Does an iPod play music better than an iPhone? Does a standalone printer make higher quality printouts than an all-in-one printer/fax/copy machine? Does a laundry detergent promising great cleaning power remove stains better than a laundry detergent that promises both great cleaning power and enhanced protection against fading?
When designing products, companies often choose one of two positioning strategies. They can opt for a narrow, specialized positioning, whereby the product is presented as a master of one, characterized by a single feature. Alternatively, companies can choose a broad, all-in-one positioning, whereby the product is described as a jack of all trades, combining different attributes in an all-in-one solution. For example, Era is positioned by Procter & Gamble as the detergent with “powerful stain removal,” Cheer promises to “help protect against fading,” Gain offers “great cleaning power,” while Tide combines all of the above features.
The widely used strategy of pricing all-in-one products at parity with specialized products might be self-defeating or destructive.Which of these two positioning strategies works best? Alexander Chernev, professor of marketing at the Kellogg School of Management, set out to answer this question, studying how consumers evaluate specialized products (masters of one) relative to all-in-one products (jacks of all trades). To investigate this issue, Chernev conducted a series of experiments in which participants were presented with choice sets composed of both specialized and all-in-one products. Respondents were then asked to rate the different alternatives on various attributes and make hypothetical purchase decisions.
An initial experiment was intended to examine how the perceived performance of all-in-one products on different attributes is influenced by the presence of specialized products and vice versa. Five product categories were used: laundry detergent, toothpaste, shaving cream, cold relief medicine, and vitamin supplements. Three alternatives were created for each product category: two specialized options described by a single attribute and one all-in-one option combining both of the attributes. For each category, respondents were shown a choice set and were asked to rate the alternatives on different attributes. For example, in the toothpaste category, respondents were first asked to rate the perceived performance of the products in the choice set on the first attribute (cavity protection) and then on the second attribute (tooth whitening). The respondents were then asked to choose which product they would purchase depending on which attribute had primary importance. For example, which toothpaste would they buy if cavity protection was their primary concern? What if tooth whitening was their primary concern?
Chernev found that a product specializing in a single attribute is perceived to be superior in that attribute relative to an all-in-one product having multiple features. This happens even when the two alternatives are clearly described as being equivalent on that attribute. For instance, consumers expect whitening-only toothpaste to whiten teeth better than toothpaste that both whitens and prevents cavities.
This phenomenon is attributed to consumers’ reliance on the so-called “zero-sum heuristic.” Heuristics are simple mental rules that people use to make decisions, form judgments, and solve problems. According to the zero-sum heuristic, individuals believe that the alternatives in a given choice set are balanced in their overall performance. Hence, consumers draw compensatory inferences and conclude that for each option, advantages in one attribute must be compensated for by disadvantages in another attribute. Therefore, when evaluating choice sets comprising both specialized and all-in-one options, consumers tend to consider the overall performance of the alternatives to be equivalent. This leads them to draw two types of compensatory inferences: compensatory devaluation, which lowers the perceived performance of the all-in-one option, and compensatory polarization, which enhances the perceived performance of the specialized options on their differentiating attributes.
In a second study, Chernev examined the role played by price. In particular, he hypothesized that the perceived attractiveness of the all-in-one option can be increased by placing it at a higher price than that of the competing specialized options. This prediction was tested using four product categories: laundry detergent, toothpaste, shaving cream, and vitamin supplements. Three options were created for each product category: two specialized options described by a single attribute and one all-in-one alternative combining both of the attributes. For each category, respondents were shown a choice set in which either all of the options were priced at parity, or one of the options was priced at a premium. Subjects were then asked to rate the perceived attractiveness of the alternatives on different attributes.
Results indicate that when the multi-attribute product is priced higher than the single-attribute alternative, consumers do not engage in compensatory devaluation of the jack of all trades. In effect, the higher price undermines the basic premise of the zero-sum heuristic, suggesting that the alternatives are not balanced in value and justifying the superiority of the all-in-one product on multiple attributes. This finding has important implications, as it suggests that the widely used strategy of pricing all-in-one products at parity with specialized products might in fact be self-defeating or destructive.
Does Function Follow Organizational Form?
Lending practices of large and small banks