Executive summary of “The impact of product innovation attributes on brand equity”

Citation

(2015), "Executive summary of “The impact of product innovation attributes on brand equity”", Journal of Consumer Marketing, Vol. 32 No. 4. https://doi.org/10.1108/JCM-06-2015-024

Executive summary of “The impact of product innovation attributes on brand equity”

Article Type: Executive summary and implications for managers and executives From: Journal of Consumer Marketing, Volume 32, Issue 4

This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.

For an organization to prosper and grow, it must possess strong brand equity and the ability to launch innovative products. Indeed, many leading companies have used product innovation as a means of fortifying their brands and subsequently increasing market share and profits.

Product innovation enables firms to secure an edge over rivals, which also raises the scope to revitalize mature businesses and compete in new markets. Performance is likewise affected by brand equity in the sense that the brand is in a stronger position to generate greater returns from various marketing activities.

Brand equity has been the subject of extensive research attention. It is conceptualized as being the product of consumer perceptions that derive from various associations individuals form about the brand. Companies thus try and create positive experiences for the consumer to ensure the associations formed are “strong, unique and favorable” when compared to those attached to rival brands.

Numerous studies have indicated that the success of product innovation depends on the firm’s ability to ensure that product attributes best serve consumer needs. Such attributes can be technical or aesthetic in nature and previous work has claimed that adoption of new products is influenced by:

1. Complexity: This reflects consumer belief in how difficult the innovation is to understand. Adoption rate becomes lower as an innovation increases in complexity, meaning that this attribute is negatively linked with innovation diffusion and is thus different from the others.

2. Relative advantage: It refers to positive perceptions of an innovation relative to current market offerings.

3. Compatibility: Here, the emphasis is on how the values, needs and experiences of a consumer are believed to be served by the innovation.

4. Observability: It reflects consumer ability to easily detect an innovation and its effects.

5. Trialability: The ease in which a consumer can test an innovation is encapsulated here.

Of these five attributes, relative advantage, complexity and compatibility most frequently impact on innovation adoption. The influence of trialability and observability vary depending on the product type and the usage context for the innovation.

In most previous investigations, brand equity and product innovation have been considered independently. The main aim of the present work is to therefore examine the relationship between the two constructs. More specifically, it is proposed that the five product innovation attributes will influence the equity of a brand. These attributes are also likely to have some impact on brand value.

It has previously been noted that brand quality will to some degree determine the effect of new product features. Brands perceived to be of high quality will gain less though, as their features are already regarded as superior. Any value added will usually therefore be minimal. On the contrary, lower-quality brands have more to gain from new features because of their current perceived inferiority. Innovation attributes are predicted to have a comparable impact on high- and low-equity brands.

Another factor expected to be significant is consumer innovativeness. Those rating higher in this characteristic tend toward adopting new products more quickly and frequently. Consumers have previously been categorized into different segments based on their propensity to adopt a particular innovation. People in the higher groups typically exhibit greater willingness to take risks and are thus likelier to purchase products and brand extensions which are more radical in nature. Other consumers follow their lead and this enhances the diffusion of new offerings. The effect of consumer innovativeness could be strongest for innovations of low-equity brands due to the greater risk involved in embracing such innovations.

Nørskov et al. examine these issues further in an online study conducted in Denmark involving subjects largely between 18 and 35 years old who were users of digital audio (MP3) players. The product was selected because of the high innovation within the electronics industry and the popularity of MP3 players at the time the research was conducted. The authors also point out how each of the innovation attributes might relate to an MP3 player. Two brands were selected for the study, with iPod representing a high-equity brand and Zune a low-equity brand.

Participants were asked for their responses to various statements pertaining to innovation attributes, brand equity and innovativeness. Analysis revealed that:

• for the high-equity brand, only observability had a strong positive effect;

• except for trialability, all attributes had a significant effect for the low-equity brand. The impact was positive for compatibility and observability, but negative for complexity and relative advantage;

• the effect of complexity and relative advantage on the brand equity of a high-equity becomes greater as consumer innovativeness increases; and

• no significant moderating effect was found for consumer innovativeness in relation to the low-equity brand.

These findings corroborate earlier work, indicating that innovation attributes often have a greater impact on low-equity brands relative to their high-equity counterparts. The comparative weakness of the former is cited as the reason for this.

Market strategies and the competitive landscape are among the situational factors also deemed important by the authors. They thus recommend that strategic combination of innovation attributes with these factors enhances the possibility of an innovation succeeding.

Situation is also considered a potential reason for the negative influence of relative advantage on the low-equity brand. Another possibility is that consumers make evaluations on attributes additional to those considered in this study. Market entry timing and the presence of competitor brands might also be significant. In this case, Microsoft’s failure to capture any relative advantage is likely to be at least partly down to the superiority of Apple’s iPod, which had the added advantage of entering the market much earlier. This could likewise explain the lack of impact of consumer innovativeness on the low-equity brand.

In the view of Nørskov et al., the impact of observability on the high-equity brand is probable testimony to the efforts of Apple to make its products aesthetically appealing. Lack of effect of trialibility on low-equity brands is attributed to the relatively low price of MP3 players.

Succeeding with innovations demands that companies properly inform consumers about their products and explicitly point out the relative advantage offered. It is important that the personnel involved also identify the optimum conditions in which consumers can attain these advantages as provided by the innovation attributes explored here. Brand managers are urged to use the attributes as a means of differentiating their innovations and adopt an appropriate focus depending on whether the brand is high or low equity. Market communications need to be adjusted accordingly.

Future research could explore additional brands and product categories. Ascertaining the impact of factors linked to the company or consumption situations is another avenue to pursue. The authors also suggest investigating the potential role of additional brand or innovation-related issues and the impact of innovation drivers on consumer perceptions. A further option is to consider the different stages associated with innovation adoption.

To read the full article, enter 10.1108/JCM-10-2014-1198 into your search engine.

(A précis of the article “The impact of product innovation attributes on brand equity”. Supplied by Marketing Consultants for Emerald.)