Mass or Only “Niche Customization”? Why We Should Interpret Configuration Toolkits as Learning Instruments

In order to configure individual products according to their own preferences, customers are required to know what they want. While most research simply assumes that consumers have sufficient preference insight to do so, a number of psychologically oriented scholars have recently voiced serious concerns about this assumption. They argue that decades of consumer behavior research have shown that most consumers in most product categories lack this knowledge. Not knowing what one wants means being unable to specify what one wants—and therefore, they conclude, the majority of customers are unable to use configuration toolkits in a meaningful way. In essence, this would mean that mass customization should rather be termed “niche customization” as it will be doomed to remain a concept for a very small minority of customers only. This pessimism stands in sharp contrast to the optimism of those who herald the new possibilities enabled by advances in communication and production technologies as the dawn of a new era in new product development and business in general. Which position is right? In order to answer this question, this research investigates the role of the configuration toolkit. Implicitly, the skeptic position assumes that the individual customers' knowledge (or absence of knowledge) of what they want is an exogenous and constant term that does not change during the interaction with the toolkit. However, learning theories suggest that the customers' trial‐and‐error interaction with the configuration toolkit and the feedback information they receive should increase their preference insight. If this was true and the effect size strong, it would mean that low a priori preference insight does not impede customers to derive value from mass customization. Three experiments show that configuration toolkits should be interpreted as learning instruments that allow consumers to understand their preferences more clearly. Even short trial‐and‐error self‐design processes with conventional toolkits bring about substantial and time‐stable enhancements of preference insight. The value of this knowledge is remarkable. In the product category of self‐designed watches, the 10‐minute design process resulted in additional preference insight worth 43.13 euros on average or +66%, measured by incentive‐compatible auctions. A moderator analysis in a representative sample shows that the learning effect is particularly strong among customers who initially exhibit low levels of preference insight. These findings entail three contributions. First, it becomes evident that the interaction with mass customization toolkits not only triggers affective reactions among customers but also has cognitive effects—a response category not investigated before. Second, it suggests that the pessimism regarding the mass appeal of these toolkits is not justified—mass customization has the potential to truly deserve its name. The prerequisite for this, and this normative conclusion is the final contribution, is that the toolkit should not be interpreted as a mere interface for conveying preexisting preferences to the producer. Rather, it should be treated as a learning instrument. Several suggestions are made for how firms employing this innovative business model could design their toolkits towards this end.     

Complementing Mass Customization Toolkits with User Communities: How Peer Input Improves Customer Self‐Design*

In this paper, the authors propose that the canonical customer–toolkit dyad in mass customization (MC) should be complemented with user communities. Many companies in various industries have begun to offer their customers the opportunity to design their own products online. The companies provide Web‐based MC toolkits that allow customers who prefer individualized products to tailor items such as sneakers, personal computers (PCs), cars, kitchens, cereals, or skis to their specific preferences. Most existing MC toolkits are based on the underlying concept of an isolated, dyadic interaction process between the individual customer and the MC toolkit. Information from external sources is not provided. As a result, most academic research on MC toolkits has focused on this dyadic perspective. The main premise of this paper is that novice MC toolkit users in particular might largely benefit from information given by other customers. Pioneering research shows that customers in the computer gaming and digital music instruments industries are willing to support each other for the sake of efficient toolkit use (e.g., how certain toolkit functions work). Expanding on their work, the present paper provides evidence that peer assistance appears also extremely useful in the two other major phases of the customer's individual self‐design process, namely, the development of an initial idea and the evaluation of a preliminary design solution. Two controlled experiments were conducted in which 191 subjects used an MC toolkit to design their own individual skis. The authors found that during the phase of developing an initial idea, having access to other users' designs as potential starting points stimulates the integration of existing solution chunks into the problem‐solving process, which indicates more systematic problem‐solving behavior. Peer customer input also turned out to have positive effects on the evaluation of preliminary design solutions. Providing other customers' opinions on interim design solutions stimulated favorable problem‐solving behavior, namely, the integration of external feedback. The use of these two problem‐solving heuristics in turn leads to an improved process outcome—that is, self‐designed products that meet the preferences of the customers more effectively (measured in terms of perceived preference fit, purchase intention, and willingness to pay). These findings have important theoretical and managerial implications.     

