Component sharing may look great in the boardroom, but not in the showroom. Indeed, savings on R&D and production costs could be offset by a plunge in customer brand attractiveness and willingness to pay. This paper investigates the impact of component sharing on customer evaluation of luxury, volume and economy brands offered in a car manufacturer’s vertical product line and its subsequent revenue consequences. The authors consider both the harm to the higher-end brand and the benefits for the lower end brand, and analyze with a random effects model how the size of these effects depends on the brand combination, the type of component, the source of the components sharing, and customer characteristics. An experimental study shows that the harm for the higher-end brand is largest, when (1) a luxury brand shares components with a volume brand, (2) the source of the components is the higherend brand, and when (3) the customer has a high initial evaluation of the higher-end brand. For the lower-end brand, the positive effect is largest, when (1) a volume brand shares with an economy brand, (2) the lower-end brand is the source of the components, and (3) customers have a high initial evaluation of the higher-end brand. Components that have a strong impact on evaluation are interior, wheels, chassis and the engine. Simulations show that sharing components typically translates in negative revenue consequences for both analyzed manufacturers. An interesting exception emerges for the Japanese manufacturer, which obtains a boost in total revenue when its small luxury brand shares components with its large volume brand.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by 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. in its series Research Paper with number
ERS-2005-007-MKT Revision_Date: 2009-07-29.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.