Can We Provide Access to Ownership? How Ownership Perceptions Threaten Product Reconfiguration Services
Augmenting physical products with digital services is an increasingly important marketplace phenomenon (Kannan & Li, 2017). Driven by emerging technologies (e.g., the Internet-of-Things), physical products are not static anymore. Rather, they evolve into dynamic service platforms that allow for customization through internal product reconfiguration throughout their lifecycle (Ng & Wakenshaw, 2017). For example, carmakers like Tesla and Audi increasingly transform cars into such platforms: They sell models with artificially limited add-on features (e.g. more battery power, adaptive headlights) and enable customers to reconfigure their cars by offering fee-based access to those features.
Whereas firms might profit from customers’ additional purchases, there are also potential risks associated with this new revenue model that marketers need to understand and manage. Specifically, customers might draw inferences from the base-product and transfer its ownership status to the internal add-on feature, even if they do not actually own it. Thus, they might perceive the fee-based access to hardware in a purchased product as limiting the access to their property, which might have negative consequences for how consumers assess the add-on features and the relationship to the firm. Despite the growing relevance of service-based product reconfiguration in the marketplace, research on this phenomenon is scarce. To date, research has focused on product reconfiguration through external add-on features (i.e. separate items like external memory cards) (Bertini et al., 2009). However, those findings may not generalize to internal product reconfiguration since the external feature is not already part of the product the consumer owns. Drawing on literature on perceived ownership (Brasel & Gips, 2014; Reb & Connolly, 2007) and betrayal perceptions (Grégoire & Fisher, 2008), our research investigates how internal product reconfiguration affects customer perceptions and behavior regarding (1) the focal add-on and (2) the relationship to the firm.
Two experiments, in different settings (n1=330, n2=304), compare product reconfiguration through internal add-on features to those with external add-on features. Results demonstrate that internal features do indeed entail higher feelings of ownership. Consequently, consumers’ willingness-to-pay and purchase intentions are lower for internal add-on features. Examining the impact on the relationship to the firm, we show that consumers are less loyal and more likely to spread negative WOM. The effects result from deflations of benefit perceptions regarding the internal add-on feature. Furthermore, consumers feel betrayed when features are already part of the product, but not accessible from the beginning.
Our research responds to calls for more work on the emerging topic of products as dynamic service platforms (Ng & Wakenshaw, 2017). Furthermore, we expand literature on product reconfiguration by investigating internal add-on features. Overall, we provide insights for scholars and managers by shedding light on the negative consequences of internal product reconfiguration.