Featured faculty: Philip Zhang Renyu and Lin Yunduan
Written by Putro Harnowo

Not everything needs to carry meaning, especially on social media. Take 67, a nonsensical expression Gen Alpha uses to confuse adults, for example. While digital platforms can forecast trends by analysing users’ behaviour, humans are inherently unpredictable and easily swayed by others. Algorithms may struggle to keep pace.

Digital anthropologist Brian Solis said, “Social media is about sociology and psychology, not technology.” This can explain many inconsequential trends exploding online. Within their social network, people randomly influence and are influenced by others, even when they don’t actually know each other.

“You may have heard of the six degrees of separation, where everyone in the world is connected through a chain of no more than six acquaintances. It means that everyone is actually more connected than they realise through social networks,” says Lin Yunduan, Assistant Professor of the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School.

Social networks lie at the intersection of many disciplines, from sociology and marketing to even politics. Understanding how ideas spread within communities or whether a new product thrives in the market amid unpredictable human behaviour becomes critical.

Given that people respond to one another in messy, often unpredictable ways, it can be hard to pin down why an idea catches on, or why a product takes off in one community but not another. To cut through that complexity, Professor Lin introduces the fixed-point approximation, a method that distils the back-and-forth of social influence into a clear picture of how these behaviours ultimately settle across the network.

“Imagine it as if a group of people want to schedule a gathering. It starts as an unspecified plan, as anyone may still change their minds. When someone confirms they can make it, their friends may become more likely to join, but when someone who confirmed later cancelled due to a sudden change, this can also ripple through the group,” she says.

“The fixed point refers to a certain level where, after these influences play out, each person’s likelihood of adopting an idea becomes steady and doesn’t change anymore.”

Predicting the trends with a mathematical formula

In a paper titled Nonprogressive diffusion on social networks: Approximation and applications, Professor Lin and Associate Professor Philip Zhang Renyu from the same department collaborate with Zhang Heng of Arizona State University and Max Shen of the University of Hong Kong to develop a deterministic approach to decode interactions within the unpredictable social network.

The fixed-point approximation starts from a few interpretable ingredients, including network structure to know who is connected to whom, intrinsic value or how much each person likes or dislikes the new idea before influences from others, noise distribution or the unpredictable whims that sway a person’s mind, and network effect intensity or how sensitive a person is to being influenced by their connections.

“Basically, we try to find a middle ground to estimate how people will behave under the influence of a network structure.”

Professor Lin Yunduan

This framework offers a way to capture social influence at scale without tracking every possible chain reaction in the network. Instead, it estimates each person’s likelihood of adoption under peer influence. For example, in a small neighbourhood, A has a 90 per cent chance of buying and B has a 30 per cent chance.

The approach is most reliable for people embedded in large, well-connected communities, since no single contact can easily dominate the outcome, and the influence of many peers creates a more stable signal. By contrast, for individuals with very few connections, the prediction can be harder, since one friend’s decision can meaningfully tilt the result, and random factors play a larger role.

To address those outliers, the paper proposes a small add-on step. After producing the main estimate, it focuses on low-connection individuals and generates many plausible scenarios for what their close contacts might do, then averages the results to refine that person’s adoption likelihood.  Professor Lin provides the formula of the framework in a GitHub repository here.

“Basically, we try to find a middle ground to estimate how people will behave under the influence of a network structure,” she says. “The approach does not require simulating every possible ripple through the network, yet it still captures the influence patterns accurately, turning messy, shifting interactions into a clear picture of each person’s likelihood of adopting a new trend.”

The researchers have examined their framework using five actual Facebook networks available in an open-access digital archive. The results show that the framework can accurately measure the likelihood of a new idea adoption, with an average error of less than 3.5 per cent. The graph below illustrates the framework’s efficiency in a small network compared with real-world results.

The researchers also compare it with other models that examine interactions within a network and find that their framework is 70 to 230 times faster than the basic simulations and 23 to 30 times faster than the advanced simulations.

Wider adoption in businesses and communities

A strong suit of fixed-point approximation is its ability to quickly pinpoint the key actors to maximise the adoption of a trend or idea, while accounting for unpredictable factors within a social network. This framework can be used in any practical setting where one’s behaviour impacts others.

“For instance, in a product launch, someone will purchase the new product, and these first purchasers may influence others to follow,” Professor Lin says. “Our framework can help to identify which first purchasers have a high downstream impact more quickly. These purchasers don’t necessarily have large numbers of followers, but are those positioned to spread adoption efficiently through their networks.”

While the framework can operate offline, digital platforms have advantages due to their infrastructure, connectivity and ability to utilise data in real time. Therefore, the framework would enable platforms to respond more quickly to market changes and stay ahead of competitors, while also adjusting their strategies over time to sustain momentum.

Another strong point of fixed-point approximation is its ability to help firms set pricing strategies by accounting for network influence. For retailers, this means the framework can help measure how many customers are likely to purchase a new product at different prices and set realistic sales goals.

Beyond profits, government or community leaders trying to spread an important message or encourage a new behaviour can use this framework to identify key community members whose participation will most effectively encourage others. The framework can also help understand how to seed these messages within the community to achieve widespread adoption.

The post How to forecast trends amid uncertainty first appeared on China Business Knowledge.

Featured faculty: Lisa Wan
Written by Pan Jingyi

It was supposed to be a fun summer trip to Puerto Rico last year, as a Spanish couple had done everything ChatGPT planned, until they were refused to board the plane for not obtaining proper paperwork. In another case, two tourists were lost in a rural Peruvian town trying to find an imaginary destination suggested by AI.

AI has been hailed as the new technological evolution, but these stories remind us not to take technology at face value. On the other hand, these cases also highlight how trip planning has moved from a search bar of internet browsers to ChatGPT, DeepSeek, Grok, and the like. Scrolling through a sea of blue links is gradually replaced with a single prompt.

“Opting for an unfamiliar and novel search method like GenAI can be seen as a risky choice for making concrete plans.”

Professor Lisa Wan

“When ChatGPT was first introduced, we immediately sensed its strong potential for tourism information search, which largely depends on context and user preferences,” says Lisa Wan, Associate Professor of the School of Hotel and Tourism Management and the Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School.

“Unlike traditional search engines that primarily provide fragmented information through hyperlinks, generative AI, or GenAI, can synthesise information, generate narratives, and adapt responses to users’ preferences.”

With much positive and negative news surrounding GenAI, Professor Wan seeks to understand what travellers actually perceive of the new technology. Working with Li Yuan of Zhejiang University, along with Luo Xiaoyan and Ding Xu of Sun Yat-Sen University, she conducted the research Advancing information search through GenAI: the roles of search type, travel motive and GenAI customisation level.

Across a series of studies involving more than 800 participants from different countries, the team examined when people lean towards GenAI or retreat to traditional search engines. They find that travellers’ willingness to use GenAI depends on their search purpose, travel motives, and whether the AI agent is tailored for trip planning.

When GenAI is less trustworthy

Trip planning often starts from curiosity and then turns into concrete actions. Individuals who come across a destination on social media or over casual conversation may want to find more about the must-sees, the overall vibe, and, as their interest deepens, may seek further information on specific prices and booking options.

