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Consumer evaluation of continuous and discontinuous innovation

The effects of brand equity and product category knowledge
Bashar S. Gammoh
Department of Marketing and International Business, College of Business and Innovation, University of Toledo, Toledo, Ohio, USA

Consumer evaluation of innovation 65

Kevin E. Voss
Department of Marketing, Spears School of Business, Oklahoma State University, Stillwater, Oklahoma, USA, and

Ryan Skiver
Department of Information Operations and Technology Management, College of Business and Innovation, University of Toledo, Toledo, Ohio, USA
Abstract
Purpose The purpose of this paper is to investigate how brand equity levels inuence the evaluation of continuous vs discontinuous innovation of new products and the moderating effects of consumers product category knowledge (PCK). Design/methodology/approach A 2 2 between-subjects experiment that varied innovation type (continuous/discontinuous) and brand equity level (high/low) was conducted in order to test study hypotheses. Findings Study results offer new understanding of how brand equity and PCK inuence subjects evaluation of discontinuous vs continuous innovation and provides valuable managerial insights into the potential value of such strategies. Originality/value Being innovative is critical to companies success. Yet, almost half of the new products introduced in the USA are either cancelled or fail to meet targeted nancial returns. Within this reality, it is not surprising that research into consumer response to new product innovation has grown over the last decade. This paper extends the current literature by explicating the interaction effects of two sources of knowledge on inuencing consumer evaluation of innovation, that is, PCK as well as brand-specic knowledge as reected by brand equity level. Keywords Brand equity, Product innovation, Continuous improvement, Consumer behaviour Paper type Research paper

Introduction Companies increasingly depend on the success of new products for future growth and protability (Steenkamp et al., 1999), yet almost half of the new products introduced in the USA are either canceled or fail to meet targeted nancial returns (Sivadas and Dwyer, 2000). With this reality, consumer evaluation of new products is important for

American Journal of Business Vol. 26 No. 1, 2011 pp. 65-79 q Emerald Group Publishing Limited 1935-5181 DOI 10.1108/19355181111124115

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both marketing theory and practice. As such, it is not surprising that research on new product innovation has grown over the last decade. One specic area of research focuses on investigating consumer response to new innovations. More specically, research in this area investigates consumer evaluation and adoption of two types of innovations, which are continuous and discontinuous innovations (Moreau et al., 2001a, b; Hoefer, 2003; Herzenstein et al., 2007; Alexander et al., 2008). Relatively less attention has been given to research regarding the inuence of brand equity on consumer evaluation of innovations. An implicit assumption in previous research is that the brand itself does not affect on the consumers response to the innovation type of the new product introduction. However, such general comparisons between continuous and discontinuous innovation fail to account for specic effects due to different levels of brand equity of the new product. Brands vary in their levels of brand equity, and thus may realize differential responses to continuous or discontinuous new products (Aaker, 1992; Keller, 1993). Recent research in marketing has also demonstrated the importance of the brand in generating differential effects from marketing actions. For example, the marketing-mix efforts (e.g. brand extensions, new product introduction, ability to charge price premiums, etc.) of brands with higher equity have been shown to generate more favorable market feedback (Aaker and Keller, 1990; Bottomley and Doyle, 1996; Hoefer and Keller, 2003; Slotegraaf and Pauwels, 2008). Along the same lines, we argue that the underlying value of the brand affects consumer evaluations of new product introductions. The purpose of this paper is twofold. First, we investigate consumer evaluations of continuous and discontinuous new products and whether these evaluations differ by brand equity. Second, we examine the inuence of product category knowledge (PCK) and brand equity on consumers evaluation of continuous vs discontinuous new products. Previous research demonstrates the importance of the consumers existing level of knowledge on their evaluation of continuous and discontinuous innovations (Moreau et al., 2001a, b; Hoefer, 2003). We extend this research tradition by exploring the interaction effects of two sources of knowledge on consumers evaluation of continuous and discontinuous new products: PCK and brand-specic knowledge, as reected by brand equity. Consistent with brand equity literature, results indicate that high-equity brands enjoy more favorable consumer evaluations regardless of the innovation type or the level of PCK. However, contrary to expectations, results show that among expert consumers, discontinuous innovations yield higher consumer evaluations for low equity brands than continuous innovations. In addition, results extend previous research ndings with regard to the impact of PCK on consumer evaluation of discontinuous innovations. Overall, results offer a better understanding of how brand equity and PCK interact in inuencing subjects evaluation of discontinuous vs continuous new products and provides valuable managerial insights into the potential value of such strategies. This paper is organized as follows. First, we briey review the literature on innovation type and brand equity and then hypothesize about the role of brand equity and PCK in consumer evaluations of continuous and discontinuous new products. Next, we present an experiment in which we manipulate new product innovation type and brand equity levels to test the study hypotheses. After that, we discuss the results and offer some managerial implications. Finally, we discuss the limitations of the study and propose suggestions for future research.

