IDEAS home Printed from https://ideas.repec.org/a/eee/joinma/v56y2021icp18-40.html
   My bibliography  Save this article

Do You Like What You (Can't) See? The Differential Effects of Hardware and Software Upgrades on High-Tech Product Evaluations

Author

Listed:
  • Wiegand, Nico
  • Imschloss, Monika

Abstract

“Over-the-air” software upgrades are a recent trend in the automotive industry to distribute firmware directly to customers via the Internet. These upgrades can endow the vehicle with completely new functions that enhance safety, convenience, and performance. The US manufacturer Tesla was the first to integrate such upgrades on a regular basis to let customers participate in continuous innovation, giving Tesla a competitive edge over rival brands. Since then, several premium manufacturers have followed suit. This research examines how consumers perceive and respond to software upgradeability in durable high-tech products vis-à-vis integral product alternatives and hardware upgradeability. Results of four studies with more than 3,000 participants suggest that consumers evaluate software upgrades less positive than hardware upgrades because they perceive software as less capable to enhance product quality. However, bundling software upgrades to larger packages and stressing the low effort required to integrate new functions are viable ways to remedy this perception. Importantly, the findings suggest that offering products fully equipped with all premium functions to be unlocked via software upgrades—as done by several premium brands—is a risky strategy. Consumers react negatively to the artificial restriction of functionalities, irrespective of whether these are offered as temporary leases or permanent purchases. The findings provide initial evidence for the game-changing potential of software upgradeability and offer managers concrete guidance for designing and marketing upgradeable hardware-software platforms.