Based on the above process, the researchers grouped these behaviours into two search types: non-decision-based, where individuals browse for general information about a destination, and decision-based, when more detailed information is sought for final decision-making.

“These differences can influence which search tools people choose,” Professor Wan says. “In the decision-based search, a small bad decision based on inaccurate information can turn into bigger problems, causing consumers to be more cautious.”

When participants are in decision-making mode, they prefer to gather information using traditional search engines. “Opting for an unfamiliar and novel search method like GenAI can be seen as a risky choice for making concrete plans,” she adds.

Professor Wan notes that new technologies often face a natural trust gap, especially when mistakes have significant consequences. Moreover, scepticism towards GenAI also reflects a rational assessment of its limitations in providing real-time and verified data, as reported in recent news.

In non-decision-based situations, however, the pattern shifts. When people are causally exploring or thinking about a destination, GenAI’s conversational style and ability to synthesise broad information become more appealing.

Traveller’s mindset and customisation make a difference

Looking further into what factors might encourage people to use AI in decision-making scenarios, Professor Wan and her collaborators found that the travel motive is the crucial piece. Specifically, participants motivated by a utilitarian goal that focuses on efficiency and convenience reported a higher preference for GenAI, whereas those with a hedonic motive of prioritising fun and pleasure are more likely to stick with traditional search engines like Google.

For utilitarian travellers, GenAI is preferred for its ability to filter information and organise search results, reducing the effort to compare options manually. Meanwhile, hedonic travellers enjoy the traditional browsing experience, mostly because search engines feature a richer mix of photos, videos, maps, reviews, and unexpected discoveries.

“Those prioritising fun and pleasure may find the variety and richness of multimedia content more appealing, providing a more immersive and enjoyable searching experience compared to the textual responses generated by GenAI,” says Professor Wan.

Customisation levels also affect user preference for AI. As booking platforms increasingly embed AI plugins for specific tasks, such as suggesting available hotels based on user preferences and providing customer service via AI chatbots, the study finds that such customisations can boost trust in GenAI.

How the tourism industry should adopt and develop GenAI

Given that GenAI is often more preferred in the non-decision stage, Professor Wan suggests platforms make an AI assistant visible in the main search bar to inform travellers general information about destinations, such as major attractions and cultural highlights. Another application is to display GenAI responses alongside traditional search results, allowing travellers to cross-check information easily.

While AI transformation continues to gain momentum, Professor Wan observes that fundamental challenges remain. “Many firms invest heavily in AI solutions but see limited results in daily operations. Two common obstacles are the lack of in-house talent to integrate AI into workflows and the tendency to adopt generic tools that don’t match real user demand.”

Furthermore, she observes that rapid AI advancements and shifting customer demand require firms to continually adapt this technology. “Rather than treating GenAI adoption as a one-off technological upgrade, firms need to view it as an organisation transformation process that involves gradual development, cross-functional collaboration and iterative experimentation.”

The future of travel planning

Professor Wan believes that AI will not completely replace search engines just yet, at least in the near future. Instead, travel information would be more distributed, with different tools serving different purposes. “GenAI is more likely to complement travel planning rather than substitute the traditional way,” she adds.

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Interestingly, she suggests that social media will be the close contender for search engines. In Chinese Mainland, for example, RedNote has already become a starting point for many travellers for its first-hand reviews. “The real shift is towards interactive, experience-rich and peer-validated information, something that social media and GenAI offer in different ways.”

Another takeaway is a concern about how GenAI can subtly change how travellers engage with places and experiences. Therefore, she encourages travellers to keep interacting with locals and communities. “The goal is not to reject intelligent tools, but to remain attentive to how they reshape human capabilities and experience.”

The post Can AI beat search engines for trip planning? first appeared on China Business Knowledge.

Featured faculty: Wu Jing, George Yang, Johnny Li, and Lisa Wan
Written by Putro Harnowo

The world started 2026 with a complex mix of opportunities and risks. Global productivity and economy have slowed down, but the Organisation for Economic Co-operation and Development expects emerging Asian markets to be resilient.

Following the recent US-China tariff truce, China achieved a record trade surplus exceeding US$1 trillion last year, setting the stage for intriguing developments in 2026. Meanwhile, sustainability backlash dominated 2025, with significant environmental, social, and governance (ESG) investment outflows in the US, leaving the sector trajectory uncertain.

Rapid demographic ageing in Asia and Europe will transform the insurance industry, with developed markets projected to see 35 per cent more individuals aged 65 and older by 2050 compared to 2025. Amid declining birth rates, younger consumers shift their priorities to products and services that provide emotional satisfaction, fueling the “emotional consumption” trend that continues to shape business.

Against these backdrops, we present our 2026 outlook by gathering insights from the Chinese University of Hong Kong (CUHK) Business School faculty. The first outlook highlights the hottest topics in technology, and the second part looks into economic and consumer behaviour that will redefine businesses.

1. New global order with a fragmented yet innovative world

Trade frictions between the US and China have already driven global firms toward diversification, prompting a shift away from reliance on Chinese manufacturing. However, Wu Jing, Professor at the Department of Decisions, Operations, and Technology, explored in his study that complete decoupling remains challenging due to entrenched dependencies.

“Currently, the most prominent strategy is ‘China plus one’ where companies maintain a baseline of production in Chinese Mainland but diversify into other emerging markets,” he says. “Relocating operations to allied or nearby countries appears to mitigate geopolitical risks, but their long-term sustainability is uncertain.”

A notable example of such dependencies is the controls over high-end computing chips by the US, which may not survive without the supply of rare earths from China. This tug-of-war was resolved at a summit of the two world leaders last year, but the truce is seen as a temporary fix, as Singapore’s Prime Minister echoed that the intense competition will continue.

“Companies are increasingly forced to navigate multiple, often conflicting regional supply chains, each governed by its own set of rules. In practice, this often means maintaining dual systems, one aligned with Western standards and another with China, which significantly drives up operational costs as they must build production lines and logistics networks to comply with different regulatory regimes,” Professor Wu adds. “If relations deteriorate further, a bifurcated supply chain system is probable.”

Not only posing a risk to global economies, Professor Wu sees geopolitical fragmentation likely to hamper sustainable supply chains by disrupting the flow of critical materials, driving up costs and creating inefficiencies. However, he believes there would be a silver lining. “Fragmentations may accelerate innovation through competitive investments, as companies facing disruptions would be incentivised to develop innovative solutions and technologies.”

2. Green finance is recalibrating

The US political polarisation, coupled with EU regulatory adjustments amid corporate and governmental pressure, drove much of the ESG backlash last year. Elsewhere, ESG investments face stricter rules: China’s new framework requires listed companies to disclose their decarbonisation plans this year, while firms listed on Hong Kong’s Hang Seng Composite LargeCap Index are mandated to disclose carbon emissions from their suppliers.