Literature review Innovation types Different classications have been suggested in the published innovation literature to categorize new innovations based on their degree of newness, from either the markets or the rms perspective. From the markets perspective, the level of innovativeness of new product introductions has been categorized as continuous, dynamically continuous, or discontinuous in nature (Robertson, 1971). From the rms point of view, a new product innovation can be new (or not) to the rms product lines and/or new (or not) to the consumer (Kleinschmidt and Cooper, 1991). In this paper, we focus on the market perspective. In the market perspective, a continuous innovation is dened as products that provide new features, benets, or improvements to the existing technology in the existing market (Robertson, 1971; Song and Montoya-Weiss, 1998; Garcia and Calantone, 2002). Thus, continuous innovations are variations of current products on the market involving a small change in either the product or process. The computer personal ash drive industry is an example of this due to its constant improvement in both design and data storage capacity within the same basic technology. At the other extreme is discontinuous innovation, dened as innovations that embody a new technology that results in a new market infrastructure (Song and Montoya-Weiss, 1998; Garcia and Calantone, 2002). Discontinuous innovations contain a breakthrough technology that makes them radically different from the current products in the market place (e.g. the transformation from oppy disks to ash drives in the data storage market). In between these two extremes are dynamically continuous innovations, which involve more than changes and advancement in technology relative to a continuous innovation but less than a discontinuous innovation. Consistent with previous research in this work, we focus our investigation on continuous and discontinuous innovations. Previous research on the adoption of new product innovations has widely documented that consumers are faced with uncertainty about the costs and the benets of adopting and evaluating new products (Hoefer, 2003). In addition, previous research has argued and demonstrated the level of uncertainty is positively correlated to the level of product newness. In other words, consumers will have a higher level of uncertainty about the potential benets of discontinuous new products relative to continuous new products. Discontinuous innovation presents consumers with both uncertainty and opportunity for benets (Hoefer, 2003). On one hand, discontinuous innovations create uncertainties in the sense that the product might not work. On the other hand, there is the potential for gain if the innovation can provide benets to the consumer (Moreau et al., 2001b; Alexander et al., 2008). In summary, consumers perceived risk and value perceptions of a discontinuous innovation vs continuous innovation play an important role in their evaluations and willingness to try such innovations. Previous research also points out the importance of consumers existing PCK in inuencing their evaluations of continuous vs discontinuous innovations. More specically, previous research shows that PCK inuences new product evaluation by inuencing consumers comprehension of the new product and their perceptions of the products relative advantages and risks (Gatignon and Robertson, 1991; Moreau et al., 2001a). For example, Moreau et al. (2001a) found that consumers with higher levels of PCK adopt a continuous product faster but resist adoption of a discontinuous product because their expertise decreases their understanding of the products benets. However, we believe that the Moreau et al. s (2001a) ndings fail to account for

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an important source of information, that is, brand knowledge. The issue of how brand knowledge (i.e. brand equity) inuences consumer perceptions of value and risk associated with continuous vs discontinuous innovations is of vital importance. We extend previous work by examining the interaction of existing PCK with brand knowledge in inuencing consumers evaluation of continuous vs discontinuous innovations. In what follows, we dene brand equity and hypothesize its effect on consumers evaluation of continuous vs discontinuous new product innovations. Brand equity Brand equity is dened as the differential impact of brand knowledge on consumer response to the marketing of the brand (Keller, 1993, 2008). Brand knowledge is the source of such equity and represents the set of associations the consumers hold in memory regarding the brands attributes, benets, perceived quality (PQ) and attitudes. Customer brand equity takes place when consumers are familiar with the brand and hold some favorable, strong and unique brand associations (Keller, 2008). Such brand knowledge provides value to consumers by enhancing their processing of information and condence in making purchase decisions (Aaker, 1992; Keller, 2008). In addition, previous research has shown that a strong brand name reduces perceived risk and enhances consumers understanding of the products benets (Erdem and Swait, 1998; Wernerfelt, 1988). Brand equity is a rich source of information, and risk reduction is particularly relevant when consumers consider the purchase of a new product. At the same time, brand equity provides value to the rm by enhancing the efciency and effectiveness of their marketing programs, including brand extensions and new product introductions (Aaker and Keller, 1990; Broniarczyk and Alba, 1994; Shocker et al., 1994). For example, Aaker and Keller (1990) show that consumers attitudes toward a new brand extension are positively related to the PQ of the parent brand and the t between the extension and the parent brand product categories. Along the same lines, Broniarczyk and Alba (1994) provide strong evidence for the importance of brand knowledge as represented by consumers brand-specic associations in positively inuencing their brand extension evaluations. In a more recent research effort, Corkindale and Belder (2009) nd a positive relationship between the strength of a companys reputation and the likelihood of adopting their innovative new service. Despite the considerable evidence regarding the importance of brand equity in the success of new products, less research attention has been given to investigating the inuence of brand equity level on consumers evaluation of continuous vs discontinuous new products. Hypotheses The preceding discussion provides the basis for our rst hypothesis regarding the effect of brand equity on consumers evaluations of a new product. We expect a new product innovation by a high-equity brand will receive more favorable consumer evaluations than a new product introduction by a low equity brand. As such, and consistent with the long tradition of brand equity research, we expect consumers evaluations (i.e. brand attitude (BA), PQ and purchase intentions (PI)) of a new product will be higher for a high-equity brand relative to a low equity brand, regardless of the innovation type. Hence, we propose: H1. Consumer evaluations (i.e. BA, PQ and PI) will be more favorable for high-equity brands compared to low-equity brands regardless of innovation type.

