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Consumer preference formation and pioneering advantage
158
J PROD INNOV MANAG 19903 m-70
Even if a company starts out with an inferior product, it can overtake the industry leader if it can turn out a new line six months faster. product designers cannot easily work with newness and keep to their timetables. Engineers need ideas that snap into the skills they already have. product development can’t be interrupted to accommodate some unexpected new piece of technology. New solutions, however desirable they may be, have to be available to designers at the beginning of the cycle. And even then, new ideas are useful only if they’ve been fleshed out and tested so they can be incorporated without breaking stride. Emphasizing the potential simplicity of the improvement process, Gomory points out that even something as elementary as using a single screw size in a computer chassis can be sign&ant. Building on his IBM experience, he then goes on to cite their Proprinter as an example: How an interdisciplinary team was assembled and given free reign to design “it.” How they were encouraged to work in parallel, not sequentially. How the typical equivalent printer of the time contained one hundred and fifty partshow the design team set a target of sixty parts (they ended up with sixty-two). How twenty parts were replaced by one molded plastic frame. How all parts that required human adjustment were eliminated; how they were made to be self-aligning so that jigs would be minimal. How parts were designed to clip together without fasteners. How the product was designed in layers so that robots could assemble it from the bottom UP* In closing, the author emphasized that engineers must continually be roaming the outside
ABSTRACTS
world searching for ideas they can use. More important than attending conferences to accomplish this is presenting papers at these meetings. The act of preparing a supposedly state-of-the-art paper forces people to keep up with the relevant literature and to anticipate questions and objections from their peers, all of which serve to keep engineers on their toes. Consumer Preference Formation and Pioneering Advantage, Gregory S. Carpenter and Kent Nakamoto, Journal of Marketing Research (August 1989),pp. 285-298 (BBH) It has long been hypothesized that early market entrants, or pioneers, enjoy considerable longterm advantages over later entrants. These “firstmovers” are likely to enjoy especially large market share advantages. They need not be the first entrant, but they should be among the first entrants. Surviving market pioneers tend to have larger market shares than surviving later entrants. This finding is evidence for both industrial and consumer markets. The advantage that accrues to market pioneers tends to be very resilient. It appears to be resistent to a variety of competitive actions, including new product introductions by existing rivals, new entrants, price competition and changes in consumer tastes and preferences. The authors observe that the “mechanism producing pioneering advan somehow slows the natural forces of competition, making it diflicult for later entrants to ‘compete away’ a pioneer’s advantage.” What this “mecht;rusm“ might be has been the subject of some speculation. Some authors have sted entry barriers that arise from preemptive positioning and the existence of switching costs are responsible. preemptive positioning by an early entrant involves adopting positions in the more lucrative segments while leaving the least attractive segments for later firms. Such positioning places a burden on later entrants to try to offer greater performance or bargain prices, thereby raising costs and lowering profit potential. Switching costs also serve as entry barriers if the later entrant is not able to offer compensating value in order to induce product trial. The authors of this article argue that while entry barriers are an important source of pioneering
ABSTRACTS
J PROD CNNOVMANAG 1990;1:156-70
advantage, they are not always associated with pioneering advantage. Indeed, pioneering advantage is present in a number of industries in which entry barriers are minimal or virtually nonexistent. The authors suggest that the process by which consumers learn about brands and form brand preferences may be an important element of the pioneering advantage mechanism. The authors’ explanation for this has two components. First, the pioneer plays an important role in educating consumers in terms of the ideal attribute set and attribute importance. This may tiuence consumers to prefer the pioneer’s brand over later entrants. Second, the pioneer’s brand may become the reference for the product category. In this instance, the brand becomes the standard against which later entrants are judged. Two experiments were conducted by the authors to demonstrate the existence of this twofold mechanism and to examine features of its operation. The results of the East experiment indicate that under conditions where the consumers’ ideal attribute set is ambiguous, pioneers have larger preference shares. The structure of consumer preferences for brands in the product category is affected by the order of market entry. Pioneers enjoy a superior position and a higher share of buyers’ choices while later entrants are perceived as less ideal. The second experiment provided a stronger test of the influence of learning on preference structure. The authors found that the consumers* product attribute preferences are highly associated with the attributes of the pioneer. If the pioneer is able to sufficiently induce trial and penetrate the market, then this bias that accrues from being first can lead to substantial competitive advantage. The type of competitor was found to influence the price sensitivity of the pioneer. As competitors become increasingly differentiated, the pioneer becomes more price sensitive. Therefore, increasing dissimilarity among brands should lead to greater pricing pressure on the pioneer. The authors state that price cutting is least effective for “me-too” brands and most effective for differentiated brands for capturing share from the pioneer. The authors have proposed an interesting the-
159
ory that sheds further light on the mechanism responsible for the advantage that is associated with market pioneers: the pioneer influences perceptions of the product category and becomes the reference brand by shifting perceptions toward its own position.
