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Rotman Insights Hub | University of Toronto - Rotman School of Management

When it comes to our perceptions and expectations, company size matters

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Pankaj Aggarwal

Why is it that we are especially offended by bad service from a local coffee shop, but brush off rudeness at a big box store? It turns out that the size and perceived power of a business drives a few of the expectations we hold as consumers, according to a recent study from the Rotman School.

This new research — which describes how customers expect more from small businesses when it comes to customer service — says a lot about how consumers view and connect with brands. And the authors share the implications for marketers and leaders at both small businesses and multinational organizations.

The study is coauthored by professor Pankaj Aggarwal of the department of management at the University of Toronto Scarborough, who is cross-appointed to the marketing area at Rotman. Aggarwal has devoted most of his academic career to understanding how consumers perceive brands, and he is specifically interested in the concept that consumers connect with brands in much the same way they connect with people.

Aggarwal was initially curious about the concept of brands-as-people, especially with the different opinions consumers seem to have surrounding small and big businesses.

“With small businesses, there is typically an underdog effect at play. People seem to see them as ‘the little guy’ and want to support them more. We see some evidence for that reflected in tax breaks for small businesses and community campaigns to shop locally,” he explains. 

“We wanted to know if there was something more at stake. In what ways do we see small and big businesses differently? Are big businesses at a disadvantage because they might be seen as the enemy?”

For this paper, the authors surveyed almost 200 American consumers about their expectations and perceptions of small and large companies. They asked study participants to rate their general expectations of small and large businesses, specifically on warmth (how warm, friendly, kind and understanding these companies seem to be in conducting business), competence (how capable, effective and decisive they appeared), and their perceived power in the market.

“There was an immediate difference in what people expected from a small company versus a bigger company, and most of these assumptions were driven by power,” explains Aggarwal. “If a businesses or individual is seen as less powerful in the marketplace, we might expect them to be overly warm or gracious to earn our business.”

These differences are also supported by analysis completed by the researchers of three years’ worth of Yelp reviews for one U.S. coffee chain that was seen as a big corporation in one state and as a smaller player in another. When the chain was perceived as a smaller player, it was their warm qualities — sincerity and friendliness — that drove their overall online scores.

Surprisingly, in other surveys conducted, the study authors also found that consumers expected the same level of competence from both big and small businesses.

“The smaller firms are actually at a disadvantage,” describes Aggarwal. “They are held to the same standard in delivering quality products as their bigger counterparts, and we also expect them to be exceptionally service-minded. We penalize smaller businesses more for being unfriendly or cold.”

Despite the advantages (and disadvantages) that come with running a smaller (or larger) company, it’s important to realize that the size of your company is relative, says Aggarwal.

“We noticed that it’s easy for a firm to position itself as a smaller or bigger player in the market by playing up or playing down certain metrics, such as the number of stores they operate or the number of employees they have on the payroll. In this way, they can make themselves seem much bigger or smaller than their competitors,” says Aggarwal.

“What is most important in this work is that we’re seeing that consumers do pay attention to company size and type, and they make certain judgement calls about customer service and competence, right away,” he adds. “Marketers and leaders need to know that consumers have certain expectations as to what you deliver and how you deliver it.”

“Make sure that the story you tell about your brand is true to your business and considers your customers’ specific expectations — especially those based on your company’s size.”

Pankaj Aggarwal is a professor of marketing in the department of management at University of Toronto-Scarborough, with a cross-appointment to the marketing area at Rotman. He sits on the editorial boards of the Journal of Consumer Research and the Journal of Consumer Psychology, and former associate chair of the department of management at the University of Toronto-Scarborough. His articles have appeared in the Journal of Consumer Research, Psychological Science, Journal of Marketing Research and Journal of Consumer Psychology among others.