You don’t want to be too distinct!
Research Paper Title:
“Categorically right? How firm-level distinctiveness affects performance across product categories”
Authors:
Background:
Firms need to attain optimal distinctiveness and find a positioning where audiences evaluate them as unique, but not as improper. Those that succeed in this task may find that their firm-level distinctiveness has a positive appeal that helps them to perform well. However, in consumer markets, where firms are often active across multiple product categories, the question arises: Does firm-level distinctiveness benefit all products across different product categories equally? The researchers use a data set of 335 new ventures selling 2198 products to online consumers to answer this question. Products offered by firms with high firm-level distinctiveness benefit in product categories that share less overlap with other categories and thus occupy a more distinct position in the classification system, but not in product categories that share frequent relations to other categories and thus occupy a non-distinct position. The results offer a more nuanced perspective on firm-level distinctiveness that is not invariably efficient in addressing audiences once the “optimal” level is found but requires careful consideration of the product categories in which a firm seeks to operate.
Methodology:
Sample Description: New ventures selling products to consumers online
Sample Size: 335 new ventures offering 2198 products over a time window of 169 weeks
Analytical Approach: Regression analysis for longitudinal panel data
Hypothesis:
Hypothesis 1. The effect of firm-level distinctiveness on product performance is U-shaped. (supported).
Hypothesis 2. The effect of firm-level distinctiveness on product performance will be accentuated (attenuated) in product categories that occupy a distinct (non-distinct) position in the broader classification system. (supported).
Results:
Products offered by firms with high firm-level distinctiveness benefit from product categories that share less overlap with other categories and thus occupy a more distinct position in the classification system.
In product categories that share frequent relations to other categories and thus occupy a non-distinct position, products do not benefit from firm-level distinctiveness at all.
The researchers explain these differences with the consumer audiences the product categories consist of: Only consumers from product categories with an increasingly distinct position are receptive to and appreciate firm-level distinctiveness, so they are more likely to rely on and utilize it when evaluating products.
Consumers in product categories with a non-distinct position usually favor a simple and effortless evaluation with little need for specialized requirements and demands. This renders firm-level distinctiveness not only less favorable but also less likely to be recognized and utilized during product evaluation.
Conclusion:
The results offer researchers and managers alike a new and more nuanced perspective on how product categories influence consumer evaluation of firms and their products. This is particularly the case for firm-level distinctiveness which is not invariably efficient in addressing audiences once the “optimal” level is found but requires careful consideration of the product categories in which a firm seeks to operate. Managers need to be aware of possible differences for individual products in their portfolio and have a clear impression of whether audiences of those targeted product categories have both a preference and the right set of tools to evaluate their firm-level distinctiveness. If both conditions are satisfied, firms are likely to benefit.