Why Customers Value Self‐Designed Products: The Importance of Process Effort and Enjoyment*

This study analyzes which factors prompt customers to attribute value to products they design themselves using mass‐customization (MC) toolkits. The assumption that self‐design delivers superior customer value is fundamental to the concept of MC toolkits and can be found in almost any conceptual work in this field. However, spectacular failures reinforce the practical relevance of developing a deeper understanding of why and when MC toolkits generate value for customers—and when they do not. Research to date has assumed that the closer fit between the self‐designed product's characteristics and the preferences of the customer is the dominant source of value. In this research, it is asked whether the enjoyment and perceived effort of the self‐design process have an additional impact on the perceived value of self‐designed products. This question is interesting because one could argue that a rational actor would hardly be willing to pay ex post for an economic good already consumed. The hypotheses are tested on 186 participants designing their own scarves with an MC toolkit. After completing the process, they submitted binding bids for “their” products in Vickrey auctions. Therefore, real buying behavior, not merely stated intentions, is observed. The present study finds that the subjective value of a self‐designed product (i.e., one's bid in the course of the auction) is indeed impacted not only by the preference fit the customer expects it to deliver but also by (1) the process enjoyment the customer reports, (2) the interaction of preference fit and process enjoyment, and (3) the interaction of preference fit and perceived process effort. In addition to its main effect, preference fit can be interpreted as a moderator of the value‐generating effect of process evaluation: in cases where the outcome of the process is perceived as positive (high preference fit), the customer also interprets process effort as a positive accomplishment, and this positive effect adds (further) value to the product. It appears that the perception of the self‐design process as a good or bad experience is partly constructed on the basis of the outcome of the process. In the opposite case (low preference fit), effort creates a negative effect that further reduces the subjective value of the product. Likewise, process enjoyment is amplified by preference fit, although enjoyment also has a significant main effect, which means that regardless of the outcome, customers attribute higher value to a self‐designed product if they enjoy the process. In a way, this effect resembles of the classic story of Tom Sawyer and the fence, in which Tom manages to “frame” the tedious chore of whitewashing a fence as a rare opportunity—thus persuading his friends to pay him for letting them work. Manufacturers designing an MC system therefore are advised to designing MC toolkits in a way that they elicit positive affective reactions that make their customers value their work.     

User toolkits for innovation

Manufacturers must accurately understand user needs in order to develop successful products-but the task is becoming steadily more difficult as user needs change more rapidly, and as firms increasingly seek to serve "markets of one." User toolkits for innovation allow manufacturers to actually abandon their attempts to understand user needs in detail in favor of transferring need-related aspects of product and service development to users along with an appropriate toolkit.
User toolkits for innovation are specific to given product or service type and to a specified production system. Within those general constraints, they give users real freedom to innovate, allowing them to develop their custom product via iterative trial-and-error. That is, users can create a preliminary design, simulate or prototype it, evaluate its functioning in their own use environment, and then iteratively improve it until satisfied. As the concept is evolving, toolkits guide the user to insure that the completed design can be produced on the intended production system without change.
Pioneering applications in areas ranging from the development of custom integrated circuits to the development of custom foods show that user toolkits for innovation can be much more effective than traditional, manufacturer-based development methods.     