commercial useof coqjoint Aludysh An up date, Dick R. Wittink and Philippe Cattin, Journal ofMarketing (July MM), pp. 91-96 (RRR) Conjoint analysis is a sophisticated market research tool frequently used (and misused) in product repositioning and new product development applications. The authors report results of a survey of conjoint analysis research suppliers (market research tlrms) covering 1981-1985. It updates an earlier study reported by them covering the period 1971-1980. They document the widening range of applications of this methodology and systematic changes in its mode of use and interpretation. The authors estimate that about four hundred research suppliers now provide to their clients, a number that cantly since 1985, following the introduction of much of the software now used to facilitate cornmercial usage of conjoint methods. Applications have grown in similar fashion to a current level of as many as two thousand studies per year. Consumer goods studies still roughly 40% of the applications, the ing from industrial goods, services neous product/service categories. Bearing in mind that can be served in a sin reported include new pr tion (47%). competitive (38%), market segmentation (33 ing (18%). While the relative i aims remains the same, it wou joint applications are now more eted with fewer purposes bei tion. As far as research personal interviews still prov put in the bulk of these studie lus construction itself also marily “full profile” to
J PROD INNOV MANAG 19903 m-70
Even if a company starts out with an inferior product, it can overtake the industry leader if it can turn out a new line six months faster. product designers cannot easily work with newness and keep to their timetables. Engineers need ideas that snap into the skills they already have. product development can’t be interrupted to accommodate some unexpected new piece of technology. New solutions, however desirable they may be, have to be available to designers at the beginning of the cycle. And even then, new ideas are useful only if they’ve been fleshed out and tested so they can be incorporated without breaking stride. Emphasizing the potential simplicity of the improvement process, Gomory points out that even something as elementary as using a single screw size in a computer chassis can be sign&ant. Building on his IBM experience, he then goes on to cite their Proprinter as an example: How an interdisciplinary team was assembled and given free reign to design “it.” How they were encouraged to work in parallel, not sequentially. How the typical equivalent printer of the time contained one hundred and fifty partshow the design team set a target of sixty parts (they ended up with sixty-two). How twenty parts were replaced by one molded plastic frame. How all parts that required human adjustment were eliminated; how they were made to be self-aligning so that jigs would be minimal. How parts were designed to clip together without fasteners. How the product was designed in layers so that robots could assemble it from the bottom UP* In closing, the author emphasized that engineers must continually be roaming the outside
ABSTRACTS
world searching for ideas they can use. More important than attending conferences to accomplish this is presenting papers at these meetings. The act of preparing a supposedly state-of-the-art paper forces people to keep up with the relevant literature and to anticipate questions and objections from their peers, all of which serve to keep engineers on their toes. Consumer Preference Formation and Pioneering Advantage, Gregory S. Carpenter and Kent Nakamoto, Journal of Marketing Research (August 1989),pp. 285-298 (BBH) It has long been hypothesized that early market entrants, or pioneers, enjoy considerable longterm advantages over later entrants. These “firstmovers” are likely to enjoy especially large market share advantages. They need not be the first entrant, but they should be among the first entrants. Surviving market pioneers tend to have larger market shares than surviving later entrants. This finding is evidence for both industrial and consumer markets. The advantage that accrues to market pioneers tends to be very resilient. It appears to be resistent to a variety of competitive actions, including new product introductions by existing rivals, new entrants, price competition and changes in consumer tastes and preferences. The authors observe that the “mechanism producing pioneering advan somehow slows the natural forces of competition, making it diflicult for later entrants to ‘compete away’ a pioneer’s advantage.” What this “mecht;rusm“ might be has been the subject of some speculation. Some authors have sted entry barriers that arise from preemptive positioning and the existence of switching costs are responsible. preemptive positioning by an early entrant involves adopting positions in the more lucrative segments while leaving the least attractive segments for later firms. Such positioning places a burden on later entrants to try to offer greater performance or bargain prices, thereby raising costs and lowering profit potential. Switching costs also serve as entry barriers if the later entrant is not able to offer compensating value in order to induce product trial. The authors of this article argue that while entry barriers are an important source of pioneering
ABSTRACTS
J PROD CNNOVMANAG 1990;1:156-70
advantage, they are not always associated with pioneering advantage. Indeed, pioneering advantage is present in a number of industries in which entry barriers are minimal or virtually nonexistent. The authors suggest that the process by which consumers learn about brands and form brand preferences may be an important element of the pioneering advantage mechanism. The authors’ explanation for this has two components. First, the pioneer plays an important role in educating consumers in terms of the ideal attribute set and attribute importance. This may tiuence consumers to prefer the pioneer’s brand over later entrants. Second, the pioneer’s brand may become the reference for the product category. In this instance, the brand becomes the standard against which later entrants are judged. Two experiments were conducted by the authors to demonstrate the existence of this twofold mechanism and to examine features of its operation. The results of the East experiment indicate that under conditions where the consumers’ ideal attribute set is ambiguous, pioneers have larger preference shares. The structure of consumer preferences for brands in the product category is affected by the order of market entry. Pioneers enjoy a superior position and a higher share of buyers’ choices while later entrants are perceived as less ideal. The second experiment provided a stronger test of the influence of learning on preference structure. The authors found that the consumers* product attribute preferences are highly associated with the attributes of the pioneer. If the pioneer is able to sufficiently induce trial and penetrate the market, then this bias that accrues from being first can lead to substantial competitive advantage. The type of competitor was found to influence the price sensitivity of the pioneer. As competitors become increasingly differentiated, the pioneer becomes more price sensitive. Therefore, increasing dissimilarity among brands should lead to greater pricing pressure on the pioneer. The authors state that price cutting is least effective for “me-too” brands and most effective for differentiated brands for capturing share from the pioneer. The authors have proposed an interesting the-
159
ory that sheds further light on the mechanism responsible for the advantage that is associated with market pioneers: the pioneer influences perceptions of the product category and becomes the reference brand by shifting perceptions toward its own position.
commercial useof coqjoint Aludysh An up date, Dick R. Wittink and Philippe Cattin, Journal ofMarketing (July MM), pp. 91-96 (RRR) Conjoint analysis is a sophisticated market research tool frequently used (and misused) in product repositioning and new product development applications. The authors report results of a survey of conjoint analysis research suppliers (market research tlrms) covering 1981-1985. It updates an earlier study reported by them covering the period 1971-1980. They document the widening range of applications of this methodology and systematic changes in its mode of use and interpretation. The authors estimate that about four hundred research suppliers now provide to their clients, a number that cantly since 1985, following the introduction of much of the software now used to facilitate cornmercial usage of conjoint methods. Applications have grown in similar fashion to a current level of as many as two thousand studies per year. Consumer goods studies still roughly 40% of the applications, the ing from industrial goods, services neous product/service categories. Bearing in mind that can be served in a sin reported include new pr tion (47%). competitive (38%), market segmentation (33 ing (18%). While the relative i aims remains the same, it wou joint applications are now more eted with fewer purposes bei tion. As far as research personal interviews still prov put in the bulk of these studie lus construction itself also marily “full profile” to