When Expertise is required

I was reflecting on a comment Dina made in class yesterday that for doctors, the best referrals are in fact loyal customers, whereas for the Trap Rock Brewery amateurs were better. One clear difference between someone who chooses restaurants and someone who chooses medications or treatments is the amount of expertise and experience required to make a judgment.

For restaurants anyone who had a one time positive experience may choose to give a positive evaluation and that evaluation would for the most part seem considered credible. Even on websites like Yelp, we receive what we perceive to be credible feedback from people we have never met or whose reputation we are unfamiliar with. So in these situations, loose networks can lead to new referrals.

For doctors, however, expertise and experience must exceed beyond a single exposure. Drugs and treatments must not only go through an FDA approval process, but even after legal vetting, still undergo in office trials and get validation through conference presentations, or repeated doctor experiences. In this case, vouching for a product that turns out not to be credible has higher cost, so a harder bar to cross to get referrals, and since doctors are looking for people whose opinions they can honestly trust, rather than people who may be indirectly benefiting from either the product manufacturer or from the increased credibility of being perceived as an expert. So compared to restaurant customers, doctors are more wary and risk averse.

It would be interesting to determine whether there is a spectrum between customer risk aversion and product complexity to the amount of expertise required in a network referral. For instance between pharmaceuticals and restaurant visits are consumer electronics; some expertise is helpful, but it's not life or death - a high complexity product that doesn't automatically generate risk aversion. Another is vacations where product complexity is low, but where people are very concerned about having a bad experience.