Integrated Product Architecture and Pricing for Managing Sequential Innovation

被引:64
作者
Krishnan, Vish [1 ]
Ramachandran, Karthik [2 ]
机构
[1] Univ Calif San Diego, Rady Sch Management, La Jolla, CA 92093 USA
[2] So Methodist Univ, Edwin L Cox Sch Business, Dallas, TX 75275 USA
关键词
product design and pricing; modular upgradability; sequential innovation; DURABLE-GOODS MONOPOLIST; NETWORK EXTERNALITIES; RATIONAL CONSUMERS; COMPATIBILITY; DESIRABILITY; STRATEGIES; MARKETS;
D O I
10.1287/mnsc.1110.1391
中图分类号
C93 [管理学];
学科分类号
12 ; 1201 ; 1202 ; 120202 ;
摘要
Science and technology advances drive firms to continually enhance their product's performance and launch sequentially improving offerings. Firms face challenges in marketing such improving products to well-informed, forward-looking consumers who anticipate product improvements and seek to delay their purchase timing. Product design, specifically a modular upgradable architecture in which improving and stable subsystems of a product are separated and selectively upgraded, can be a valuable approach for marketers to alleviate consumer concerns about product obsolescence. However, such an architecture-based approach can present new challenges as well, and dealing with them requires carefully coordinated cross-functional decision making by the firm. In this paper, we identify and formalize the notion of design inconsistency, which refers to the monopolist firm's inability to commit to future product design architectures. We find that firms experience design inconsistency even when they are able to commit to future prices, and design inconsistency lowers firm profits as well as consumer surplus. We then derive a joint product architecture and pricing approach to solve this problem; this enables an innovating firm to optimally and in a time-consistent manner launch modular upgradable products. The modeling and analysis in the paper lends insight into types of markets and products for which modular upgradability is most appropriate and offers guidelines on making pricing and product design decisions jointly for managing sequential innovation.
引用
收藏
页码:2040 / 2053
页数:14
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