These developments underscore resilience, refining the field by weeding out superficial approaches. “Maximising ESG value is not only about disclosing and reporting, but also about what the companies are actually doing,” says George Yang, Professor at the School of Accountancy. “Firms need to be transparent and provide credible and verifiable evidence to stakeholders, especially investors.”

One of the main criticisms is that green investments may obscure the potential earnings. Professor Yang’s recent study finds that prioritising ESG information can make a company’s stock price less accurately reflect future returns, since investors may overlook traditional financial metrics. This finding reveals implications that extend beyond the surface.

“Sensible ESG initiatives are intended to be aligned with corporate strategies and shareholder values, including profit maximisation. However, in the value maximisation of ESG investments, we need to pay attention to a longer time frame than in the traditional approaches,” he adds.

Value maximisation of ESG investments involves incorporating ESG factors to achieve optimal financial performance. As opposed to traditional approaches that typically focus on maximising profits in the short term, ESG investments often take a longer time, even years, to deliver full benefits for shareholders.

Such a gap calls for the need to manage and balance shareholders’ expectations. In this regard, Professor Yang emphasises financial analysts’ crucial role in linking sustainability goals to investor decisions. “Financial analysts should pass investors’ concerns and expectations to the firm and help the firm to improve its actual ESG initiatives.”

3. Insurers’ battle for the ageing population

As the proportion of elderly citizens rises in some parts of the world, the insurers face mounting pressure to manage spiralling claim costs and a wave of soon-to-retire customer base. Johnny Li, Professor at the Department of Finance, observes that only those who master the art of extracting valuable insights from large and intricate big data can survive.

“Insurers aim to accurately categorise individuals with different health profiles into appropriate risk categories and corresponding premiums effectively. Those that fail to leverage data analytics for this purpose will be crowded out of the market,” he says.

To illustrate, Insurer A charges US$100 for all customers, and Insurer B uses predictive analytics, leveraging health history, lifestyle, and medical records, to assess the risk of each policyholder and charges US$50 to healthy customers and US$150 to less healthy ones. Healthy individuals would choose Insurer B, leaving Insurer A with high-risk clients, rising costs, and eventual failure.

“In practice, there are no insurance products that can be called unique,” Professor Li says. “Many insurers are already using predictive analytics, but those that are willing to invest more to have more refined models can put customers into finer categories, and they tend to have a better competitive advantage.”

Professor Li has developed a new method to forecast longevity risk, a financial risk of a person living longer than their savings, for China’s population. The country only saw the insurance industry emerge after 1979, making its population data inconsistent. As a comparison, insurers in Western markets have collected risk data since the 18th century.

He notes that China’s vast territory leads to regional differences in longevity risk, and these trends are likely to diverge further as socioeconomic disparities persist. Therefore, predictive analytics is essential for insurers to thrive. “With limited data available in the Chinese market, factors such as gender, city of residence, and income may be incorporated into a machine-learning-supported model.”

4. Emotional connection is the prime consumer driver

2025 has seen collectable plush monster toys called Labubu taking the world by storm, with teenagers and adults lining up at stores. In Hong Kong, a Japanese character series, Chiikawa, has captured fans’ hearts through themed cafés and pop-up events celebrating its cute and comforting charm.

While AI has integrated itself deeper into our daily lives, human emotions remain utterly irreplaceable and may become more profound in consumer behaviour. For example, a recent report by the AI Security Institute shows that a third of UK adults have turned to AI chatbots for emotional support.

Lisa Wan, Associate Professor in the School of Hotel and Tourism Management, observes modern customers increasingly seeking deep emotional connections and value beyond the product’s functional benefits. “In the case of Labubu or Chiikawa, the appeal lies beyond the toy, but the surprise in the blind box, scarcity from limited editions, and social buzz increase the emotional drive to buy,” she says.

Emotional connection also matters in the tourism industry. Professor Wan’s study highlights how emotional factors, such as thematic storytelling and colour cues, drive customers’ impulsive buying behaviour. Travellers also often form emotional bonds with a destination even before they arrive, sparked by captivating articles, social media, or heartfelt stories shared by friends and loved ones.

Applying an emotional touch may also be useful for Hong Kong, which has seen hotel occupancy rebound, but retail spending and hotel stays are lower than pre-pandemic levels. The city could consider shifting away from mass shopping toward cultural and authentic experiences to foster emotional connection.

“Hong Kong has unique cultural assets, including the mix of East and West, Cantonese heritage, street markets, and festivals,” says Professor Wan. “More attention should be given to how visitors feel connected to the region and the Greater Bay Area. With economic headwinds and more cost-aware consumers, emotional consumption means shifting from luxury for luxury to emotion-driven value, where deep and meaningful experiences matter, even in moderately priced stays.”

Professor Wan elaborates that when customers feel emotionally attached, they become advocates, community members, repeat visitors, and co-creators of value. “Their loyalty goes beyond ‘I like the hotel’ to ‘I feel connected to the brand and destination.’ Loyalty isn’t just about returning customers, but also making them willing to recommend to others.”

The post China Business Knowledge’s 4 market forces in 2026 first appeared on China Business Knowledge.

Featured faculty: Li Hongfei
Written by Pan Jingyi

We are living in an age of digital solutions. Customers nowadays conveniently turn to their gadgets seeking answers to almost anything, including health and wellness issues. From finding clinics for specific health problems to advanced beauty treatments, people search for guidance online, and user-generated reviews often play a big role in influencing their decision.

Hence, healthcare and medical platforms often feature reviews from their patients to showcase their sophisticated services and procedures. Patients can also share their experiences on their social media or other digital channels. Unlike hotel or restaurant ratings, the most helpful reviews for medical procedures aren’t necessarily the ones that are the most enthusiastic, but those that provide honest accounts of the process and outcomes.

“There are millions of online reviews and blog posts about medical treatments. Since ordinary people have no clue how to evaluate the quality or safety of medical treatments, patient testimonials fill this information gap,” says Li Hongfei, Assistant Professor at the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School.

“Service providers need to identify which types of reviews offer the most value for prospective customers to guide meaningful improvements in their service delivery and targeted marketing strategies.”

“Service providers need to identify which types of reviews offer the most value for prospective customers to guide meaningful improvements in their service delivery and targeted marketing strategies.”

Professor Li Hongfei

Professor Li’s recent study, The impact of process versus outcome-oriented reviews on the sales of healthcare services, finds that reviews for healthcare services generally focus on the process and outcome. Process-focused review describes the medical journey and recovery, and outcome-based review emphasises the results after the treatment.

From the potential customer’s point of view, when deciding whether to use a healthcare service, people typically weigh between its feasibility and desirability. Feasibility refers to how easy or doable the procedure is, and desirability refers to how much the patient wants the final result after the procedure. “Reviews that focus on the process help customers understand the feasibility, while reviews that focus on the outcome highlight the desirability of the procedure,” Professor Li adds.

Feasibility vs. desirability in medical service

Professor Li and his collaborators, Peng Jing at the University of Connecticut, Wang Gang at the University of Delaware, and Bai Xue at Temple University, collected and analysed more than 110,000 reviews from one of the largest online platforms for cosmetic procedures in Chinese Mainland.

