Christopher K. Hsee, PhD, Yang Yang, PhD, Xingshan Zheng, PhD,
and Hanwei Wang, PhD
Predicting consumer behavior is crucial to success in any business, including real estate. Our research identifies that a key way to predict consumer behavior is through a consumer’s level of what is called lay rationalism, which refers to the weight a consumer gives to feelings versus reason in the decision-making process. Lay rationalism differs from rationality in economics and decision theory, where feelings and reason both contribute to the rationality of individuals and their decisions. Lay rationalism, as its name suggests, identifies the day-to-day notion that consumers recognize the value of using logic over feelings when making a purchasing decision. Our research analyzes specific contexts in which consumer decisions may involve tradeoffs between feelings and reason.
Situational Factors on Lay Rationalism
Consumers place differing weights or emphases on reason versus feelings based on situational contexts. In one of our studies, we showed two different cell phones to consumers. One phone had many beneficial features where the other phone was quite simple, but aesthetically pleasing. When individuals were asked which of the two phones they prefer, the answer was consistently the logical option, the phone with more functional benefits. However, when consumers were asked which one they liked best, the individuals tended to pick the aesthetically pleasing one. Situational factors impacted what weight individuals gave to feelings versus reason. Recognizing this situational set-up can be key for real estate professionals as you guide your clients toward a purchase decision.
Measuring Lay Rationalism
Initially, we gathered statements for and against lay rationalism from colleagues as well as examples of reasons and feelings from respondents via an online data collection service. From these inputs, we generated 36 statements that represented lay rationalism such as When making decisions, I focus on objective facts rather than on subjective feelings. Then, we briefed a focus group of graduate students on the concept of lay rationalism and they ranked the 36 items as clearly representative, somewhat representative, or not representative. We retained items deemed as clearly representative by the super majority of participants of lay rationalism, and deemed somewhat representative by the others. This process allowed us to tailor the list to 13 statements.
Then, we tested the factor structure of the 13 statements. From a series of tests, we identified a single underlying factor within six statements which form our lay rationalism scale. We then tested the scale’s validity by assigning individuals to either a pro-reason or pro-feeling condition where both groups received a purchasing scenario. The pro-reason group was given a statement involving a lack of feeling but top-of-the-line product specification. The pro-feeling group was told that they loved the product despite its mediocre specifications. The groups then completed the lay rationalism scale and we correlated the pro-reason and pro-feeling scenarios with the lay rational scale. Results showed a correlation between the conditioning statements and lay rational score. Even when controlling for variables such as gender, age, education, and income, the correlation was significant. The results identified that more lay-rationalistic people were willing to purchase the product in the pro-reason condition and the opposite was true for the pro-feeling condition which demonstrates that lay-rational characteristics will be predictors of buyer behavior.
Finally, we tested whether demographic variables related to lay-rationalism levels. Using regression analyses, we found that men tended to be more lay rationalistic than women and that older, more educated, and higher-income individuals tended to be more lay rationalistic than their counterparts, but only to a small degree.
Using Lay Rationalism to Predict Consumer Behavior
Our research included three studies designed to measure the predictability of lay rationalism for product preferences, savings decisions, and donation decisions. In study one, we tested products categorized as either hedonistic or utilitarian. Utilitarian products are characterized as being useful and practical, while hedonic products are experiential, fun and for pleasure. Understanding a consumer’s preference for hedonic and utilitarian products is crucial to market analysis. Our research shows that lay rationalism can predict consumer product preferences, as more lay-rationalistic people, as compared to less lay-rationalistic people, rely on feelings less. Feelings are by their nature hedonic, and thus, more lay-rationalistic individuals lean away from hedonic and more toward utilitarian products.
Spending money now or saving money for the future are tendencies that vary from consumer to consumer. While one’s tendency to save rather than spend is based on a array of factors, lay rationalism also plays a role. More lay-rationalistic individuals, compared to their less lay-rationalistic counterparts, tend to save more money than spend, putting more emphasis on reason than feelings. Lay rationalism also can predict one’s tendency to donate to charity. More lay-rational people donate less to charity than their less lay-rational counterparts. Such philanthropic behavior seems to stem from emotions of sympathy and empathy, key motives for making charitable contributions. These three additional studies provide evidence of the impact lay-rationalism can have on consumer behavior.
Impact of Lay Rationalism on Consumer Real Estate Transactions
Our research into lay rationalism provides a significant way to understand consumers and their behaviors. Understanding whether customers are more lay-rationalistic will help real estate professionals predict the customers’ purchasing and spending behaviors. The lay rationalism scale, reproduced in the table, can be used in initial encounters with clients to gauge the client’s tendency to prioritize or weight reason over feelings. In fact, when working with a home-buying party (e.g., husband and wife), this scale may prove helpful to the agent in understanding the extent to which the pair may differ in their decision-making approach.
Lay rationalism predictions can guide you as a real estate professional in your client approach, the language of your written and verbal communications, and even the properties to show to particular clients. Lay rationalism provides one more insight into your client’s possible behavior as a consumer and may be key to aligning client interactions for greater success.
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Hsee, Christopher K., Yang Yang, Xingshan Zheng, & Hanwei Wang (2015), “Lay Rationalism: Individual Differences in Using Reason versus Feelings to Guide Decisions,” Journal of Marketing Research, 53(1), 134-146.
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About the Authors
Christopher K. Hsee, PhD
Theodore O. Yntema Professor of Behavioral Science and Marketing, Booth School of Business, University of Chicago
Christopher K. Hsee (PhD in psychology from Yale) is the Theodore O. Yntema Professor of Behavioral Science and Marketing at the University of Chicago’s Booth School of Business. His research interests include psychology, marketing, management, and happiness.
Yang Yang, PhD
Assistant Professor of Marketing, University of Florida
Yang Yang (PhD in Marketing from Carnegie Mellon) conducts research on consumption experiences, judgment and decision-making. Her research has been published in the Journal of Marketing Research, the Journal of Experimental Social Psychology, and the Journal of Consumer Research.
Xingshan Zheng, PhD
Associate Professor, Antai College of Economics & Management, Shanghai Jiao Tong University
Xingshan Zheng graduated with a master’s degree from Shanghai Jiaotong University, Department of Material Engineering and received his doctor’s degree in Business Administration at Antai School of Management in Jiaotong University. He has worked as an engineer at Shanghai Metallurgy Equipment Company, a project manager in Maxwel International Trade (Shanghai) Company and is now an associate professor at Antai College of Economics & Management in Shanghai Jiao Tong University. He teaches Management of Human Resources, Organizational Behavior in the undergraduate and the MBA program.
Hanwei Wang, PhD
Assistant Professor at School of Business, Jiangnan University
Hanwei Wang (PhD in Business Administration from Shanghai Jiao Tong University) is an Assistant Professor at School of Business, Jiangnan University. His research interests include marketing and happiness.