Suggested Citation

  • Wiegand, Nico & Imschloss, Monika, 2021. "Do You Like What You (Can't) See? The Differential Effects of Hardware and Software Upgrades on High-Tech Product Evaluations," Journal of Interactive Marketing, Elsevier, vol. 56(C), pages 18-40.
    • Handle: RePEc:eee:joinma:v:56:y:2021:i:c:p:18-40
    DOI: 10.1016/j.intmar.2021.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1094996821000207
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intmar.2021.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Raghu Garud & Arun Kumaraswamy, 1995. "Technological and organizational designs for realizing economies of substitution," Strategic Management Journal, Wiley Blackwell, vol. 16(S1), pages 93-109.
    2. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    3. Vishal V. Agrawal & Atalay Atasu & Sezer Ülkü, 2016. "Modular Upgradability in Consumer Electronics: Economic and Environmental Implications," Journal of Industrial Ecology, Yale University, vol. 20(5), pages 1018-1024, October.
    4. Miceli, Gaetano “Nino” & Raimondo, Maria Antonietta & Farace, Stefania, 2013. "Customer Attitude and Dispositions Towards Customized Products: The Interaction Between Customization Model and Brand," Journal of Interactive Marketing, Elsevier, vol. 27(3), pages 209-225.
    5. Russell W. Belk, 2013. "Extended Self in a Digital World," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 40(3), pages 477-500.
    6. Verhoef, Peter C. & Stephen, Andrew T. & Kannan, P.K. & Luo, Xueming & Abhishek, Vibhanshu & Andrews, Michelle & Bart, Yakov & Datta, Hannes & Fong, Nathan & Hoffman, Donna L. & Hu, Mandy Mantian & No, 2017. "Consumer Connectivity in a Complex, Technology-enabled, and Mobile-oriented World with Smart Products," Journal of Interactive Marketing, Elsevier, vol. 40(C), pages 1-8.
    7. Sezer Ülkü & Claudiu V. Dimofte & Glen M. Schmidt, 2012. "Consumer Valuation of Modularly Upgradeable Products," Management Science, INFORMS, vol. 58(9), pages 1761-1776, September.
    8. Cabigiosu, Anna & Zirpoli, Francesco & Camuffo, Arnaldo, 2013. "Modularity, interfaces definition and the integration of external sources of innovation in the automotive industry," Research Policy, Elsevier, vol. 42(3), pages 662-675.
    9. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    10. Vish Krishnan & Karthik Ramachandran, 2011. "Integrated Product Architecture and Pricing for Managing Sequential Innovation," Management Science, INFORMS, vol. 57(11), pages 2040-2053, November.
    11. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    12. Langlois, Richard N. & Robertson, Paul L., 1992. "Networks and innovation in a modular system: Lessons from the microcomputer and stereo component industries," Research Policy, Elsevier, vol. 21(4), pages 297-313, August.
    13. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
    14. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    15. Carrozzi, Amelia & Chylinski, Mathew & Heller, Jonas & Hilken, Tim & Keeling, Debbie I. & de Ruyter, Ko, 2019. "What's Mine Is a Hologram? How Shared Augmented Reality Augments Psychological Ownership," Journal of Interactive Marketing, Elsevier, vol. 48(C), pages 71-88.
    16. Rijsdijk, S.A. & Hultink, E.J. & Diamantopoulos, A., 2007. "Product Intelligence: Its Conceptualization, Measurement and Impact on Consumer Satisfaction," ERIM Report Series Research in Management ERS-2007-006-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    17. Joann Peck & Suzanne B. Shu, 2009. "The Effect of Mere Touch on Perceived Ownership," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 36(3), pages 434-447.
    18. Marc Fischer, 2019. "Practice Prize Paper–Managing Advertising Campaigns for New Product Launches: An Application at Mercedes-Benz," Marketing Science, INFORMS, vol. 38(2), pages 343-359, March.
    19. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    20. repec:cup:judgdm:v:2:y:2007:i::p:107-114 is not listed on IDEAS
    21. Das, Kanchan & Chowdhury, Abdul H., 2012. "Designing a reverse logistics network for optimal collection, recovery and quality-based product-mix planning," International Journal of Production Economics, Elsevier, vol. 135(1), pages 209-221.
    22. Vishal V. Agrawal & Sezer Ülkü, 2013. "The Role of Modular Upgradability as a Green Design Strategy," Manufacturing & Service Operations Management, INFORMS, vol. 15(4), pages 640-648, October.
    23. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    24. Fixson, Sebastian K. & Park, Jin-Kyu, 2008. "The power of integrality: Linkages between product architecture, innovation, and industry structure," Research Policy, Elsevier, vol. 37(8), pages 1296-1316, September.
    25. Dabholkar, Pratibha A, 1994. "Incorporating Choice into an Attitudinal Framework: Analyzing Models of Mental Comparison Processes," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 21(1), pages 100-118, June.
    26. Petit, Olivia & Velasco, Carlos & Spence, Charles, 2019. "Digital Sensory Marketing: Integrating New Technologies Into Multisensory Online Experience," Journal of Interactive Marketing, Elsevier, vol. 45(C), pages 42-61.
    27. Mark Heitmann & Andreas Herrmann & Christian Kaiser, 2007. "The effect of product variety on purchase probability," Review of Managerial Science, Springer, vol. 1(2), pages 111-131, August.