Cosmetic procedures provide an ideal context to examine the dynamics of process and outcome, given their complex treatments with highly visible recovery processes. Customers also have more varied perceptions on the desirability and feasibility of plastic surgery compared to other medical procedures.

Their findings are intriguing. The researchers find that reviews highlighting outcomes have a stronger impact on booking rates for less complex medical procedures. Take a simple treatment like Botox injection for facial wrinkles, for example. The appealing outcomes are powerful enough to influence the customer’s decision.

However, when a procedure is more intricate and invasive, such as the rhinoplasty surgery to change the shape of one’s nose, the study reveals a dramatic shift. Process-oriented reviews become overwhelmingly important to influence potential customers in making a decision.

“Imagining the detailed process helps people reduce their concerns about the feasibility, that the procedure will work for them and encourages them to sign up,” Professor Li adds. “Highlighting the process can also enhance the testimonial’s credibility by providing detailed evidence of the recovery journey.”

The researchers further find that popularity and complexity also play a significant role. A popular treatment means it is widely adopted and valued, indicating its feasibility and desirability. Potential customers are more assured about the process and shift their focus to the outcomes. As a result, outcome-based reviews exert a stronger influence on popular treatments.

For complex procedures, however, the primary concern shifts to feasibility. Although the end goal is a desired outcome, potential customers first need to be confident that the procedure is safe and feasible. In these cases, process-oriented reviews are more critical to ease concerns about the process itself and mitigate perceived risks.

The more complex the procedure, the more it requires process-oriented reviews to persuade potential customers. “Customers anticipate a long process of recovery for complex procedures, and truthful reviews focusing on such a process help them feel more prepared,” says Professor Li. “Even if the complex procedure is popular, knowing the details of how it works is important to them.”

For less popular treatments, process-oriented reviews have a stronger influence since customers are more sceptical about feasibility and need detailed information to feel assured.

Making the best use of online reviews

Although the study was done on cosmetic procedures as a specific type of medical treatment, Professor Li believes that the findings and theoretical insights have broader implications for general healthcare services.

Moving beyond a one-size-fits-all approach, he recommends that healthcare platforms identify whether a procedure is complex or simple and highlight the most relevant and useful reviews that resonate with target customers. Leveraging process-oriented reviews into visual recovery timelines can also further exemplify the anticipated arduous procedures.

On the other hand, service providers can encourage customers to write the types of reviews, whether process-based or outcome-based, that best fit the nature of each procedure. “This tailored review management strategy can enhance the effectiveness of user-generated content,” says Professor Li.

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He also suggests the importance of balancing feasibility and desirability factors beyond the healthcare industry to fields like fitness and education, where success often depends on a lengthy process, strenuous exercise, and where reviews from others influence decision-making before an individual invests time and money.

“Service providers should not only emphasise the appeal of desirable outcomes but also thoughtfully integrate the pragmatic and procedural details into their marketing materials,” he adds.

The post Do patients care more about process or results? first appeared on China Business Knowledge.

Featured faculty: Michael Zhang
Written by Putro Harnowo

Hungry while travelling, but couldn’t decide which restaurant to go to? No worries. Just grab your phone and check the ratings for nearby restaurants. These user-generated reviews appear to be more trustworthy than traditional advertising due to their open submissions, making them handy not only for tourists, but also for locals craving something special.

No wonder platforms like Google Reviews and Yelp are cherished. Local apps like Japan’s Tabelog, South Korea’s Naver and Kakao, Chinese Mainland’s Meituan, and Hong Kong’s OpenRice also thrive on their community-based and more curated ratings. However, these reviews should be taken with a grain of salt. Ratings often vary across different platforms, and a high rating doesn’t always guarantee quality.

“Online ratings can be biased, leading to misleading information for readers,” says Michael Zhang, the Wei Lun Professor of Business AI at the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School.

In his latest study, Why is the grass always greener on the other side? Tourist bias in online restaurant ratings, Professor Zhang finds that one key source is tourist bias in their reviews. “Tourists are about 13.4 per cent more likely to give restaurants a higher rating than locals. If most reviews come from tourists who rate places more positively, locals might feel the restaurant is overrated.”

This tendency is evidently found across all kinds of restaurants, whether chains or independent, cheap or high-end, and among tourists from both large and small cities, across all genders. The study also looks into the very different experiences and expectations about restaurants from local customers and tourists.

Understanding this bias would help businesses better manage customer satisfaction levels and tailor their offerings to meet their customers’ expectations. Meanwhile, customers can leverage the findings to assist their judgment when looking for restaurants.

“Tourists are about 13.4 per cent more likely to give restaurants a higher rating than locals. If most reviews come from tourists who rate places more positively, locals might feel the restaurant is overrated.”

Professor Michael Zhang

Why do tourists tend to give higher ratings?

Along with Xu Da Peng at South China University of Technology, Hong Hong at Tongji University, and Ye Qiang at the University of Science and Technology of China, Professor Zhang collected data from Chinese Mainland’s most popular restaurant review platform, focusing on 10 cities famous for their local cuisines, namely Changchun, Changsha, Guangzhou, Guiyang, Haikou, Suzhou, Tianjin, Xi’an, Xiamen, and Zhengzhou.

The sample consists of 70,950 reviews written by 747 users for nearly 40,000 restaurants with a wide range of prices and popularities. The researchers identify whether a reviewer is a local or traveller by analysing their location information relative to the location of the reviewed restaurants.

Professor Zhang and his team discovered that the positive emotional state while travelling is the reason for tourist bias. Travelling boosts their mood and makes tourists more willing to express their feelings instead of pondering on analytical or detailed reasoning. Reviews from tourists are also shorter but accompanied by more photos, suggesting they care more about sharing their experiences rather than commenting on taste and price. They are also more forgiving of restaurant flaws.

Tourists on the lookout for more than just functional dining are more sensitive to the emotional aspects, such as the restaurant’s vibe and the hospitality they experience, as they mention in their reviews. Meanwhile, locals write more about locations, cooking methods, and prices. The researchers further identify the distinctive words used by each group

Focusing on experience may give the impression that tourists seek more expensive or higher-quality restaurants, but a deeper analysis finds that both locals and tourists who write reviews often avoid fancy establishments. It’s just that reviews from tourists tend to be more positive.

How can restaurants and customers leverage tourist bias?

Given the different interests between locals and tourists, Professor Zhang suggests restaurants apply a dual-focus promotional strategy that addresses the distinct needs of both groups. Restaurants can emphasise service quality to attract tourists, create photo-worthy environments and highlight experiential aspects that tourists can share with others, while also training staff to provide attentive service that generates positive emotional experiences.

To retain local customers, restaurants should focus on fundamentals, such as competitive prices and consistent quality and taste, while offering value propositions that appeal to the rational mind and build a reputation through authentic cooking techniques that locals prefer to mention in reviews.

“To integrate both target markets, restaurants may separate seating areas or dining times to cater to different atmospheres, or differentiate menus by highlighting signature experiences for tourists and the most favourite dishes for local patrons,” he says. “Both groups value quality, so maintaining high standards across all dimensions benefits all target markets.”