User Toolkits for Innovation: Consumers Support Each Other

User toolkits for innovation were recently proposed as a means to eliminate (costly) exchange of need-related information between users and manufactures in the product development process. The method transfers certain development tasks to users and thereby empowers them to create their own desired product features. This article examines the implications of different levels of opportunities for consumer involvement (OCI) in product development to learn what happens when firms pass design tasks on to consumers. It explores this issue by studying the relation between the employment of user toolkits and the need for firms to support their consumers. An analysis of 78 computer games products and the amount of support given by firms to the consumers of these products suggests that a share of the costs firms save on information acquisition by letting consumers "do it themselves" may eventually reemerge as costs in consumer support. In other words, an increase in opportunities for consumer involvement seems to increase the need for supporting consumers. A promising solution to the problem of support costs is identified, namely, the establishment of consumer–consumer support interaction. A case study of an outlier in terms of firm support to consumers—Westwood Studios—shows that consumers who use toolkits may be willing to support each other. Such interactive problem solving in a firm-established user community is advantageous to the firm, because the process reduces the amount of resources that the firm itself needs to dedicate to the support of consumers using toolkits. Generally, consumer-to-consumer interaction can facilitate problem-solving in the consumer domain, can aid the diffusion of toolkit related knowledge, and potentially can enhance the outcomes produced by the toolkit approach.     

Learning from leading-edge customers at The Sims: opening up the innovation process using toolkits

Recently, toolkits for user innovation and design have been proposed as a promising means of opening up the innovation process to customers. Using these tools, customers can take on problem-solving tasks and design products to fit their individual needs. To date, arguments in favor of this new concept have been limited to the idea of satisfying each user's needs in a highly efficient and valuable way. The aim of this empirical study is to extend our knowledge of how users deal with 'the invitation to innovate' and how attractive individual user designs might be to other users. In studying the users of toolkits for the immensely popular computer game The Sims , we found that (1) users are not 'one-time shoppers'– in fact, their innovative engagement is rather long-lasting, continuous, evolving, and intense. We also found that (2) leading-edge users do not merely content themselves with the official toolkits provided by the manufacturer. They employ user-created tools to push design possibilities even further. (3) Moreover, individual user designs are not only attractive to the creators themselves; instead, certain innovative solutions are in high demand among other users. Based on our findings, we discuss how toolkits and their users might add to the process of innovation in general. We argue that toolkits could serve as a promising market research tool for guiding a firm's new product development efforts. Furthermore, toolkits may serve as a crèche for interested but inexperienced users who could evolve into leading-edge users over time. These innovative users might then be integrated into more radical product development efforts.     

What is the intrinsic value of fertilizer? Experimental value elicitation and decomposition in the hill and terai regions of Nepal

We use Becker-DeGroot-Marshak value elicitation methods to derive the intrinsic value that farmers in Nepal place on fertilizers. Eliciting values under three distinct procurement scenarios, we are able to decompose the total intrinsic value of fertilizer into a willingness-to-pay (WTP) to travel to procure fertilizer, a WTP for assured fertilizer supplies, and a WTP for the productivity benefits of fertilizer. Disaggregating our sample according to location (hills versus terai), we are able to estimate differences in total intrinsic value as well as value components along these geographical dimensions. While farmers in the hills are generally willing to pay more for urea than their counterparts in the terai, the total amount they are willing to pay is, on average, less than the market price for urea. We explore heterogeneity in valuations and discuss the implications of our findings on fertilizer procurement and distribution policies, as well as direct support policies that the Nepal government may consider. While support policies such as subsidies may encourage increased utilization of fertilizers, policies that lower barriers to private sector entry and increase the density of fertilizer retailers could also increase fertilizer utilization.     