In H1, we propose a main effect for brand equity level: regardless of the type of innovation level a new product innovation by a high-equity brand will receive higher customer evaluations than a new product introduction by a low-equity brand. However, in our second hypothesis we build on and extend this argument and propose there will be differences in consumer evaluations between continuous vs discontinuous innovations by brand equity level. As discussed earlier, previous research has demonstrated that consumers will have a higher level of uncertainty about the potential risks and benets of a discontinuous innovation relative to continuous innovation (Moreau et al., 2001b; Hoefer, 2003; Alexander et al., 2008). As such, previous research suggest that consumers, in general, will evaluate discontinuous new products less favorably than continuous new products due to the inherent uncertainty associated with discontinuous innovations. However, such general comparisons between continuous and discontinuous innovation fail to account for the specic effects due to different levels of brand equity of the new product innovation. Brands with stronger equity enjoy more favorable, strong and unique associations and have a well-established familiarity in the marketplace (Keller, 2008). Keller (1993) suggests that consumers existing knowledge structures (i.e. associations) and familiarity with the high-equity brand can reduce uncertainty about the new innovation. Strong brand equity can also reduce the amount of information needed for the consumer to evaluate the product. That is, strong brand equity provides consumers with a rich set of associations upon which consumers can base their product evaluations. In addition, such brand equity serves as a general signal of creditability (Erdem and Swait, 1998). The credibility of the high-equity brands may lead consumers to positively evaluate a discontinuous innovation from a high-equity brand. Accordingly, we expect that consumers will not discount their evaluations of discontinuous new products relative to continuous new products when the innovation is offered by a high-equity brand. This reasoning suggests a challenge for low-equity brands, which is in the absence of a rich set of brand associations held by consumers, new product innovations from low-equity brands can receive less favorable consumer evaluations not because of inadequacy in their product development efforts but because of the lack of strong brand equity. However, although low-equity brands lack brand equity to exploit, they can create value by introducing new products to the marketplace. A discontinuous innovation introduced by a low-equity brand may lead the consumer to infer that the company is investing to build their brand. This argument is consistent with signaling theory, which postulates that the rms marketplace actions can send credible signals to consumers (Akerlof, 1970; Wernerfelt, 1988). Signaling theory suggests that the investment a company undertakes acts as collateral or a bond for product quality (Wernerfelt, 1988). The introduction of a discontinuous innovation by a low-equity brand can signal a brand-building strategy that may be rewarded by the market (Erdem and Swait, 1998). Therefore, for a low-equity brand, we expect consumers are more likely to favorably evaluate a discontinuous innovation in comparison to a continuous innovation. Furthermore, Slotegraaf and Pauwels (2008) found that low-equity brands gain greater benets from product introductions. Their results show that lower equity brands obtain higher long-term benets from new product introductions than higher equity brands. Given our previous discussion, we expect discontinuous innovations to generate greater differential effects relative to continuous innovations for low-equity brands than for a high-equity brands.

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Therefore, we propose the differences in consumer evaluations between continuous vs discontinuous innovations will vary by brand equity levels as follows: H2. Consumer evaluations (i.e. BA, PQ and PI) will be more favorable for discontinuous innovations compared to continuous innovations for (a) low-equity brands, (b) but not for high-equity brands.