For the customers, Professor Zhang suggests taking extra steps to find reviews that better match their preferences and weigh the ratings differently. “Tourists wanting to eat like a local should prioritise longer reviews that highlight the restaurant’s location, cooking methods, value for money, with more analytical wordings. Meanwhile, those seeking a memorable experience should consider reviews highlighting service and ambience, with more photos and emotional expressions.”

As restaurants located in touristy areas may have their overall ratings inflated by travellers, the actual local feedback might be closer to lower-rated reviews.

Taking bias into account for better reviews

To ensure the users receive more accurate reviews, Professor Zhang suggests platforms identify which reviews are submitted by tourists and locals, then calculate separate average ratings for each group and provide functionality that allows users to view ratings from either locals or tourists.

With ever-evolving technologies, machine learning can be deployed to train algorithms to scan and detect reviewer types. Algorithmic adjustments can also be carried out to moderate ratings from identified tourists, considering their tendency to inflate their rating submissions.

For transparency, platforms can add labels mentioning locals or tourists to their reviews or display notes or disclaimers about potential bias in highly rated restaurants with predominantly tourist reviews. Platforms can also show trend lines of ratings separated by reviewer type over time.

Furthermore, platforms can suggest personalised recommendations. For example, platforms can recommend restaurants emphasising service and environment for travellers, while suggesting restaurants highlighting location, cooking quality, and value for local users.

“Overall, we find that the tourist bias is consistent across restaurant types, whether chains or independent, as well as across price levels and cities, making the findings broadly applicable,” Professor Zhang adds.

The post The hidden bias of restaurant reviews first appeared on China Business Knowledge.

Featured faculty: Lisa Wan
Written by Pan Jingyi

Imagine you are scrolling through Instagram or RedNote, craving your next travel adventure. A stunning mountain vista appears, but it leaves you unmoved. Then you see the same peak again, this time with a lone hiker, back turned, gazing at the horizon. Suddenly, you pause. “That could be me,” you think.

Science can explain why you feel indifferent to stunning landscapes, but get captivated by a random hiker’s back view, regardless of their personal attractiveness. Travellers heavily rely on imagination when planning trips, as tourism is unique—you can’t try before you buy. Therefore, visual materials play a powerful role in helping tourists envision future experiences.

“We found that the presence of a person in photos significantly prompted tourists to imagine their future travel experiences in the depicted travel scenes, thereby enhancing the perceived destination attractiveness.”

Professor Lisa Wan

But what happens when people are included in these photos? Researchers have long debated whether human presence enhances or detracts from a destination’s appeal. Lisa Wan, Associate Professor of the School of Hotel and Tourism Management and Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School, delves deeper into this question, shedding light on the psychology behind it.

“We found that the presence of a person in photos significantly prompted tourists to imagine their future travel experiences in the depicted travel scenes, thereby enhancing the perceived destination attractiveness,” says Professor Wan.

Moreover, she adds, this favourable effect depends on the type of photo and how the human figure is portrayed.

Humans activate mental simulation

In the study titled Inspiring tourists’ imagination: How and when human presence in photographs enhances travel mental simulation and destination attractiveness, Professor Wan and her PhD student, Li Yuan, conducted three experimental studies across different cultures to test their hypotheses.

The first study recruited 200 American participants through an online platform, aiming to investigate how human presence in destination photos affects tourists’ responses. All participants were required to imagine planning a trip and were shown a travel recommendation post on the social media platform.

As expected, participants found the destination more appealing when the photos included human figures. “The inclusion of humans in the photo activated their mental simulation, resulting in an increase in perceived destination attractiveness,” says Professor Wan.

Mental simulation is a future-thinking process, which happens when people imagine and create scenarios in their minds based on memories and past experiences. “Human presence in destination photos can act as a mental shortcut, making it easier for you to imagine yourself in that scene by observing how other individuals interact with the place,” she adds.

This experience is similar to seeing someone model clothing, which helps us envision how the outfit would look on ourselves. The vivid and detailed imagery of the product experience and consumption process enhances tourists’ connection to the destinations, thus amplifying the destination attractiveness, she explains.

Visible vs. invisible faces

Some studies support the positive effects of including humans in travel photos, but others argue it may diminish tourists’ perceived attractiveness. To explore this further, the team tested different ways of portraying people in photos.

In the second study, nearly 500 American and British participants were recruited from the same online platform. They were randomly assigned to view one of three types of landscape photos: without human presence, with human faces visible and with human faces invisible.

Researchers discovered that travel destinations appear more attractive when the faces in the photos are invisible. Additionally, the physical attractiveness and gender of the model did not impact the results.

“The presence of unfamiliar faces in the photo would make consumers more aware that it is someone else’s travel experience but not theirs, potentially hindering their ability to retrieve self-referencing memories and knowledge to simulate future scenarios,” says Professor Wan.

Natural vs. urban landscape

In the final study, the researchers explored how the types of destinations affect the impact of human presence in photos. This offline experiment involved over 250 Chinese undergraduate students from a university in Hong Kong. The participants were shown photos of a natural mountain landscape or a view of a European city street.

Interestingly, human presence enhanced the appeal of natural landscapes but had a less significant impact on urban ones. Professor Wan notes that urban landscapes represent typical man-made environments, which can effectively activate observers’ mental simulation process and diminish the positive effect of human presence cues.

“In contrast, individuals have fewer expectations about what they can do in the non-humanised scene.  Human presence in such cases would effectively help viewers construct potential behavioural scenarios,” she says.

Present human in a wise way

It’s not uncommon for marketers to include human figures in travel photos to attract tourists, but Professor Wan emphasises the importance of doing it wisely.

Given that mental simulation induced by human presence can significantly improve destination attractiveness, she encourages marketers to incorporate human figures in travel photos on their official websites and social media thoughtfully.

It would be more beneficial to include humans in natural landscape photos than those with urban views. However, Professor Wan reminds that showing a clear face may backfire, “using a model with a back view or an unclear face can reduce the intrusiveness of others to achieve a better communication effect.”

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What about urban attractions? The researchers recommend to highlight the atmosphere, design details or the cultural vibe instead of filling the photo with human figures.

While the results are consistent among participants from various backgrounds, Professor Wan notes that cultural nuances may still play a role. These nuances can manifest in varying attitudes towards group versus solo travel and preferences for social versus private experiences.

Besides these subtle cultural differences, researchers can also further explore how advancements in technology could open new opportunities for leveraging human presence in travel promotion. “Future research can investigate whether the positive effects of human presence still exist in advanced visual formats, such as video and virtual reality devices,” she adds.

The post How the backs of strangers become your invisible guides first appeared on China Business Knowledge.

Featured faculty: Andrew Meyer
Written by Sha Miao

“Intuition is a very powerful thing, more powerful than intellect, in my opinion,” said Steve Jobs. Intuition often inspires a multitude of ideas, but creating a tech giant like Jobs did requires more than just instinct. For most of us, simply relying on gut feelings for problem-solving may only work best in movies and novels.

