Marketing Strategy Mandatory Articles
Table of content:
The playing field....................................................................................................................... 1
Steiner, Michael, Nico Wiegand, Andreas Eggert, and Klaus Backhaus (2014), Platform
Adoption in System Markets: The Roles of Preference Heterogeneity and Consumer
Expectations,” International Journal of Research in Marketing, 33 (2), 276-296............... 1
The behavior of the players......................................................................................................6
Ritson, M. (2024), “Copy KitKat on your quest for ‘double D marketing’,”
marketing-week.com.......................................................................................................... 6
Price leadership....................................................................................................................... 8
Hamilton, Ryan, and Alexander Chernev (2013), “Low Prices Are Just the Beginning:
Price Image in Retail Management,” Journal of Marketing, 77 (5), 1-20............................8
Quality leadership.................................................................................................................. 12
Siebert, Anton, Ahir Gopaldas, Andrew Lindridge, and Claudia Simones (2020),
“Customer Experience Journeys: Loyalty Loops Versus Involvement Spirals,” Journal of
Marketing, 84 (4), 45-66................................................................................................... 12
Time leadership......................................................................................................................16
Hingston, Sean T., and Theodore J. Noseworthy (2018), “Why Consumers Don’t See the
Benefits of Genetically Modified Foods, and What Marketers Can Do About It,” Journal of
Marketing, 82(5), 125-140................................................................................................ 16
Marketing and Ethics..............................................................................................................19
Sandel, M. (2013), “Market Reasoning as Moral Reasoning: Why Economists Should
Reengage with Political Philosophy,” The Journal of Economic Perspectives, 27(4),
121-140............................................................................................................................ 19
Chaput, M., & Paulsson, A. (2023), “Bypassing the animal: Plant-based meat and the
communicative constitution of a moral market,” Economy and Society, 52(2), 274-297..22
Dynamic strategy adaptation..................................................................................................24
McGrath (2013), “Transient Competitive Advantage,” Harvard Business Review, 91 (6),
62-70................................................................................................................................ 24
The playing field
Steiner, Michael, Nico Wiegand, Andreas Eggert, and Klaus Backhaus (2014), Platform
Adoption in System Markets: The Roles of Preference Heterogeneity and Consumer
Expectations,” International Journal of Research in Marketing, 33 (2), 276-296.
Network effects significantly influence consumer value and platform adoption in system
markets. Two types of network effects are identified:
1. Direct Network Effects - Consumer value directly increases with more users on the
platform, such as in communication services where each additional user enhances
interaction options.
2. Indirect Network Effects - Common in system markets, these occur when a larger
user base attracts more complementary goods (CG), which in turn increases the
perceived value of the platform. This effect has been critical in driving platform
success and diffusion.
Researchers studying platform adoption use two main methodological approaches:
● Market Response Models using sales data, which offer concrete metrics but are
limited to post-launch analysis.
,Marketing Strategy Mandatory Articles
● Mindset Metrics focused on attitudes, expectations, and intentions, which can be
gathered pre-launch and are useful in understanding early adoption drivers.
Drivers of Network Effects and Their Influence on Platform Value.
Proprietary Nature: Video game consoles are proprietary, meaning each console's hardware
is owned by a single firm and is incompatible with others. This leads to high switching costs
as consumers must invest in new consoles and compatible games when changing platforms
or when new generations are released.
Generational Incompatibility: Each new hardware generation resets the competitive
landscape, intensifying competition as firms can fight for market dominance with each new
release.
Critical Mass and Network Dependency:
- Initial Adoption Pressure: During a new system’s launch, providers must achieve a
critical mass of adopters to encourage software development and further platform
adoption.
- Pure Network Goods: Consoles themselves have no standalone value without
complementary goods (games), making network effects (both user and complement
networks) essential for consumer value and platform success.
Complex Decision-Making for Consumers:
- Choice Complexity: Consumers must consider both the platform and its ecosystem of
compatible games, increasing the complexity of adoption decisions.
- Amplified Network Effects: Stronger network effects enhance the influence of the
installed base (IB) on perceived platform value, thereby driving adoption.
2.1 Direct Network Effects:
- Rise of Social Gaming: Modern consoles facilitate social interactions, making direct
network effects (interactions among users) more important
- Local vs. Global IB: While traditional studies focus on the global IB, recent research
emphasizes the significance of the local IB—friends and acquaintances—which more
directly enhance user interactions and platform value.
2.2 Indirect Network Effects:
Complementary Goods Supply: A larger IB attracts more developers, increasing the variety
and quality of games available. This boosts consumer adoption by providing greater choice
and better-quality options.
- Variety: More game options allow consumers to find titles that match their
preferences, enhancing the platform’s appeal. However, the impact of variety may
vary across different markets.
- Quality: High-quality games significantly influence platform adoption, sometimes
overshadowing the effect of variety. Superstar titles, which generate disproportionate
revenues, play a crucial role in attracting consumers.