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In our previous discussion for H2, we argue that for low-equity brands, consumers are more likely to favorably evaluate a discontinuous innovation relative to a continuous innovation. We propose such an effect seems most likely among expert consumers with higher levels of PCK. Experts, in the absence of high brand equity or positive brand knowledge, may rely on their PCK to assist them in evaluating the new product introduction. Previous consumer research shows that existing knowledge improves the comprehension of new information and increases search efciency (Alba and Hutchinson, 1987). More specically, consumers with high PCK tend to possess a strong knowledge in the underlying category product features, available brand names and the likely benets of new products in this category. Thus, consumers with high PCK will be more prepared to develop a good understanding of the functionality of the discontinuous new product. Comprehending it will require less learning effort, and they will have less difculty understanding its potential value. With regard to the discontinuous new product, the more information the consumers have, the more likely their degree of perceived uncertainty is reduced, and the more likely their evaluation is positive. However, product category novices do not possess the depth of PCK that would enable them to make similar judgments. As such, we propose that the subjects PCK will moderate these effects such that the previously hypothesized favorable consumer evaluations for a discontinuous innovation by a low-equity brand will only be observed under high PCK levels. Hence, we propose: H3(a). Under low PCK, consumer evaluations (i.e. BA, PQ and PI) will not vary between continuous and discontinuous innovations for both low- and high-equity brands. H3(b). Under high PCK, consumer evaluations (i.e. BA, PQ and PI) will be more favorable for discontinuous innovations compared to continuous innovations for (a) low-equity brands, (b) but not for high-equity brands. Methodology Research design and stimuli This study is designed as a 2 (innovation type continuous or discontinuous) 2 (brand equity high or low) between-subjects design. A television was chosen as the product in our study due to its relevancy to the study participants and its use in previous published research. The study stimuli consisted of a consumer scenario, in which a person is in the market for a new 32 inch television. Participants were told to imagine themselves in this situation, that there is one particular TV set in which they are interested, and were also instructed to carefully read a brief product description provided for the TV set. The product description introduced the rm and brand, briey described the product and, in very general terms, the product level of innovation.

Manipulations and pre-tests The product description was altered to include innovation type and brand equity manipulations. We changed the brand equity level into low and high conditions by indicating that the TV set was either offered by Pacic or Sony, respectively. A ctitious brand, Pacic, was selected as the low-equity brand and Sony as the high-equity brand via pre-tests. First, an unaided recall test (n 45) suggested that Sony was one of the three most recalled brands in the televisions product category (others are Samsung and Vizio). Second, Sony received the highest ratings by a new sample (n 29) asked to rate their attitudes (A), PQ (Q) and familiarity (F) with the top three brands from the recall test while Pacic received the lowest ratings (Sony A 6.17, Q 6.45 and F 6.93; Samsung A 5.72, Q 5.58 and F 6.10; Visio A 4.28, Q 4.31 and F 4.48; Pacic A 3.17, Q 2.96 and F 2.14). The unknown focal brand was necessary to isolate the effects due to brand equity strength. The second part of the product description was manipulated to create the two types of innovation (i.e. continuous and discontinuous). For example, the discontinuous innovation condition stated This new TV is a breakthrough from the standard models offered in the market place and This TV model uses new innovative technology that provides higher resolution and a clearer picture. For the continuous innovation condition, these sentences were adjusted to reect that condition; This new TV is a step ahead of the standard models offered in the market place and This TV model is improved to provide higher resolution and a clearer picture (see the study stimuli in Appendix 1). Innovation type manipulation was pre-tested with a sample of students (n 61), none of whom participated in other phases of this study. Randomly assigned subjects were asked to evaluate the product using two seven-point scaled items. The rst item asks subjects to rate how different the innovation was from other TV products they currently know (ranging from not at all different to very different). The second item asks subjects about their perceived innovativeness of the TV (ranging from not at all innovative to very innovative). Subjects in the discontinuous innovation condition rated the TV signicantly higher on these two items relative to subjects in the continuous innovation condition (item 1 Mdiscontinuous 5.85, Mcontinuous 2.96, F(1,60) 21.74 and p 0.000; item 2 Mdiscontinuous 4.3, Mcontinuous 2.91, F(1,60) 10.99 and p 0.000). The overall results of our pre-test suggest that participants perceptions of the degree of innovativeness of the two innovation type conditions are signicantly different and in accordance with the intended manipulation. Procedures Study participants (n 145) were randomly assigned to one of the four experimental conditions (continuous/Pacic, continuous/Sony, discontinuous/Pacic and discontinuous/Sony). Study participants were business students recruited from a large university located in the mid-Western USA. The experiment was conducted in three stages. First, subjects answered questions in a booklet containing measures of PCK and attitudes, PQ and familiarity with Sony and Pacic, in addition to demographic questions. Second, subjects completed a distracter task unrelated to this study. Third, subjects were given a second booklet that includes the experimental stimuli and were instructed to read the consumer scenario and complete the measures on the remaining pages of the booklet, including the dependent variables, the remaining covariates and the manipulation check questions. Finally, the two booklets for each subject were attached together.