“There’s an idea that we should follow our intuition,” says Andrew Meyer, Research Assistant Professor with the Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School. “Obviously, we need to act and can’t be paralysed by reflection, but the idea that there’s any special insight in whatever first comes to mind is probably wrong.”

Since the 1970s, two world-renowned psychologists, the late Amos Tversky and Daniel Kahneman, have highlighted flawed patterns in decision-making with their theories of cognitive bias. A notable example is their famous Linda problem:

Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations. Which of the following is more likely:

1) Linda is a bank teller; or

2) Linda is a bank teller and is active in the feminist movement.

Most people guess the second option because Linda “seems” like a feminist. However, the likelihood of two events occurring together is always less than or equal to either individual event. Therefore, the first option is more likely. This conjunction fallacy exemplifies how intuition can blind us to logic—a tendency measured by tools like the cognitive reflection test.

More than just a math test

In a recent paper, Professor Meyer worked with Kahneman before the Nobel laureate passed away in 2024 to explore the cognitive reflection test, a seemingly simple test to measure how likely someone is to stop and think before jumping to conclusions.

Unlike standard mathematical tests that simply assess how well individuals can compute or solve equations, the cognitive reflection test has intuitively compelling wrong answers (like Linda seeming like a feminist) that allow it to evaluate “cognitive reflection” – the ability to override an incorrect gut response and reach a correct answer. This ability is crucial in many areas of life, from making better decisions at work, having the patience to wait for larger rewards, and being less prone to fall for misleading information.

“You could think about a distinction between the ability to think and the tendency to think,” says Professor Meyer. “Some people might be very smart but prone to stick with initial intuitions instead of actually thinking. The cognitive reflection test is supposed to measure this latter tendency.”

“The tendency to stop and think is important for avoiding all kinds of traps in daily life, from phishing emails to overly sweet desserts.”

Professor Andrew Meyer

Cognitive reflection is a distinct and measurable trait describes recent research by Professor Meyer along with Kahneman, as well as Shane Frederick of the Yale School of Management, Maya Bar-Hillel of the Hebrew University of Jerusalem, and Yigal Attali of Duolingo. They compared the cognitive reflection test with a standard math test to see which was a better predictor.

In the study, 4,407 participants were recruited from four different online platforms, and each participant was administered an eight-item cognitive reflection test and an eight-item mathematical aptitude test.

The questions in the cognitive reflection test appear simple, like the classic bat and ball problem: A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?

Most people quickly and intuitively guess 10 cents, because 1.10 and 1.00 differ by 0.10, but the correct answer is five cents. On their variant of this problem, only 26 percent of participants answered correctly.

The questions are designed to trick people into relying on gut feelings rather than taking a moment to think it through. However, the items are still math problems, so they test mathematical abilities. In a previous paper, the Bar-Hillel and Attali had argued that that was all these items tested.

Although the standard math test without intuitive lures was better at predicting numeracy skills, the cognitive reflection test was a better predictor of religious and paranormal beliefs, patience, and the ability to tolerate risk. This suggests that the cognitive reflection test measures something unique beyond math skills.

Why reflection matters

The key aspect of the cognitive reflection test is its intuitive lures—easy responses that seem right, but are designed to catch the participants off guard. These layers help distinguish between those who rely on quick, intuitive answers and those who reflect.

“The cognitive reflection test has been shown to correlate with lots of behaviours like investment decisions, belief in God, and work performance,” Professor Meyer says. “If it was just a math test, those relations might mean something very different than if the cognitive reflection test was actually measuring the tendency to question initial intuitions.”

The study also found that those who scored high on the cognitive reflection test are more sceptical of claims that lack evidence, such as paranormal beliefs or verbiage that sounds deep but is meaningless.

Cognitive reflection is a powerful trait that plays a critical role in both the personal and professional realms. Consumers can apply cognitive reflection when choosing between many products to help them think about the long-term benefits and costs. In professional settings, cognitive reflection can lead to better strategic planning and risk management. In personal situations, it can help manage finances better or make better choices about health and education.

The cognitive reflection test is a useful tool for highlighting this trait and identifying people who possess it. It emphasises the importance of thinking about things in a reflective way. “The tendency to stop and think is important for avoiding all kinds of traps in daily life, from phishing emails to overly sweet desserts,” Professor Meyer adds. “Being able to measure it could be useful for large employers.”

The post Trust your mind or follow your gut? first appeared on China Business Knowledge.

Featured faculty: Zhang Meng
Written by Ellis Ng

Retail is crucial to connecting businesses and consumers but many would agree that retail jobs are quite challenging. Retail workers often encounter customer misbehaviour like yelling at cashiers, trashing stores, making unreasonable demands, committing return fraud, and the like.

But what happens when shoppers who have misbehaved later become victims of poor service? A new study found that these shoppers may connect their own past misdeeds with subsequent negative experiences through a framework of karmic belief.

“Deeply held, culturally rich, yet irrational beliefs – like fate, luck and karma – can shape consumer decisions,” says Zhang Meng, Professor of Marketing at the Chinese University of Hong Kong (CUHK) Business School. “Consumers might psychologically link their own past misdeeds to later encountered shopping experiences, even when those experiences are completely unrelated.”

The idea that our actions have consequences is nearly universal. From the Chinese saying, “種瓜得瓜 種豆得豆: Plant melons and you get melons, plant soybeans and you get soybeans”, to the English, “You reap what you sow,” cultures worldwide share a deep-rooted belief that what goes around comes around. The karmic principle, it turns out, shapes not just our beliefs but also our behaviour as consumers.

In a study titled Retail karma: How our shopping sins influence evaluation of service failures, Professor Zhang, along with Li Ran of Nanjing University and Pankaj Aggarwal of the University of Toronto, found that customers who have previously engaged in questionable shopping behaviour tend to be more forgiving when they later experience poor service themselves.

“Consumers might psychologically link their own past misdeeds to later encountered shopping experiences, even when those experiences are completely unrelated.”

Professor Zhang Meng

From shop floor to karma door

Through eight carefully designed experiments, Professor Zhang and fellow researchers discovered an intriguing pattern: consumers who had previously wronged a business – whether through shoplifting, providing false information or even just contemplating such actions – were notably more forgiving when they later experienced poor service at a different store.

In a series of experiments, participants were asked to imagine themselves in everyday shopping situations where they crossed ethical lines: walking away from items they had accidentally damaged, pocketing items without paying or sneaking extra loyalty points. Later, these same people were presented with scenarios of service failures at different stores. The results showed that rather than reacting with typical consumer frustration, people who had recently imagined themselves (or acted) as “shopping sinners” were notably more accepting of poor service. It is as if their earlier misdeeds made them feel they deserved less-than-stellar treatment – a retail version of karma.

To understand the role of karmic beliefs more deeply, the researchers used moderation-of-process in experiments to examine whether certain factors strengthened or weakened an effect. For example, in one experiment, some participants’ rational thinking was heightened before completing the experiment by reading scientific pieces arguing against the seeming connections between random events.

“If karmic belief was truly driving the effect, then for those whose rational thinking is highlighted at the time of the decision, we expected that their tolerance to the poor service to change – and that’s what we found,” Professor Zhang says.

