand Out from the Crowd

Consider how you can make your store or service the preferred choice. “Small business owners should contact their existing customers and highlight their unique level of service,” advises SCORE mentor John Doyle.

Highlight your strengths—whether it’s one-of-a-kind products, exceptional offerings, or a strong local connection. Design your holiday strategy around what sets you apart and amplify these messages through social media and your marketing materials.

Be E-Commerce Friendly

As you roll out holiday promotions, make sure that your digital doorstep is ready, too. Confirm your hours, location and contact info are updated on your website, Google Business Profile and other local listings. Many customers will be shopping on their phones so be sure your website is optimized for mobile use and that your most popular products are easy to find. A smooth checkout process is vital for keeping customers happy and encouraging repeat purchases.

“Small Business Saturday offers a prime opportunity for small businesses to step into the spotlight,” said SCORE CEO Bridget Weston. “With a strategic approach, small businesses can leverage this season and see big returns.”

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