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Measurement Study constructs are measured with multiple item scales drawn from published research. Three dependent variables are considered in this study. First, attitude toward the brand (AB) is measured using a three-item scale adopted from Simonin and Ruth (1998). Second, PQ was measured using four items drawn from Ratneshwar and Chaiken (1991). Third, PI were measured using a three-item scale adopted from MacKenzie et al. (1986). Participants knowledge about the television product category was measured using a four-item scale adopted from Lichtenstein et al. (1990). Finally, to check the innovation type manipulation, participants were asked to evaluate the new TV set using two items adopted from previous research. We also measured subjects attitudes, PQ and familiarity with both Pacic and Sony brands to check for the success of brand equity manipulation. Potential covariates measured include level of involvement with the experiment and television ownership (see Appendix 2 for study measures). Results Psychometric analysis of study measures indicates reliable and valid scales. The observed coefcient alphas range from 0.86 to 0.95. Exploratory factor analysis indicates that for each study variable, all items converged on one-factor solution, with eigenvalues ranging from 2.623 to 3.138. In addition, the lowest average variance extracted for study constructs was 71 percent, well above the 50 percent benchmark suggested by Fornell and Larcker (1981) (Appendix 2). Regarding the manipulation check, and similar to our pre-tests, subjects were asked to evaluate the product degree of innovativeness on the same items described above. Our results show that subjects in the discontinuous innovation condition rated the brand signicantly higher on these two items relative to subjects in the continuous innovation condition (item 1 innovation degree of difference from current products Mdiscontinuous 4.13, Mcontinuous 3.64, F(1,144) 4.520 and p 0.035; item 2 perceived product innovativeness Mdiscontinuous 4.72, Mcontinuous 4.17, F(1,144) 9.713 and p 0.002). Second, examining subjects attitudes (A), PQ (Q) and familiarity (F) with Sony and Pacic indicates the success of our brand equity manipulation (Sony A 5.83, Q 6.01 and F 6.20; Pacic A 3.66, Q 3.72 and F 2.98). There were no signicant differences in subjects attitudes, PQ, or familiarity with Sony and Pacic across the two innovation type conditions. Overall, these results suggest that our manipulations were successful. Hypothesis testing We created high and low PCK groups based on a median split of the measured subjects PCK. We introduced this variable as a third factor and t an ANOVA model for each of the three dependent variables with the levels of brand equity, innovation type and PCK as the between-subjects factors. Next, to test H1-H3, we examine the main effects of brand equity level, the two-way interaction effects between brand equity and innovation levels and the three-way interactions between brand equity, innovation and PCK, respectively. In addition, because our hypotheses propose specic effects in certain conditions, tests are made using a priori planned contrasts (Brown and Melamed, 1990; Winer et al., 1991). Analysis of variance results in a signicant three-way interaction between brand equity level, innovation type and PCK level for PI, while the three-way interactions for AB and PQ were marginally signicant (AB F(1,144) 2.863 and p 0.093; PQ F(1,144) 3.422 and p .067; PI F(1,144) 7.674 and p 0.006).

With regard to the main effect of brand equity level (H1), our results show signicant main effects for brand equity level across the three dependent variables. For each case, subjects evaluated the high-equity brand (i.e. Sony) higher than the low-equity ctitious brand (Pacic) (AB: 5.92 . 4.86, F(1,144) 52.00 and p 0.000; PQ: 5.71 . 4.77, F(1,144) 33.12 and p 0.000; PI: 5.61 . 4.37, F(1,144) 46.49 and p 0.000). This supports H1 and is consistent with the long tradition of branding research with regard to the power of brand equity. With regard to H2, our analysis results in a signicant two-way interaction between brand equity level and innovation type for each of the three dependent variables (AB F(1,144) 9.78 and p 0.002; PQ F(1,144) 5.48 and p 0.021; PI F(1,144) 12.00 and p 0.001). Next, we conducted a series of planned comparisons to test this hypothesis. The interaction graphs and results from planned comparisons tests are shown in Figure 1. In H2, we propose that consumers AB, PQ and PI for a discontinuous innovation will be higher than for a continuous innovation only when the new product is from an unknown, low-equity and ctitious brand. Also, there will be no difference in consumer evaluations between the continuous and the discontinuous innovation when the new product is from a high-equity brand. Examining the interaction graphs in Figure 1 shows higher ratings on AB, PQ and PI when the new low-equity product introduction is perceived as discontinuous compared to when it is perceived as continuous. These observations are supported by statistical analysis. Planned comparisons show that for each of the dependent variables (i.e. AB, PQ and PI) the mean difference between low equity continuous condition and low equity discontinuous condition is statistically signicant (AB: 5.25 . 4.49, t 3.325 and p 0.001; PQ: 5.12 . 4.45, t 3.119 and p 0.003; PI: 4.85 . 3.91, t 2.858 and p 0.006). There are no statistically signicant mean differences between the continuous and discontinuous conditions for the high-equity brand (AB: 5.89 , 5.95, t 0.259 and p 0.796; PQ: 5.75 . 5.67, t 0.305 and p 0.762; PI: 5.50 , 5.71, t 0.99 and p 0.324). This supports H2.
5.95 Brand equity level 5.89 High (sony) 6.00 Low (pacific) 5.25 5.00 4.49 4.50 4.00 Continuous Discontinuous (C) (DC) Innovationtype (a) Attitude toward the brand (AB) 4.50 4.00 Continuous Discontinuous (C) (DC) Innovation type (b) Perceived quality (PQ) 4.45 5.50 Brand equity level 5.67 5.75 High (sony) 5.12 Low (Pacific) 6.00 5.50 5.00 4.50 4.0 3.91 5.71 5.50 High (sony) Low (pacific) 4.85 Brand equity level