The researchers also employed serial mediation in experiments to map out how this “retail karma” works. The analyses showed a clear psychological chain reaction: After prior wrongdoing is salient in mind (real or imagined), then the consumer “sees” causality between their own prior wrongdoing and the current service failure, followed by self-blame, and finally, a more forgiving attitude toward poor service.

“These analyses provided more evidence that karmic belief, not simple mood shifts or others, was the most likely key factor in shaping the effects observed in our research,” Professor Zhang adds.

A better understanding of retail karma helps both sides

For businesses, this insight sheds light on customer service and marketing. For example, companies might remind customers of ethical behaviour—perhaps through messaging about fairness, integrity, or reciprocity. Customers might become more forgiving when things go wrong.

“Ultimately, our research aims to raise awareness of the influences of karmic belief in commercial settings. By understanding this factor better, both businesses and consumers can foster more positive interactions.” Says Professor Zhang.

Will technology downplay retail karma?

Karmic-based beliefs run deep in many Asian religions and philosophies, but they are not just limited to the East – according to a recent report (Statista Research Department 2022), 31 per cent of Americans strongly believe in the concept of karma. This makes karma one of the “extraordinary beliefs” with the potential to shape how consumers make decisions in a powerful way.

The rise of artificial intelligence, or AI, in retail raises fascinating questions, says Professor Zhang. “How do consumers perceive service failures when AI, rather than humans, is responsible? Can karma still apply when the ‘wronged party’ isn’t a person but an algorithm?”

“As AI continues to reshape the retail landscape, understanding how human psychology interacts with technology will continue to be crucial for businesses looking to create better customer experiences,” she concludes.

The post Understanding retail karma first appeared on China Business Knowledge.

Featured faculty: Tony Ke
Written by Ellis Ng

Positioning a company’s brand can be a complicated process, especially in today’s world, where even luxury brands struggle to gain dominance. Take a look at LVMH, the owner of Louis Vuitton, and Kering, the owner of Gucci and Bottega Veneta. Both have grappled with shrinking consumer spending and reported a significant drop in China sales.

In these hard times, it’s natural for companies to rethink of positioning themselves closer to the mainstream in search of success. However, does giving in to popular taste will guarantee success? Recent research sheds light on how brands can effectively guide consumer decisions through strategic positioning.

“Positioning is one of the most important strategic decisions for brands, but as technology advances, market and consumer tastes are ever-changing,” says Tony Ke, Associate Professor in the Department of Marketing at the Chinese University of Hong Kong (CUHK) Business School. “It is not uncommon for some brands to chase the trends by adding new products to their portfolio. This will create the discrepancy between the product portfolio and the brand positioning and thus leads to brand dilution.”

Brand positioning requires careful planning. Therefore, in a new paper titled A model of product portfolio design: Guiding consumer search through brand positioning, Professor Ke along with Shin Jiwoong of Yale University and Yu Jungju of Korea Advanced Institute of Science and Technology, came up with a theory to help brands connect with their customers more meaningfully. The study also identifies conditions under which brands should adopt a niche positioning strategy rather than a mainstream one.

“Traditional marketing theory does not really distinguish between brand positioning and product positioning, and when it does, it talks about brand positioning totally separate from product positioning,” Professor Ke says. “Our theory of product-based brand positioning recognises both the difference as well as the link between brand positioning and product positioning.”

Niche vs. mainstream

Brands have become shorthand for consumers, and their positioning provides critical information about the characteristics of a firm’s products, making it easier for consumers to look for what they want. Product positioning, on the other hand, focuses on the specific attributes and characteristics of an individual product within the brand’s portfolio.

“When we want to shop for a new jacket, we may visit our favourite brand first, even though we do not know what designs of the new season will be offered by this brand,” Professor Ke says. “This simple observation implies that brand is guiding consumer search for products.”

Professor Ke used this idea to propose a theory using a Hotelling line model to visualise how brands position themselves in a market. Named after economist Harold Hotelling, the model illustrates how businesses position themselves in a market to maximise consumer reach. The mainstream brands are positioned close to the centre of the Hotelling line to appeal to the mass consumers, while niche brands are positioned near an endpoint to appeal to a specific group of consumers.

“It is not uncommon for some brands to chase the trends by adding new products to their portfolio. This will create the discrepancy between the product portfolio and the brand positioning and thus leads to brand dilution.”

Professor Tony Ke

The researchers then analysed how different factors affected the firm’s optimal positioning strategy, considering variables like search cost, consumer preferences, and the firm’s ability to position its various products in the market. Search cost refers to expenses or efforts consumers must take when searching for products before making a purchase decision.

The niche brand positioning allows firms to stand out and better match the specific tastes of their consumers, especially when search costs are high. Mainstream positioning allows brands to attract a larger number of consumers, but they may dilute their unique identity by offering a wide range of products. However, if many consumers are interested in the brand, maintaining a mainstream position won’t be a problem.

“Many great brands start as niche brands, such as Arc’teryx and Patagonia. Even the name of these brands hints at their niche origin,” says Professor Ke. “Yet, they become very successful because of the clarity of their brand positioning.”

Why is it good to be niche?

According to the theory of product-based brand positioning that the researchers propose, consumers may not know the exact details of every product, but they understand the overall style or type of products the brand offers. Based on this information, consumers can decide whether to search for a specific brand by visiting the store.

Therefore, a brand’s position can convey crucial information that guides the consumer’s search decisions. Instead of having to search through multiple brands to find what they want, consumers can use their understanding of brand positions to narrow down where they look for. Niche positioning naturally provides more information that facilitates consumer search because it restricts the spread of the product portfolio and hence guarantees the consistency between the brand position and the designs of all products under the brand.

A good example of a successful niche brand is Lululemon, which is known for its activewear and lifestyle apparel. “Lululemon builds a very consistent product portfolio,” says Professor Ke. “Consumers know if they want a particular style, say a pair of violet yoga pants with a slim fit and high waist for warm weather, they can get it at Lululemon.”

The theory then implies that a consistent portfolio will save consumers’ search costs. Lululemon, with its limited designs and rich selections, is thus clear and informative with its branding, Professor Ke says. “The brand itself tells consumers lots of information about the products under the brand,” he adds. “If they go to a different brand, there is a chance they can get some selections of yoga pants, but they may not get the exact thing they want.”

And that has helped Lululemon, which is currently enjoying breakout popularity. It now has more than 100 stores in mainland China and saw a 34 per cent year-on-year revenue rise in the last quarter.

Brand positioning in the e-commerce era

Brand building takes time as consumers form their perception about a brand over interactions with its products. Search costs, to some extent, “lock” consumers to their favourite brand by limiting their consideration set. The rise of e-commerce is likely to disrupt branding in general, Professor Ke says, with some merchants focusing less on brand positioning and more on grabbing consumer attention.

“The rise of e-commerce has lowered consumers’ search costs, and our theory thus predicts that brand positioning would become less important, as consumers can now freely explore more products from different brands, consistent with the market trend of ‘brandless’,” he adds. “Indeed, instead of using brands to guide consumer search, e-commerce platforms have powerful recommendation algorithms that could steer consumers to products or brands.”