Willingness to pay for over-the-top services in China and Korea

The increasing penetration of broadband and multiscreen availability has encouraged the development of premium video consumption through over-the-top (OTT) services. Netflix, the leading global OTT provider, is aggressively expanding its international operations and has ambitiously entered the Asian market. To prepare for the shift that the streaming service giant will bring, a proper understanding of consumer acceptance and intent to pay for OTT services is crucial. Therefore, this empirical study uses conjoint analysis to investigate the key attributes and to examine consumers’ marginal willingness to pay (WTP) for OTT services. We identified recommendation systems, resolution, and viewing options as important product attributes of OTT services that influence the WTP of Chinese and Korean consumers. The most important attribute for Chinese consumers of OTT services was resolution, followed by the recommendation system and viewing options. For Korean consumers, the recommendation system was ranked as the most valuable attribute, followed by viewing options and resolution. The overall WTP of Chinese consumers was 22.6 yuan (3.4 USD) per month, while Korean consumers’ intent to pay amounted to a total of 3530 won (3.1 USD) for OTT services.     

Kundenpräferenzen für leistungsrelevante Attribute von Stromprodukten

This article addresses whether standard electricity products in Switzerland meet the preferences of private customers. To determine customers’ preferred electricity product we conducted an online survey with choice experiments implying 9420 choice decisions by 628 respondents in Switzerland. Using hierarchical Bayes estimation we determined customer preferences and the importance of individual product attributes in product choice. This procedure makes it possible to calculate part worth utilities for product attributes and to derive customers’ implicit willingness to pay. The “electricity mix” had the most important influence on choice decisions, followed by “monthly electricity costs” and the “location of the electricity generation”. The current Swiss electricity mix which consists of mainly nuclear and hydro power was only rated second to last in a comparison of five alternative mixes. Customers clearly prefer electricity mixes containing green energy. Findings of this study reveal strategic options for product design, positioning, and marketing for a liberalized electricity market.     

The virtual customer

Communication and information technologies are adding new capabilities for rapid and inexpensive customer input to all stages of the product development (PD) process. In this article we review six web‐based methods of customer input as examples of the improved Internet capabilities of communication, conceptualization, and computation. For each method we give examples of user‐interfaces, initial applications, and validity tests. We critique the applicability of the methods for use in the various stages of PD and discuss how they complement existing methods. For example, during the fuzzy front end of PD the information pump enables customers to interact with each other in a web‐based game that provides incentives for truth‐telling and thinking hard, thus providing new ways for customers to verbalize the product features that are important to them. Fast polyhedral adaptive conjoint estimation enables PD teams to screen larger numbers of product features inexpensively to identify and measure the importance of the most promising features for further development. Meanwhile, interactive web‐based conjoint analysis interfaces are moving this proven set of methods to the web while exploiting new capabilities to present products, features, product use, and marketing elements in streaming multimedia representations. User design exploits the interactivity of the web to enable users to design their own virtual products thus enabling the PD team to understand complex feature interactions and enabling customers to learn their own preferences for new products. These methods can be valuable for identifying opportunities, improving the design and engineering of products, and testing ideas and concepts much earlier in the process when less time and money is at risk. As products move toward pretesting and testing, virtual concept testing on the web enables PD teams to test concepts without actually building the product. Further, by combining virtual concepts and the ability of customers to interact with one another in a stock‐market‐like game, securities trading of concepts provides a novel way to identify winning concepts. Prototypes of all six methods are available and have been tested with real products and real customers. These tests demonstrate reliability for web‐based conjoint analysis, polyhedral methods, virtual concept testing, and stock‐market‐like trading; external validity for web‐based conjoint analysis and polyhedral methods; and consistency for web‐based conjoint analysis versus user design. We report on these tests, commercial applications, and other evaluations. © 2002 Elsevier Science Inc. All rights reserved.     

The choice between uniqueness and conformity in mass customization

Extant research emphasizes that consumers use mass customization toolkits to create products they consider to be unique, and that perceived uniqueness is an important part of customer value. This research investigates the conditions of the customer's quest for uniqueness. It is motivated by the observation that decisions are often driven by others’ choices and a desire to fit in, rather than to be distinct. We hypothesize that consumers are more inclined to choose uniqueness for hedonic product attributes but tend toward conformity in utilitarian attributes, and that consumers’ need for uniqueness and product involvement moderate the choice. In a series of experiments, we find support for most hypotheses. We introduce conformity as a driver of choice behavior in mass customization toolkits and suggest that mass customization can best be seen as enabling consumers’ preferred mix of uniqueness and conformity. Our results also inform managerial practice, highlighting that mass customization toolkits should consider customers’ uniqueness and conformity requirements. We suggest reducing the number of utilitarian options while increasing the variety for hedonic attributes.     