    28. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
    29. Bruce Kogut & Nalin Kulatilaka, 1994. "Operating Flexibility, Global Manufacturing, and the Option Value of a Multinational Network," Management Science, INFORMS, vol. 40(1), pages 123-139, January.
    30. Michael G. Jacobides & John Paul MacDuffie & C. Jennifer Tae, 2016. "Agency, structure, and the dominance of OEMs: Change and stability in the automotive sector," Strategic Management Journal, Wiley Blackwell, vol. 37(9), pages 1942-1967, September.
    31. Karthik Ramachandran & V. Krishnan, 2008. "Design Architecture and Introduction Timing for Rapidly Improving Industrial Products," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 149-171, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Janina Garbas & Sebastian Schubach & Martin Mende & Maura L. Scott & Jan H. Schumann, 2023. "You want to sell this to me twice!? How perceptions of betrayal may undermine internal product upgrades," Journal of the Academy of Marketing Science, Springer, vol. 51(2), pages 286-309, March.
    2. José A. García-Berná & Raimel Sobrino-Duque & Juan M. Carrillo de Gea & Joaquín Nicolás & José L. Fernández-Alemán, 2022. "Automated Workflow for Usability Audits in the PHR Realm," IJERPH, MDPI, vol. 19(15), pages 1-30, July.
    3. Martina Pocchiari & Jason M.T. Roos, 2023. "The Heterogeneous Effect of Digitizing Community Activities on Community Participation," CESifo Working Paper Series 10841, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gutiérrez-Nieto, Begoña & Ortiz, Cristina & Vicente, Luis, 2023. "A bibliometric analysis of the disposition effect: Origins and future research avenues," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    2. Syed Aliya Zahera & Rohit Bansal, 2018. "Do investors exhibit behavioral biases in investment decision making? A systematic review," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 10(2), pages 210-251, May.
    3. Eduard Marinov, 2017. "The 2017 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 117-159.
    4. Kogler, Christoph & Kühberger, Anton & Gilhofer, Rainer, 2013. "Real and hypothetical endowment effects when exchanging lottery tickets: Is regret a better explanation than loss aversion?," Journal of Economic Psychology, Elsevier, vol. 37(C), pages 42-53.
    5. L. Robin Keller & Yitong Wang, 2017. "Information Presentation in Decision and Risk Analysis: Answered, Partly Answered, and Unanswered Questions," Risk Analysis, John Wiley & Sons, vol. 37(6), pages 1132-1145, June.
    6. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Consumer Choice," Journal of Political Economy, University of Chicago Press, vol. 121(5), pages 803-843.
    7. Summers, Barbara & Duxbury, Darren, 2012. "Decision-dependent emotions and behavioral anomalies," Organizational Behavior and Human Decision Processes, Elsevier, vol. 118(2), pages 226-238.
    8. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    9. Antonides, Gerrit, 1995. "Entrapment in risky investments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 24(3), pages 447-461.
    10. Roth, Gerrit, 2006. "Predicting the Gap between Willingness to Accept and Willingness to Pay," Munich Dissertations in Economics 4901, University of Munich, Department of Economics.
    11. Zhihua Li & Songfa Zhong, 2023. "Reference Dependence in Intertemporal Preference," Management Science, INFORMS, vol. 69(1), pages 475-490, January.
    12. Kwak, Kiho & Kim, Namil, 2022. "Industrial Leadership Changes without Technological Discontinuity: Modularization, Institution-Led Market Discontinuity, and Market Development Strategy," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    13. Gürtler, Marc & Hartmann, Nora, 2003. "Behavioral dividend policy," Working Papers FW04V1, Technische Universität Braunschweig, Institute of Finance.
    14. Stephan Tontrup & Christopher Jon Sprigman, 2022. "Self‐nudging contracts and the positive effects of autonomy—Analyzing the prospect of behavioral self‐management," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(3), pages 594-676, September.
    15. Riella, Gil & Teper, Roee, 2014. "Probabilistic dominance and status quo bias," Games and Economic Behavior, Elsevier, vol. 87(C), pages 288-304.
    16. Tomasz Potocki, 2012. "Cumulative Prospect Theory as a model of economic rationality," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 31.
    17. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    18. Frederiks, Elisha R. & Stenner, Karen & Hobman, Elizabeth V., 2015. "Household energy use: Applying behavioural economics to understand consumer decision-making and behaviour," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1385-1394.
    19. repec:oup:qjecon:v:128:y:2012:i:1:p:53-104 is not listed on IDEAS
    20. Daniel Serra, 2021. "Decision-making: from neuroscience to neuroeconomics—an overview," Theory and Decision, Springer, vol. 91(1), pages 1-80, July.
    21. Nicholas Burton & Peter Galvin, 2022. "The effect of technology and regulation on the co-evolution of product and industry architecture," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 31(4), pages 1056-1085.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joinma:v:56:y:2021:i:c:p:18-40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-interactive-marketing/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.