Consumer evaluation of innovation 73

6.00 5.50 5.00

Continuous Discontinuous (C) (DC) Innovation type (c) Purchase intentions (PI)

Notes: Significant differences: high equity continuous vs low equity continuous for the three dependent variables (AB: t (df = 72) = 5.743 and p = 0.000; PQ: t (df = 72) = 4.463 and p = 0.000; PI: t (df = 72) = 6.145 and p = 0.000); high equity discontinuous vs low equity discontinuous for the three dependent variables (AB: t (df = 69) = 3.432 and p = 0.001; PQ: t (df = 69) = 3.086 and p = 0.003; PI: t (df = 69) = 2.146 and p = 0.018); low equity continuous vs low equity discontinuous for the three dependent variables (AB: t (df = 70) = 3.325 and p = 0.001; PQ: t (df = 70) = 3.119 and p = 0.003; PI: t (df = 70) = 2.858 and p = 0.006); NS high equity continuous vs high equity discontinuous for the three dependent variables (AB: t (df = 71) = 0.259 and p = 0.796; PQ: t (df = 71) = 0.305 and p = 0.762; PI: t (df = 71) = 0.99 and p = 0.324); all other pairwise comparison were non-significant with p > 0.10

Figure 1. Dependent variables means across brand equity level and innovation type

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Next, we conduct a series of planned comparisons to test H3(a) and H3(b), in which we propose the hypothesized mean differences in subjects evaluations between the continues and discontinuous innovation for the low-equity brand will only be observed in the high PCK group. As apparent from the interaction graphs in Figure 2, the mean ratings on the
Low product category knowledge (PCK) 6.08 6.00 5.50 5.00 4.50 4.00 Continuous Discontinuous (C) (DC) Innovation type 4.78 Brand equity level 5.94 High (sony) 6.00 5.50 Low (pacific) 5.00 5.05 4.50 4.00 Continuous (C) Discontinuous (DC) 5.48 Brand equity level 5.78 High (sony) 6.00 5.50 5.70 Brand equity level 5.78 High (sony)

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4.62

5.00 Low (pacific) 5.03 4.50 4.00 3.50 Continuous (C) 4.27

Low (pacific) 4.59

Discontinuous (DC)

Innovation type

Innovation type

(a) Attitude toward the brand (AB)

(b) Perceived quality (PQ)

High product category knowledge (PCK)

(c) Purchase intentions (PI)

6.00 5.50 5.00 4.50

5.78

Brand equity level 5.83 High (sony)

Brand equity level 6.00 5.90 5.72 High (sony) 6.00 5.50 5.73

Brand equity level

Low (pacific) 5.50 5.45 5.00 4.50 4.00 4.00 Discontinuous Continuous (C) (DC) Innovation type 4.16

Low (pacific) 5.00 5.22 4.50 4.00 3.50 Continuous Discontinuous (C) (DC) Innovation type 3.31 Continuous (C)

5.22 High (sony) Low (pacific) 5.12

4.00

Discontinuous (DC)

Innovation type

(a) Attitude toward the brand (AB)

(b) Perceived quality (PQ)

(c) Purchase intentions (PI)