Putting Your Money Where Your Mouth Is: The Value of Low Purchase Intention Consumers to Product Pricing

Hypothetical bias is a common research problem in measuring intentions. This study examines differences in individuals' hypothetical and nonhypothetical willingness to pay (WTP) based on purchase intention level. The purpose of Study 1 is to see if hypothetical bias is affecting all groups of individuals when segmented by purchase intentions. The contingent valuation method (CVM) was used to assess to individuals' purchase intentions and hypothetical WTP for an environmentally friendly (EF) offering. Individuals then participated in an auction that required them to bid on the same offering, thus requiring an actual monetary commitment. Through segmenting individuals into three purchase intention groups (high, moderate, and low), WTP biases were found to be positively related to stated intention level. High and moderate purchase intenders significantly overstated their hypothetical WTP. However, low purchase intenders did not. Further, no significant differences existed in nonhypothetical WTP between the three groups. The price that low purchase intenders were willing to pay through the CVM represented closely what they and the rest of the market were willing to pay in practice. The purpose of Study 2 was to examine several reasons why higher purchase intenders may be overstating their hypothetical WTP, with normative pressure and social desirability bias taken into consideration. Individuals indicated their purchase intentions and hypothetical WTP for an EF and a non‐EF product, and then participated in an auction. The higher purchase intenders again overstated their actual WTP for both products, whereas low purchase intenders did not. Results suggest that both normative pressure and social desirability bias contribute to hypothetical bias for products that carry a normative dimension (EF products). Controlling for these two factors eliminated the differences between hypothetical and nonhypothetical WTP. For products that did not have a normative component (non‐EF products), controlling for social desirability eliminated the gap between the hypothetical and nonhypothetical WTP amounts. A main implication from this research is that hypothetical bias is not a universal phenomenon and does not operate equally in all groups of purchase intenders. Marketers may want to consider only using lower purchase intenders in their pricing estimates for new products, especially for those that carry a normative component. Further, the CVM has received much criticism for measuring hypothetical WTP. However, estimates produced by the CVM were nearly exact for the low purchase intender group and were reliable when controlling for social desirability bias and normative pressure for the higher purchase intenders.     

Lead-farmer extension and smallholder valuation of new agricultural technologies in Tanzania

Encouraging the widespread adoption and use of new on-farm technologies is an important part of productivity-led strategies to promote agricultural transformation. While many interventions have been designed to promote adoption through extension and education, little is known about how these efforts influence farmer willingness-to-pay (WTP) for new technologies. We use a Becker-DeGroot-Marschak (BDM) mechanism to elicit farmer WTP for two improved seed varieties and a new seed treatment product, Apron Star, under two different lead-farmer extension treatments in Tanzania: (i) a demonstration plot showcasing the technologies within a village; and (ii) a demonstration plot coupled with distribution of trial packs enabling some farmers to test the technologies on their own land. In the BDM, farmers were presented with six products – the two bean varieties: without Apron Star, with Apron Star already applied, and with a sachet of Apron Star for the farmer to treat the seed him/herself. Our results suggest that neither extension treatment significantly affects WTP for these technologies. However, we find that farmers are willing to pay more for seed that is pre-treated with Apron Star than for seed bundled with a sachet of Apron Star for self-treatment.     

