6.18 Consumers' Evaluation of New Products: Learning from Self and
Others

When offered a new product whose attributes are unknown, customers can
determine whether they like the product by trying it themselves or can
wait to observe the experience of other customers who try the
product. The authors specify a rational decision process and
investigate the implications of learning from others on the sales of
new products and the impact of advertising.  Consumers are often
confronted with new products whose benefits and costs are not fully
known to them. Consumers can learn about the product by trying it;
however, by doing so, they bear the risk that the experience will be
negative. Instead, consumers can wait and observe whether other
customers like the product. This learning from others is only partial,
since the consumer knows that different people have different tastes,
so that he might like a product that most other people dislike, or
vice versa. Even though learning from others reduces risk, it entails
waiting until the experience of others can be observed, which delays
the possible benefits of the good. Also, for repeat-purchase goods,
there is informational value to the consumer of trying the good, since
the consumer knows that he will continue to buy the good only if he
likes it. For one-shot purchases, there is no informational value to
trying the good, so that waiting to learn from others becomes more
attractive.