Standards Competition and Effectiveness of Advertising Formats in New Product Introduction

Abstract

Compared to other markets, those with standards battles exhibit certain fundamental characteristics that make the consumer decision to adopt a new product more risky and complex. This paper examines how standards competition affects consumer behavior, an issue that has been relatively neglected by past research in this area. Study 1 sheds light on the fundamental issue of how consumers respond to information on absolute and relative utility of a product. We find that standards competition motivates consumers to heed information on relative performance and ignore information on absolute performance. As a result, information regarding the relative (absolute) performance of a product has a stronger (weaker) impact on a product's share in markets with standards competition. Consistent with this finding, Study 2 shows that standards competition moderates the effectiveness of different advertising formats: it strengthens the effect of comparative ads but weakens the effect of non comparative ads. This moderating effect relates to the manner in which the ad format influences confidence in the advertised brand, associative heuristic processing, and attitude towards the ad. Finally, Study 3 shows that in a market with a standards war, the effectiveness of comparative ads is moderated by the relative brand familiarity of the advertised brand. This research takes a step toward a better understanding of these important but under explored issues and provides managerial insights for firms launching new products in markets with competing technological standards.

Keywords: network effects, standards competition,Advertising Formats, consumer behavior