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Customers Score Highest New Products that Balance Innovation and Familiar - Ideas for Leaders
Idea #824

Customers Score Highest New Products that Balance Innovation and Familiar

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KEY CONCEPT

Customers prefer new products that balance innovation and the familiar. With too much innovation, according to a study based on 50,000 movie reviews, positive evaluations of a product turn negative. Companies with a high reputation for innovation need to be particularly careful not to violate customer expectations.


IDEA SUMMARY

Is novelty a winning strategy for business? Some observers argue that innovative products attract more customers, who are eager to discover new features. Others argue that customers do not want products that are vastly different from what they are accustomed to buying.

A study from two researchers from the University of Cambridge Judge School of Business suggests most customers are likely to fall in the middle. The more innovative a new product, the more highly they rate the new product—until the innovation increases beyond customer comfort levels and preferences. At this point, ratings for the new product turn negative.

The researchers used the response of moviegoers to novelty in films as the basis of their study. They mined the IMDb database, recognized as one of the leading online sources for movie and television information, for their raw data.

The movie industry was particularly rich for the research as new movies represent a large number of new products introduced to customers. Analyzing nearly 50,000 reviews of 147 movies, the researchers used the movie review score (based on a scale of 1-10) as their measure of customer product evaluation. They then used 20 novelty-related keywords in the text of the film reviews (e.g., unusual, twist, radical, groundbreaking) to measure the novelty of a product as perceived by customers. Finally, they used the category of movie genre (e.g., comedy, drama, action) to measure product novelty. Specifically, a movie was deemed to be novel if it failed to fit into one of the 20 movie genres used in the IMDB database.

The researchers also studied the influence of a producer’s (i.e., the creator of the product) reputation on customers’ response to novelty in a product. They developed a measure for reputation based on the number of awards received by the directors of the 147 films studied.

The results of the study confirmed that filmgoers wanted a moderate amount of novelty and innovation in the films the watched. Comparing customer evaluations (the review scores) to customer-perceived novelty (the novelty score based on key words in the reviews), the researchers found a curvilinear, upside-down U relationship. In other words, the more moviegoers considered a movie to be innovative, the higher the score—up to a certain level, at which point if the novelty score increased, the evaluation scores decreased, leading to the downward slope of the upside-down U.

The study also revealed that the reputation of a director ironically reduced filmgoers’ tolerance for novelty. The inverted U remained—that is, filmgoers accepted a moderate amount of perceived novelty in a film regardless of the reputation of the film’s director. However, the peak of the inverted U—the threshold when review scores started to sink if the film’s novelty continued to increase—came earlier for film directors with high reputations.

Thus, the greater the reputation of a director, the less amount of novelty filmgoers were willing to accept. In addition, when the threshold was reached, the downward evaluation slope was steeper—indicating that filmgoers judged more harshly what they perceived as too much innovation in a movie.

The moviegoers’ lack of flexibility toward novelty from high-reputation directors stems from the expectations set by the earlier movies. Filmgoers want to see more of the same. In contrast, directors with low reputations have not set any expectations with moviegoers, giving them more room to be innovative.

One final insight that emerged from the study of the movie reviews is the difference between a customer’s perception of novelty and a producer’s perception of novelty. Product novelty—based on movies not fitting into predefined genre categories—did not align with the perceived novelty of the films as described in the movie reviews. In short, filmgoers and film professionals did not agree on what made a movie innovative.


BUSINESS APPLICATION

Because the results of this study are based on human characteristics that are likely to apply to a variety of products, the research offers several lessons for companies.

 

The core lesson is the importance of moderating novelty and innovation in a product. The upside-down U sends an eloquent message to companies: too much novelty will send rising product approval rates spiraling downwards.

 

In addition, a high reputation for innovation can counterintuitively reduce customer tolerance for innovation in future products. When companies seek to replicate the earlier success of innovative products with greater innovation, they may ironically be putting off rather than attracting customers. Companies who have developed a reputation for innovation should be aware of the expectations they have set for future products and create new products that include familiar elements of past successful products.

 

Finally, what companies consider to be novel about a product is not necessarily what customers view as novel. And since customers make their purchase decisions based on their perception of novelty or innovation, companies should consult with customers during the product development process. The goal: to ensure that the innovations they perceive in the new product is aligned with the innovations that customers perceive. Otherwise companies may overvalue the innovation in a new product, and as a result overvalue the product, leading to disappointing sales.

 


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FURTHER READING

An integrative model of new product evaluation: A systematic investigation of perceived novelty and product evaluation in the movie industry. Yingyue Luan and Yeun Joon Kim. PLOS ONE (March 11, 2022).

https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0265193

 

 

Further Relevant Resources:
Yingyue Luan’s profile at Cambridge Judge Business School

https://www.jbs.cam.ac.uk/programmes/research-programmes/students/yingyue-luna-luan/

 

Yeun Joon Kim’s profile at Cambridge Judge Business School

https://www.jbs.cam.ac.uk/faculty-research/faculty-a-z/yeun-joon-kim/

 


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Idea conceived

March 11, 2022

Idea posted

Aug 2022
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