Modularity in making: simplifying solution space for user innovation

An increasingly popular form of open innovation in the digital age is ‘making,’ where users innovate across multiple disciplines and make products that meet their needs, using mechanical, electronic, and digital components. These users have at their disposal, a wide solution space for innovation through various modular toolkits enabled by digital‐age technologies. This study explores and outlines how these users simplify this wide solution space to innovate and make tangible products. Following a modularity theory perspective, it draws on case studies of users and their innovations: (1) Users with initial prototype product designs based on the Internet of things (IoT) from a maker event and (2) users with established product designs from the online community platform Thingiverse. The studies found that users reused the design in the form of existing off‐the‐shelf products and utilized digital fabrication and low‐cost electronics hardware as a ‘glue’ to create physical and informational interfaces wherever needed, enabling bottom‐up modularity. They iteratively refined their innovations, gradually replacing re‐used designs with own integrated designs, reducing modularity, and reducing wastage. The study contributes to open innovation and modularity with implications on the design of products and toolkits enabled by the digital age.     

THE VALUE OF PRIVATE INFORMATION IN MONOPOLY*

We investigate a basic question about a monopoly with incomplete information: when does the seller have an incentive to allow potential buyers to acquire more private information about their tastes for the seller's product? Under plausible conditions such as log‐concave density of willingness‐to‐pay and convex marginal cost, the seller prefers that the paying customers be well informed as a group but be left in the dark regarding their individual tastes.     

Responsive and Proactive Market Orientation and New‐Product Success*

What is the relationship between market orientation and new‐product success? This important question has not been examined adequately to date because the concept of market orientation has been measured too narrowly. The concept of market orientation implies both responsive market orientation, which addresses the expressed needs of customers, and proactive market orientation, which addresses the latent needs of customers—that is, opportunities for customer value of which the customer is unaware. In the numerous market orientation–performance studies to date, the measure of market orientation has consisted virtually entirely of behaviors related to satisfying customers' expressed needs rather than satisfying their latent needs as well. The present study extends the measurement of market orientation to match the full scope of the concept—to measure both responsive market orientation and proactive market orientation. Using data from a sample of technologically diverse businesses, the present study develops a measure of proactive market orientation, refines the extant measure of responsive market orientation, and analyzes the relationship of a business's responsive and proactive market orientation to its new‐product success. The study findings imply that for any business to create and to sustain new‐product success, a responsive market orientation is not sufficient and, thus, that a proactive market orientation plays a very important positive role in a business's new‐product success. These findings make intuitive sense. For if in developing its new products a business relies solely on what customers state as their new product needs, the business is very vulnerable economically. Such a business is vulnerable not only for relying on customers' best guesses for new products, many or most of which may have little long‐term economic value for either party, but also to competitors' parallel new product responses and the inevitable resulting price competition. A business that relies solely on customers' expressed needs to develop its new products creates no new insights into value‐adding opportunities for the customer and thereby creates little or no customer dependence and foundation for customer loyalty. The important role for proactive market orientation in new‐product success is intuitively obvious—and is supported empirically in this study.     

Applying Hedonic Pricing Models and Factorial Surveys at Parker Pen to Enhance New Product Success

Walking the path from new product concept to successful commercialization is a tightrope act. Product developers must carefully balance a variety of factors, including predictions of consumer price sensitivity as well as which combination of product attributes will be most valued by the intended market. A well-chosen mix of analytical tools can enhance a firm's chances of accurately predicting market demand. Chuck Tomkovick and Kathryn E. Dobie describe how the integration of two product attribute assessment techniques–hedonic pricing models and factorial surveys–allows product designers to more accurately gauge price sensitivity and market receptivity to new product designs. They also describe how these analytical tools were used to improve decision-making in product development at the Parker Pen Company, and they discuss the role these tools can play in facilitating the transition from concept to commercialization. Hedonic price analysis is an econometric method for determining the value purchasers place on attributes of existing products. In product development, factorial surveys are used to identify the value members of the target market place on new product concepts and prototypes. When used in combination with identified hedonic prices, the responses to a factorial survey allow product developers to predict consumer willingness-to-pay for various combinations of new product attributes. Following development of prototypes for two new product lines, product developers at the Parker Pen Company used hedonic pricing models and factorial surveys as a means for reducing demand uncertainty and for clarifying what consumers were willing to pay for various combinations of product attributes that were under consideration. The integration and use of these techniques involved a five-step process of target market identification, product attribute identification, hedonic price estimation, administering of the factorial survey, and determination of consumer willingness-to-pay. The results of these analyses allowed Parker Pen to better focus product development efforts on those design elements for which test market customers indicated both demand and willingness-to-pay. The Parker Pen Company found hedonic pricing and factorial surveys useful for predicting both the rate and the degree of change in consumers' marginal utility for specific product attributes. The usefulness of these techniques also extends beyond the early stages of new product conception. These techniques are helpful in the development and implementation of dynamic new product marketing mix strategies, including such elements as product design, pricing, channel selection, and promotion.     