Notes: Significant differences: low PCK: high equity continuous vs low equity continuous for the three dependent variables (AB: t (df = 41) = 4.547 and p = 0.000; PQ: t (df = 41) = 2.117 and p = 0.040; PI: t (df = 41) = 3.675 and p = 0.001); low PCK: high equity discontinuous vs low equity discontinuous for the three dependent variables (AB: t (df = 34) = 4.468 and p = 0.000; PQ: t (df = 34) = 2.856 and p = 0.007; PI: t (df = 34) = 3.957 and p = 0.000); NS Low PCK low equity continuous vs low equity discontinuous for the three dependent variables (AB: t (df = 39) = 1.001 and p = 0.323; PQ: t (df = 39) = 1.367 and p = 0.179; PI: t (df = 39) = 0.802 and p = 0.427); NS high equity continuous vs high equity discontinuous for the three dependent variables (AB: t (df = 36) = 0.593 and p = 0.557; PQ: t (df = 36) = 0.737 and p = 0.466; PI: t (df = 36) = 0.255 and p = 0.800); high PCK: high equity continuous vs low equity continuous for the three dependent variables (AB: t (df = 29) = 4.041 and p = 0.000; PQ: t (df = 29) = 5.186 and p = 0.000; PI: t (df = 29) = 6.470 and p = 0.000); NS high PCK high equity discontinuous vs low equity discontinuous for the three dependent variables (AB: t (df = 33) = 1.203 and p = 0.238; PQ: t (df = 33) = 1.573 and p = 0.125; PI: t (df = 33) = 0.236 and p = 0.815); high PCK low equity continuous vs low equity discontinuous for the Figure 2. three dependent variables (AB: t (df = 29) = 3.954 and p = 0.000; PQ: t (df = 29) = 3.386 and p = 0.002; Dependent variables PI: t (df = 29) = 3.388 and p = 0.002); NS high PCK high equity continuous vs high equity discontinuous means across brand equity for AB and PQ and marginally significant for PI(AB: t (df = 33) = 0.127 and p = 0.900; PQ: t (df = 33) = 0.521 level, innovation type and and p = 0.606; PI: t (df = 33) = 1.735 and p = 0.092); all other pairwise comparisons were non-significant with PCK p > 0.10

three dependent variables under the low brand equity condition for discontinuous innovation are much higher than for the low equity with continuous innovation only for the high PCK group. These observations are supported by our analyses. In each case, the difference between the low brand equity discontinuous innovation and the low equity continuous innovation are statistically signicant only for the high PCK group (AB: 5.45 . 4.00, t 3.954 and p 0.000; PQ: 5.22 . 4.16, t 3.386 and p 0.002; PI: 5.12 . 3.31, t 3.388 and p 0.002). No such differences are observed for the low PCK group (AB: 5.05 . 4.78, t 1.001 and p 0.323; PQ: 4.62 . 5.03, t 1.367 and p 0.179; PI: 4.59 . 4.27, t 0.802 and p 0.427). Thus, H3(a) and H3(b) are supported (see Figure 2 for interaction graphs and planned comparisons results). Discussion In this study, we examine the effects of brand equity level and PCK on consumer evaluations of continuous and discontinuous innovations. In doing so, we contribute to the innovation literature by exploring whether consumers evaluations of innovation types differ for brands of varying equity. Furthermore, we extend previous research by examining the interaction effects of two sources of knowledge on inuencing consumers evaluation of continuous and discontinuous innovation. This enabled us to simultaneously examine the role of PCK as well as brand-specic knowledge on consumer evaluations of new product innovations. Our results illustrate three critical ndings that offer better understanding of brand equity inuence on subjects evaluation of new innovative product introductions. First, our results validate previous ndings, in general, by substantiating the positive inuence of a well-known and high-equity brands on consumer evaluations of new product introductions regardless of the innovation type. In support of H1, brands with higher equity enjoy higher consumer evaluations relative to the low-equity brand across our three dependent variables. The main effect of brand equity was statistically signicant. More importantly, our results extend previous ndings in the literature with regard to the impact of existing PCK on consumers evaluation of discontinuous innovations. The previous literature has found that experts resist adoption of a discontinuous product because their expertise decreases their understanding of the products benets. Our results show that when the discontinuous innovation is offered by a high-equity brand, which possesses a rich set of associations in consumers minds, expert consumers favorably evaluate the discontinuous innovation. A potential explanation for such results is that high brand equity provides consumers with more information about the broad array of the benets of the brand and thus reduces their perceived uncertainty about the potential benets and risks associated with a discontinuous innovations offer. Furthermore, our results demonstrate that for low-equity brands, a strategy of discontinuous innovation can yield higher product evaluations from the customers relative to a continuous innovation strategy, though this takes place only with expert customers. Thus, having a discontinuous innovation appears to improve subjects evaluations of the new product introduction of a low-equity and ctitious brand. This implication is especially important for low-equity brands because they enjoy higher benets from new discontinuous product introductions. A potential explanation for such results is that for high-equity brands, the availability of a strong set of associations provides consumers with the needed information to evaluate the new product introduction, regardless of the innovation type. However, in the absence of such