2.3 The Impact of Consumer Expectations:
- Realized vs. Expected Network Effects: Most research has focused on realized
network effects, where consumers choose platforms based on current value.
, Marketing Strategy Mandatory Articles
However, expectations about future network effects also play a crucial role in
adoption decisions.
- Future-Oriented Decisions: Consumers anticipate future developments in the
platform and its complement ecosystem, influencing their current adoption intentions.
This forward-looking behavior means that expectations about future software variety
and quality can drive platform choice.
- Rational Expectations Assumption: Existing studies often assume consumers have
rational expectations, perfectly predicting future software trends and prices. These
studies typically interpret consumer choices as reflections of these expectations
without directly measuring them.
- Empirical Gap: There is a lack of empirical research directly measuring consumer
expectations and their impact on platform adoption. Steiner et al. (2016) aim to fill
this gap by assessing how different consumer segments form expectations about
future network effects and how these expectations influence their adoption intentions.
Key Contributions:
1. Identifies distinct segments of game console users with varying valuations of network
effects and personal characteristics.
2. Develops a model detailing how direct and indirect network effects, influenced by
consumer expectations, shape adoption intentions.
3. Demonstrates the value of using customer attitudes and expectations to predict
platform adoption before market launch, providing actionable insights for managers
during the critical early stages of platform introduction.
4. Highlights that while expectations of future network effects influence adoption, their
importance varies across different consumer segments, challenging the notion that
expectations are universally critical in system markets.
Study 1: Consumer Heterogeneous Perceptions of Network Variables in Game
Console Market:
Industry Context and Consumer Heterogeneity:
Oligopolistic Market Structure: Unlike other industries where a dominant design often
emerges (e.g., Blu-ray in film), the video game industry typically maintains an oligopoly with
multiple competing platforms. This structure is sustained by diverse consumer preferences
and distinct positioning among platforms.
Importance of Consumer Heterogeneity: The variation in consumer preferences plays a
significant role in platform adoption, making it essential for analyzing network effects within
the gaming industry.
Methodology: Choice-Based Conjoint (CBC) Analysis and Latent Class Approach:
CBC Analysis: Study 1 uses choice-based conjoint (CBC) analysis, an indirect method
where consumer preferences for network effect drivers are inferred based on their choices
among product alternatives rather than through direct questioning.
Latent Class Analysis: To segment consumers, latent class analysis identifies clusters of
respondents with similar preferences, allowing the study to pinpoint distinct target groups
that vary in their valuation of network effects.
Key Insights from Study 1:
Table of content:
The playing field....................................................................................................................... 1
Steiner, Michael, Nico Wiegand, Andreas Eggert, and Klaus Backhaus (2014), Platform
Adoption in System Markets: The Roles of Preference Heterogeneity and Consumer
Expectations,” International Journal of Research in Marketing, 33 (2), 276-296............... 1
The behavior of the players......................................................................................................6
Ritson, M. (2024), “Copy KitKat on your quest for ‘double D marketing’,”
marketing-week.com.......................................................................................................... 6
Price leadership....................................................................................................................... 8
Hamilton, Ryan, and Alexander Chernev (2013), “Low Prices Are Just the Beginning:
Price Image in Retail Management,” Journal of Marketing, 77 (5), 1-20............................8
Quality leadership.................................................................................................................. 12
Siebert, Anton, Ahir Gopaldas, Andrew Lindridge, and Claudia Simones (2020),
“Customer Experience Journeys: Loyalty Loops Versus Involvement Spirals,” Journal of
Marketing, 84 (4), 45-66................................................................................................... 12
Time leadership......................................................................................................................16
Hingston, Sean T., and Theodore J. Noseworthy (2018), “Why Consumers Don’t See the
Benefits of Genetically Modified Foods, and What Marketers Can Do About It,” Journal of
Marketing, 82(5), 125-140................................................................................................ 16
Marketing and Ethics..............................................................................................................19
Sandel, M. (2013), “Market Reasoning as Moral Reasoning: Why Economists Should
Reengage with Political Philosophy,” The Journal of Economic Perspectives, 27(4),
121-140............................................................................................................................ 19
Chaput, M., & Paulsson, A. (2023), “Bypassing the animal: Plant-based meat and the
communicative constitution of a moral market,” Economy and Society, 52(2), 274-297..22
Dynamic strategy adaptation..................................................................................................24
McGrath (2013), “Transient Competitive Advantage,” Harvard Business Review, 91 (6),
62-70................................................................................................................................ 24
The playing field
Steiner, Michael, Nico Wiegand, Andreas Eggert, and Klaus Backhaus (2014), Platform
Adoption in System Markets: The Roles of Preference Heterogeneity and Consumer
Expectations,” International Journal of Research in Marketing, 33 (2), 276-296.
Network effects significantly influence consumer value and platform adoption in system
markets. Two types of network effects are identified:
1. Direct Network Effects - Consumer value directly increases with more users on the
platform, such as in communication services where each additional user enhances
interaction options.
