Innovation in context: the effect of diminishing sensitivity, reference dependence, and goal orientation on consumer acceptance of new features

Abstract

The same level of product feature enhancement can have differential effects on consumer choice depending on the product's other feature levels, and consumers' expectations for its features. Based on decreasing marginal utility and theories that derive from it, in Chapter 1 I present that a given level of feature enhancement has the greatest effect on brand choice for those brands whose other features are at relatively lower levels. Actual transaction data from an internet auction site is used to demonstrate that feature enhancements result in a greater increase in choice for those products whose other features are relatively inferior.A boundary condition for this theory is explored in Chapter 2. Consumers have general expectations for a product's features, and if the lower-end model falls below those expectation levels, enhancing a feature will not result in a greater impact on choice. By designing and conducting a lab experiment that measured people's expectation levels for a product's features as well as their brand choices, it is demonstrated that feature enhancements do not increase choice when a product's other features fall below consumers' expectations.Chapter 3 demonstrates that self-regulatory focus influences consumer preference for brands and innovative features. It also extends the work of Nowlis and Simonson (1996) by illustrating that when a product's target consumers are relatively promotion-oriented, new or comparatively weak brands will profit more than relatively strong brands from the introduction of new features. Where respondents are prevention-oriented, however, new or comparatively weak brands do not profit more than relatively strong brands. Also, where quality-assurance mechanisms, such as brand trust, are in place, price expectations reported by prevention oriented respondents were not significantly different from those of other respondents. Brand affect will positively influence brand choice for promotion-oriented individuals, but prevention-oriented individuals will prefer lower prices to higher equity brands.