Are consumers concerned about palm oil? Evidence from a lab experiment

A lab experiment evaluates the consumers’ willingness to pay (WTP) for food products made with and without palm oil. Palm oil production induces environmental damages, and its consumption presents a health risk. However, the production of alternative oils raises land use issues. In the experiment, successive messages emphasizing the characteristics of palm oil and palm oil-free products are delivered to participants. Information has a significant influence on WTP when it underlines the negative impact of the related product. This effect is stronger for the palm oil product than for the palm oil-free product. The experiment also compares the welfare effects of two regulatory instruments, namely a consumer information campaign versus a per-unit tax. Because of the respective attributes of both palm oil and palm oil-free products, the information campaign improves welfare with a much larger impact than the tax.     

Two experiments in one: How accounting for context matters for welfare estimates

By combining two different types of experiments in one experimental session, this paper aims at understanding how different contexts may influence participants’ choices. This paper focuses on one hybrid experimental session that mixed one voluntary contributions mechanism (VCM), influencing the indemnity received by participants, and one mechanism eliciting willingness to pay (WTP) for milk bottles with public and private attributes. The VCM shows relatively high levels of contributions that are mainly influenced by the positive expectations of participants about the average group contribution, rather than by the variations in the design of this mechanism and the period of experiments. The WTP for milk bottles are particularly sensitive to the order of mechanisms and to the period of experiments. Conversely, the WTP differences between milk bottles for a given round of information are invariant across the order of mechanisms and the period of experiments. For each bottle, the variations of WTP coming from the messages about private and public attributes are also stable over the order of mechanisms and the period of experiments. This confers validity to experiments for measuring WTP for public and private attributes related to food. In other words, these variations of WTP contribute to welfare estimates and are useful to evaluate market regulations focusing on public and/or private attributes.     

Virtual Word of Mouth and Willingness to Pay for Consumer Electronic Innovations

The authors examine the impact of virtual word‐of‐mouth (vWOM) communication on willingness to pay (WTP) for an innovation. A series of hypotheses are developed that link vWOM to the credibility of innovation information, perceived utilitarian value, and the perceived hedonic value of an innovation, which are in turn hypothesized to influence WTP. The authors test these hypotheses using data collected in Japan from 658 potential adopters of e‐readers and from 565 potential adopters of smartphones. Findings indicate that, in both samples, vWOM is positively correlated with the perceived credibility of innovation information, which in turn is positively correlated with both perceived utilitarian value and perceived hedonic value. WTP is also positively correlated with an innovation's perceived utilitarian and perceived hedonic value. In addition, the path between vWOM and perceived hedonic value is positive and significant in both samples. However, the path between vWOM and perceived utilitarian value is positive and significant in the smartphone sample, but not in the e‐reader sample. The empirical findings provide support for theoretical arguments that link WTP for complex consumer electronic products to consumer perceptions of utilitarian and hedonic value. The results also have important implications for the creation of vWOM strategies designed to reduce the price sensitivity of potential adopters.