However, Professor Ke argues that branding itself remains a comprehensive concept. “Besides guiding consumer search, the brand is an important social device that allows patrons to signal their wealth, taste and social status, and this aspect will not be altered by the advancement of e-commerce,” he says.

As big Chinese brands seek breakout success, with BYD attempting to make inroads in the electric vehicle market, Chagee and Luckin Coffee in the beverages market, and Pop Mart in the toys market, they should be more patient. Instead of constantly rolling out new products to chase market trends, companies can focus on the consistency of their product portfolio. This is the organic way to build a brand that lasts and resonates with consumers. For companies with diverse product capabilities, instead of throwing everything under one brand, they can consider building a house of brands to segment the market, like what P&G and Unilever did, says Professor Ke.

“Chasing the market trend is risky because it leads to brand dilution,” he adds. “Staying focused on their product portfolio is important. You cannot put everything that you can make, or you can sell under one brand, which will make the brand lose its identity.”

The post Stay niche for better branding first appeared on China Business Knowledge.

Featured faculty: Wang Weiquan
Written by Putro Harnowo

The global e-commerce market has expanded remarkably and is estimated to reach US$8.09 trillion by 2028, according to Canadian multinational e-commerce company Shopify. In this field, China has been dominating the market with platforms like Taobao, JD.com, and Pinduoduo providing a diverse array of products, making buying experience as effortless as a snap of the fingers. The hardest part may lie in searching for products that match expectations.

When looking for products on e-commerce platforms, users are normally presented with organic search results along with sponsored ones. These sponsored results are paid placements that advertisers purchase to promote their products. However, the growing number of misleading and deceptive advertisements have tainted user trust. As a result, users are likely to skip or even grow suspicious towards sponsored products or the sellers.

“Online users’ trust and evaluations in e-commerce are multifaceted concepts, such as whether the product is of high quality and whether the seller is honest,” says Wang Weiquan, Professor in the Department of Decisions, Operations and Technology at the Chinese University of Hong Kong (CUHK) Business School.

Advertisements are crucial for e-commerce to gain revenue and for sellers to boost sales, so user distrust could threaten the platform’s sustainability. In a study titled Addressing online users’ suspicion of sponsored search results: Effects of informational cues, Professor Wang, along with Deng Honglin of Tongji University and Lim Kai of the Hong Kong Polytechnic University, examined the complexities behind such scepticism and how to minimise it.

“Different positive informational cues, such as user ratings, seller reputation ratings, and product reviews, help users assess different facets of trust in the seller,” he adds. “These cues allow the user to compare the sponsored results or misleading advertisements with organic search results, thereby influencing their trust.”

Why do e-commerce users become suspicious?

E-commerce users are normally less sceptical when seeing organic search results. To understand how suspicions towards sponsored results arise, the researchers look into the nature, dimensions, and characteristics of such behaviour and identify three key reasons: decision uncertainty, perceived malintent and increased processing of sponsored search results.

Decision uncertainty appears when a user has difficulty in evaluating the search results accurately, e.g., whether the sponsored products are good quality or the sellers are credible. Perceived malintent refers to the perception that the platforms intend to mislead. Increased processing involves heightened cognitive, behavioural and affective efforts to evaluate the sponsored search results, which will reduce suspicions.

“Online users’ trust and evaluations in e-commerce are multifaceted concepts, such as whether the product is of high quality and whether the seller is honest.”

Professor Wang Weiquan

Through an experiment involving 90 participants using a website that simulated Taobao, the researchers found that positive informational cues can help ease suspicions. These cues can be related to the product quality via ratings and reviews from previous buyers, or the sellers’ credibility by showcasing information about the reputation, certifications, or other indicators that suggest reliability.

Showing positive informational cues will reduce decision uncertainty and perceived malintent, which also increases the processing of sponsored search results. The researchers argue that positive cues prompt internalisation, a mental process of adopting and integrating external information into one’s beliefs that leads users to change their perceptions.

“As user-generated content comes from other users who have purchased the products, it is generally perceived as more credible due to the altruistic motivations of prior buyers,” says Professor Wang. “By contrast, misleading advertisements create scepticism among users because these advertisements are sponsored by the seller, which acts in the seller’s interest and may conceal possible disadvantages of the seller.”

When positive cues are not enough

While giving out positive cues can influence perceptions, the researchers found that some users still bear suspicions towards sponsored search results. These users are typically wary of persuasive messages, making it harder to internalise positive cues. To investigate this further, in another experiment with 120 different participants on the same platform, the researchers delved into the conditions under which kind of cues are helpful to minimise suspicions.

The researchers found that showing popular brands on the sponsored search results will reduce users’ uncertainty and perceived malintent while increasing the processing of search results. A popular brand signals that many consumers have purchased and used the products, which pictures product quality. On the contrary, when an unknown brand is displayed, positive ratings and reviews may lower users’ uncertainty and perceived malintent, but they are not strong enough to overcome the inherent suspicion.

As users can easily compare the ratings and reviews of the sponsored results with organic ones on the platforms, the researchers looked deeper into other factors that may help to trigger internalisation. Through the third experiment involving a new group of 120 participants on the same platform, the researchers found that seeing sponsored and organic search results with similar positive ratings or reviews would reduce users’ decision uncertainty and perceived malintent, even for unknown brands. With such comparisons, users are more willing to process information about sponsored results if they feel assured about the quality based on ratings or reviews despite initial doubts about the unknown brand.

Increasing user engagement with sponsored search results

As organic results are typically shown in descending order from top to low ratings, the researchers encourage platforms to examine the rating of the sponsored results, especially for unknown brands, before allowing them to be presented on top of the search results page.

The rating should also be verified to be comparable to the organic results. Encountering poorly rated sponsored results may lead to scepticism about the platform’s overall credibility and the quality of its offerings.

Furthermore, presenting sponsored results with low ratings in the top position would be perceived as misleading. The platform should not place the sponsored results together with the top organic ones, as this would undermine its reputation.

“Platforms can enhance the credibility of sponsored search results by collaborating with reputable third-party organisations to provide certification badges or endorsements,” Professor Wang adds. “These endorsements or certifications can include quality assurance, user satisfaction survey results, or compliance with industry standards, effectively reducing user scepticism. Our study shows that users trust information from a reputable or credible source.”

Another way to boost user confidence is to collaborate with social media influencers as opinion leaders. The interaction between influencers and their followers fosters a sense of community and engagement, which can further increase users’ interest in and perceptions of the sponsored product.

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Lastly, although the study was conducted in China, Professor Wang is certain that the findings are applicable to different environments. “Cultural differences can indeed influence consumer decisions on e-commerce. However, the fundamental psychological factors driving user suspicion and trust in online environments are universal,” he explains.

“The need for credible information and the tendency to rely on social proof, like user-generated content, are common across different cultures. Furthermore, e-commerce users in different cultures are exposed to similar types of online information cues, making our findings relevant beyond the Chinese context.”

The post Enhancing consumer trust in sponsored ads first appeared on China Business Knowledge.