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associations for the low-equity brands, the mere perception that the new product introduction is a discontinuous innovation may imply the company is motivated to maintain their high investment. New product introduction is critical to marketing strategy. One of the important decisions for marketing managers is whether to use discontinuous or continuous innovation strategy. This study provides valuable managerial insights into the potential value of discontinuous vs continuous innovation strategy. Our ndings imply that low-equity and unknown brands are better off creating discontinuous product innovations for their survival in the new economy, whereas the companies with high brand equity are not taking a signicant risk by creating new discontinuous products since consumers are just as likely to positively evaluate those products. This implication is especially important for low-equity brands because they enjoy higher benets from new discontinuous product introductions. In addition, our results indicate that such effects are particularly evident for experts relative to novice consumers. As such, discontinuous innovation seems to be an effective strategy for unknown, low-equity brands, particularly when dealing with consumers that have high levels of PCK. Limitations and directions for future research In what follows, we discuss the limitations of our study and outline some suggestions for future research. As with all experimental research, the fact that participants were exposed to scenarios with ctitious brand name and product concept descriptions might have contributed to the articiality of our study, thus, limiting the external validity of our ndings. Future research studies should attempt to replicate our ndings in more realistic contexts using actual new product innovations and real brands. Another limitation of this study is the generalizability of the results is limited by the fact that we examine one product within the consumer electronics product category using a student sample. Although through a series of pre-tests we selected a product and product category suitable for the study target subjects, it would be benecial in future research to study other products and other product categories with various consumer segments to verify our results across different product and consumer contexts. Future studies should also examine the role of other potential moderator variables in inuencing consumers evaluation of continuous and discontinuous innovations. One other individual difference variable that has been shown to inuence the tendency of consumers to adopt new products is consumer level of innovativeness. Whether dened as a domain-specic innovativeness (Goldsmith and Hofacker, 1991) or innate innovativeness (Hirschman, 1980), it is interesting to investigate the interaction between level of brand equity and level of individual consumer innovativeness in inuencing consumers evaluations of continuous vs discontinuous innovations.
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Product description (discontinuous innovation) There is one particular new TV set that you are interested in. This TV set is offered by Sony/Pacic. Sony/Pacic Corporation is a manufacturer of various products in the consumer electronics industry. This set is a 32 inch LCD TV that has been in stores for the last month. This new TV set is a breakthrough from the standard models offered in the market place. This TV model uses new technology that provides higher resolution and a clearer picture. The new model contains comparable features to other same size screen TVs including being an LCD TV with the new advanced technology. Appendix 2
PQa (a 0.91, eigen value 3.138 and variance explained 78 percent) This TV set brand conveys a high-quality image

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This TV set appears to be of very high quality I would consider this TV set to be very functional This TV set would be very dependable Attitude toward the brandb (a 0.93, eigen value Bad/good Unfavorable/favorable 2.623 and variance explained 87 percent) Unpleasant/pleasant PIb (a 0.95, eigen value 2.740 and variance Unlikely/likely explained 91 percent) Improbable/probable Denitely would not buy/denitely would buy PCKa (a 0.86, eigen value 2.829 and variance I feel very knowledgeable about televisions explained 71 percent) If a friend asked me about TVs, I could give them advice about different brands If I had to purchase a TV today, I would need to gather very little information in order to make a wise decision I feel very condent about my ability to tell the difference in quality among different brands of TVs Notes: aItems were measured on a seven-point response scale anchored by strongly disagree and strongly agree; bitems were measured using seven-point semantic differential type scales

Table AI. Measurement items, internal consistency and exploratory factor analysis

About the authors Bashar S. Gammoh (PhD Oklahoma State University) is an Assistant Professor of Marketing, College of Business and Innovation at University of Toledo. His major research interests are in the areas of marketing strategy and brand management. His research has appeared in Journal of Product & Brand Management, Psychology and Marketing and Marketing Letters. Kevin E. Voss (PhD Washington State University) is an Associate Professor of Marketing, William S. Spears School of Business, Oklahoma State University. His research interests are in the areas of international marketing, brand management and measurement issues. His publications include articles in Journal of Marketing Research, Journal of Business Research, Marketing Letters and Psychology and Marketing. Ryan Skiver is currently a second year PhD student in the College of Business and Innovation, at University of Toledo, Toledo, Ohio, USA. His major research interests are in the area of new product development specically radical innovation creation and management. Prior to joining the PhD program, Ryan Skiver worked as an Executive for a Fortune 500 company in the area of operations management. To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints