The Impact of Innovation on Product Usage: A Dynamic Model with Progression in Content Consumption

42 Pages Posted: 15 Nov 2011 Last revised: 19 Jun 2014

See all articles by Paulo Albuquerque

Paulo Albuquerque

INSEAD

Yulia Nevskaya

Olin Business School - Washington University in St. Louis

Date Written: June 24, 2012

Abstract

We propose a dynamic model to explain product usage in categories characterized by frequent updates and progression of consumer involvement. In our setting, product updates introduce additional content that, to be fully enjoyed, requires increasing consumer experience and involvement with the product. Consumers gain experience through recurrent product usage and content consumption. Examples of such categories include TV series, computer games, mobile apps, books, movies, and educational products. Our modeling approach builds on theory from experiential products to define the product usage utility as a function of intrinsic consumer preferences, satiation, social interactions, and future usage. We use data on consumer participation from the online computer game World of Warcraft to empirically test our model. We show that the success of product updates strongly depends on consumer heterogeneity, on the rate of content consumption, and on the social interaction of consumers. Using our approach, we are able to quantify the value of a product update for the firm. We also provide managerial recommendations to improve scheduling of product innovation and offer insights about consumer segmentation and targeting to increase product usage.

Keywords: Product updates, forward-looking consumers, dynamic model, experiential products

Suggested Citation

Albuquerque, Paulo and Nevskaya, Yulia, The Impact of Innovation on Product Usage: A Dynamic Model with Progression in Content Consumption (June 24, 2012). Simon School Working Paper No. FR 10-37. Available at SSRN: https://ssrn.com/abstract=1960020 or http://dx.doi.org/10.2139/ssrn.1960020

Paulo Albuquerque (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Yulia Nevskaya

Olin Business School - Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
304
Abstract Views
2,016
rank
98,648
PlumX Metrics