2. Indirect Network Effects - Common in system markets, these occur when a larger
user base attracts more complementary goods (CG), which in turn increases the
perceived value of the platform. This effect has been critical in driving platform
success and diffusion.
Researchers studying platform adoption use two main methodological approaches:
● Market Response Models using sales data, which offer concrete metrics but are
limited to post-launch analysis.
,Marketing Strategy Mandatory Articles
● Mindset Metrics focused on attitudes, expectations, and intentions, which can be
gathered pre-launch and are useful in understanding early adoption drivers.
Drivers of Network Effects and Their Influence on Platform Value.
Proprietary Nature: Video game consoles are proprietary, meaning each console's hardware
is owned by a single firm and is incompatible with others. This leads to high switching costs
as consumers must invest in new consoles and compatible games when changing platforms
or when new generations are released.
Generational Incompatibility: Each new hardware generation resets the competitive
landscape, intensifying competition as firms can fight for market dominance with each new
release.
Critical Mass and Network Dependency:
- Initial Adoption Pressure: During a new system’s launch, providers must achieve a
critical mass of adopters to encourage software development and further platform
adoption.
- Pure Network Goods: Consoles themselves have no standalone value without
complementary goods (games), making network effects (both user and complement
networks) essential for consumer value and platform success.
Complex Decision-Making for Consumers:
- Choice Complexity: Consumers must consider both the platform and its ecosystem of
compatible games, increasing the complexity of adoption decisions.
- Amplified Network Effects: Stronger network effects enhance the influence of the
installed base (IB) on perceived platform value, thereby driving adoption.
2.1 Direct Network Effects:
- Rise of Social Gaming: Modern consoles facilitate social interactions, making direct
network effects (interactions among users) more important
- Local vs. Global IB: While traditional studies focus on the global IB, recent research
emphasizes the significance of the local IB—friends and acquaintances—which more
directly enhance user interactions and platform value.
2.2 Indirect Network Effects:
Complementary Goods Supply: A larger IB attracts more developers, increasing the variety
and quality of games available. This boosts consumer adoption by providing greater choice
and better-quality options.
- Variety: More game options allow consumers to find titles that match their
preferences, enhancing the platform’s appeal. However, the impact of variety may
vary across different markets.
- Quality: High-quality games significantly influence platform adoption, sometimes
overshadowing the effect of variety. Superstar titles, which generate disproportionate
revenues, play a crucial role in attracting consumers.
2.3 The Impact of Consumer Expectations:
- Realized vs. Expected Network Effects: Most research has focused on realized
network effects, where consumers choose platforms based on current value.
, Marketing Strategy Mandatory Articles
However, expectations about future network effects also play a crucial role in
adoption decisions.
- Future-Oriented Decisions: Consumers anticipate future developments in the
platform and its complement ecosystem, influencing their current adoption intentions.
This forward-looking behavior means that expectations about future software variety
and quality can drive platform choice.
- Rational Expectations Assumption: Existing studies often assume consumers have
rational expectations, perfectly predicting future software trends and prices. These
studies typically interpret consumer choices as reflections of these expectations
without directly measuring them.
- Empirical Gap: There is a lack of empirical research directly measuring consumer
expectations and their impact on platform adoption. Steiner et al. (2016) aim to fill
this gap by assessing how different consumer segments form expectations about
future network effects and how these expectations influence their adoption intentions.
Key Contributions:
1. Identifies distinct segments of game console users with varying valuations of network
effects and personal characteristics.
2. Develops a model detailing how direct and indirect network effects, influenced by
consumer expectations, shape adoption intentions.
3. Demonstrates the value of using customer attitudes and expectations to predict
platform adoption before market launch, providing actionable insights for managers
during the critical early stages of platform introduction.
4. Highlights that while expectations of future network effects influence adoption, their
importance varies across different consumer segments, challenging the notion that
expectations are universally critical in system markets.
Study 1: Consumer Heterogeneous Perceptions of Network Variables in Game
Console Market:
Industry Context and Consumer Heterogeneity:
Oligopolistic Market Structure: Unlike other industries where a dominant design often
emerges (e.g., Blu-ray in film), the video game industry typically maintains an oligopoly with
multiple competing platforms. This structure is sustained by diverse consumer preferences
and distinct positioning among platforms.
Importance of Consumer Heterogeneity: The variation in consumer preferences plays a
significant role in platform adoption, making it essential for analyzing network effects within
the gaming industry.
Methodology: Choice-Based Conjoint (CBC) Analysis and Latent Class Approach:
CBC Analysis: Study 1 uses choice-based conjoint (CBC) analysis, an indirect method
where consumer preferences for network effect drivers are inferred based on their choices
among product alternatives rather than through direct questioning.
Latent Class Analysis: To segment consumers, latent class analysis identifies clusters of
respondents with similar preferences, allowing the study to pinpoint distinct target groups
that vary in their valuation of network effects.
Key Insights from Study 1:
