An Empirical Analysis of Consumer Purchase Behavior of Base Products and Add-ons Given Compatibility Constraints

Abstract

In the digital camera market, Sony developed the Memory Stick card, which is only compatible with Sony's cameras. However, Kodak, Canon, Nikon, and HP all adopted the SD (Secure Digital) memory card. Despite the common practice of multiple standards, there is lack of knowledge on how technological compatibility affects consumer purchase decisions on base products and add-ons at the brand and/or standard level. We recognize the existence of multiple standards and develop a dynamic model in which a consumer makes periodic purchase decisions on whether to adopt/replace a base product and/or an add-on product. We take into account the dynamic and interactive inventory effect by allowing consumers to recognize the long-term financial implications when forward-planning in switching to a base product that is incompatible with the inventory of memory cards they have accumulated. Applying the model to consumer purchase history of digital cameras and memory cards from 2000 to 2004, we demonstrate compatibility makes consumer purchase decisions of base and addon products inter-temporally interdependent. Inventory of add-ons significantly affects purchases of base products. Our model explains the sales trends of the major brands of cameras and quantifies how much promotion to offer consumers in order to switch standards.

You want to sell this to me twice!? How perceptions of betrayal may undermine internal product upgrades

“…First, examining how consumers react to internal (vs. external) product upgrades, we reveal its systematic negative impact on consumers' responses in the post-purchase stage. Prior work on product modifications largely focused on consumer responses in a pre-purchase stage (Bertini et al, 2009;Gershoff et al, 2012;Wiegand & Imschloss, 2021), and the few studies on post-purchase responses either examined external product upgrades (Liu et al, 2018), non-built-in software applications (Erat & Bhaskaran, 2012;Yoo et al, 2012), or nonpermanent internal product upgrades without comparing them to established product reconfiguration approaches (Schaefers et al, 2022). As such, our research expands the literature on product modifications in general (Bertini et al, 2009;Ma et al, 2015), and it responds to calls for more research on product reconfigurations (Ng & Wakenshaw, 2017).…”

“…Perceived betrayal is defined as "[…] a customer's belief that a firm has intentionally violated what is normative in the context of their relationship" (Grégoire & Fisher, 2008, p. 250). In contrast, we theorize that external product upgrades will not elicit similar perceptions of betrayal as the external feature is a separate item that is not already part of the consumer's purchased product (Bertini et al, 2009;Erat & Bhaskaran, 2012;Liu et al, 2018). Research on exchange relationships suggests that these perceptions of betrayal, in turn, motivate consumers to restore fairness (e.g., by punishing or causing inconveniences to the firm; Grégoire & Fisher, 2008;Grégoire et al, 2009;Ward & Ostrom, 2006).…”

“…For example, some research has examined how the availability of external add-on features influences the evaluation of the base product in the pre-purchase stage (Bertini et al, 2009). Other work (Erat & Bhaskaran, 2012;Liu et al, 2018) focused on the post-purchase stage itself and examined how base product or add-on pricing influences the decision to purchase the add-on feature or the future replacement of the base product. Recently, some initial research investigated internal product upgrades.…”

“…Adding an incongruent, hedonic functionality (HF) to an utilitarian base product is valued more than adding a congruent, utilitarian functionality (UF). Adding an incongruent, UF to a hedonic base product is valued less than adding a congruent HF Liu et al (2018) Digital camera (memory card) Investigate the impact of incompatibility of add-ons with base products and the role of past purchases on replacement purchases Consumers are locked-in by their past purchase behavior and by the utility that compatible add-ons provide. The add-on inventory effect is enhanced when future prices of add-ons are higher; lock-in is attenuated when future incompatibility is expected Ma et al (2015) Car (autopilot technology, adaptive cruise control system) Smartphone (kinetic charging system)…”

What attracts vehicle consumers’ buying

“…The specific differences on cancer treatment medicine in terms of trust belief levels are investigated using a large cross-cultural sample, which facilitates consumers segmentation and precise marketing based on its corresponding characteristics (Strang, 2018). Liu et al (2018) developed a dynamic model to study the different consumer purchase behavior on buying base product and add-on product concerning compatibility constraints. The empirical analysis argued that the inventory of add-ons showing an obvious impact on the consumer purchase behavior of base products.…”