Inexperienced decision-makers' use of positive heuristics for marketing decisions

Abstract

PurposeResearch has reliably demonstrated that decision-makers, especially expert ones, use heuristics to make decisions under uncertainty. However, whether decision-makers with little or no experience also do, and if so, how? is unknown. This research addresses this issue in the marketing context by studying how a group of young and generally inexperienced entrepreneurs decide when asked to set a price and choose a distribution channel in a scenario involving a hypothetical firm.Design/methodology/approachThe authors used think-aloud protocols to elicit data and then used inductive procedures to code the data for analysis.FindingsThe inexperienced entrepreneurs in the sample used three types of heuristics in their decision-making, forming a structured process that narrows in scope. First, metacognitive heuristics, which specify a decision-making approach, were used, followed by heuristics representing the criteria they considered, and finally, heuristics detailing the execution of a selected option. The authors also found that heuristics relating to a market orientation, especially customer-centric criteria, were the most common, but these were balanced with ones representing an internal orientation or growth.Research limitations/implicationsThe generally inexperienced decision-makers the authors’ studied used heuristics in a structured way that helped them to select and balance several potentially conflicting decision-making criteria. As with most research using qualitative research designs, the generalizability of these findings is unclear. Further research on the mechanisms by which relatively inexperienced decision-makers learn the heuristics they use is recommended.Originality/valueThis research's novelty lies in its focus on heuristic use by nonexpert decision-makers under conditions of uncertainty and the findings about their scope and the order they are used. As the authors collected data from think-aloud protocols with relatively young entrepreneurs with limited experience, they also offer a description of the heuristics used by nascent entrepreneurs when making marketing decisions about pricing and channels. The most surprising conclusion is that even without relevant domain-specific knowledge, decision-makers can use heuristics in an ecologically rational way (i.e. structured to match the environment).

Simple rules made simple: The origins and outcomes of managerial heuristics

“…Outcomes, negative or positive, are the key issue of the scholastic divide between the negative and positive views on heuristics, and our systematic literature review found consistent empirical support for both perspectives. In decision-making, studies in our sample found that reflex heuristics lead to subpar strategic decisions (Ahmad et al, 2021;Workman, 2012), while deliberate heuristics lead to good decision-making (Eberhart and Naderer, 2017;Gilbert-Saad et al, 2021;Katsikopoulos, 2013;Oliver and Roos, 2005), which happens faster (Eberhart and Naderer, 2017;Suarez and Montes, 2019) and with less effort (Maitland and Sammartino, 2015). Concerning prediction, reflex heuristics lead to biased prediction (Devers et al, 2007;Miller and Shapira, 2004), while deliberate heuristics are shown to lead to accurate prediction that is as good as and sometimes even slightly better than more complex algorithms (Albar and Jetter, 2013;Luan et al, 2019;Wübben and von Wangenheim, 2008).…”

“…Why? Literature on heuristics is marred by controversy, with two divergent perspectivesthe negative view and the positive viewstating, with empirical support, that heuristics lead to negative outcomes (Workman, 2012) and positive outcomes (Gilbert-Saad et al, 2021), respectively. The extant literature could not clarify "when and where heuristics are liabilities in management and when they are assets" (Mousavi andGigerenzer, 2014, p. 1677).…”

“…Managers and firms use simple rules as guides for effective (Gigerenzer, 2008;Gilbert-Saad et al, 2021;Wübben and v. Wangenheim, 2008) and efficient (Maitland and Sammartino, 2015;Suarez and Montes, 2019) managerial decision-making and as key tools for strategizing (Bingham et al, 2019;Eisenhardt and Sull, 2001) and organizing (Eriksson and Kadefors, 2017). We can, therefore, synthesize extant research on simple rules' origin, nature, usage, form, and purpose into the following definition:…”

“…shown that knowledgeable consumers use heuristics to make quick, satisfying purchasing decisions. Gilbert-Saad et al (2021) have found that a heuristics-based decision-making process helped entrepreneurs evaluate and balance conflicting criteria. Katsikopoulos (2013) has calculated that the combination of two deliberate heuristics, elimination by aspects and equal weighting of attributes, performs "curiously well" in choosing between many alternatives.…”