It’s relatively easy to pinpoint when and why a consumer buys a new product. Purchasing behavior is well documented, with good reason. But what happens next? How often consumers use a product, for how long, and which features of the product they use: all these factors can be important to a company’s bottom line. Yet it isn’t easy to find data to answer any of these questions—most companies are happy to make the sale and call it a day.
Understanding how consumers use products and services can pay off for managers, says Tingting Fan of the Chinese University of Hong Kong. In “Dynamics of Multi-Feature Product Usage: Carryover, Spillover, and Social Effects,” Fan and Peter Golder of Dartmouth College and Eitan Muller of New York University and The Interdisciplinary Center, Israel, show how managers can leverage data on consumer usage to improve a product or service’s utility and maximize revenues.
“Many studies examine the moment when people purchase new products,” says Fan. “Very few studies focus on product usage, yet it’s extremely important to understand how people use a new product, which features they use, and how this usage drives future purchases or upgrades of the product. Because if people do not use it, they won’t buy it again. Eventually, sales will drop.”
What drives usage?
Fan and her coauthors designed an eight-week longitudinal survey to provide a direct window into how people used two multi-feature products—smartphones and Renren.com (a social networking site that is China’s equivalent of Facebook). They gleaned data from weekly surveys of 175 Beijing University freshmen, quizzing participants on the frequency and duration of their use of four of the most popular features of each product, in addition to perceptions of their friends’ usage. In analyzing the results, they zeroed in on three effects that were most important in driving usage behavior.
The first two, carryover and social effects, are uniformly positive in driving usage. Past experience and enjoyment of a product motivate a consumer to continue using it, and the social nature of products means that others’ sharing behavior will drive up yours as well. In analyzing their data, Fan and her coauthors did, in fact, find positive carryover and social effects for the smartphone features they analyzed (voice calling, text messaging, email, and camera) as well as for the four most popular Renren.com features (news feed, blog, buzz feed, and photo).
"It's not just the sales data that matter—a major portion of revenues will come from people's usage."
To take advantage of those positive carryover effects, Fan suggests that service provider managers at companies such as Verizon, AT&T, and Facebook consider implementing programs that broaden the use of multiple features from the very start of a product’s purchase. To capitalize on positive social effects and encourage word of mouth, providers can embed social sharing components into product features.
The iPhone, for example, enables people to easily send photos via text message; and some online video games encourage people to share their experience of using virtual goods (such as weapons) in online chat rooms.
Complement or substitute?
The third effect, spillover, yielded more complex results. If product features complement one another, the spillover effect will be positive; that is, the use of one feature increases as another becomes more appealing. In the case of smartphones, for example, the utility of sending text messages increases as the quality of the camera function goes up, producing higher resolution, easy-to-edit images available to send. On the other hand, the voice calling and text messaging features serve a similar purpose of contacting other people, so the use of one typically cancels out the use of the other. As expected, they found a positive spillover (complement) effect between the text messaging and camera features for smartphones, and a negative spillover (substitute) effect for voice calling and text messaging.
For Renren.com, the news feed feature had a positive spillover effect on both the blog and photo sharing features, no doubt because users were more likely to read their friends’ blogs or see their photos while checking the news feed feature. The buzz feed feature (which enables users to watch videos, much like YouTube), however, had a negative spillover effect on the news feed and blog features, most likely because visitors were pulled away to view popular videos, articles, and pictures.
These findings offer important insights for managers, says Fan, noting that with so much available technology, it can be tempting to put many features on one product. The Apple iPhone 5, for example, comes with 26 built-in apps, with 775,000 more available for download. Yet more isn’t always better. “Sometimes companies aren’t sure which features they should add, and which they should drop,” she says. “Understanding how features complement or substitute for one another can help managers think more strategically in order to maximize overall product usage.”
Fan and her coauthors also analyzed the interaction between the spillover and social effects, finding that a 1% increase in friends’ usage of a feature can result in a .47% increase in product usage overall. As an example, you might be more likely to use the text messaging function if your friend does—and an interaction between social and spillover effects could result in increased use of the camera function as well. “As a manager, if you want to increase usage of the entire product, you may want to pick one feature that has the strongest spillover effect,” says Fan. “I might make it free to use the text messaging feature, for example, which would result in lost revenues for that function but overall gains from other features, the social effect, and from the use of data.
“I would like managers to realize it’s not just the sales data that matter—a major portion of their revenues will come from people’s usage,” Fan continues. “It’s important to understand how people use a new product, which features they use, and how this usage drives data use, future purchases, and upgrades of the product.”
Fan is using the same data gathered from her longitudinal survey to do a cross-platform analysis of feature usage to understand how using one device, such as a smartphone, can influence usage on another (such as a desktop computer or tablet). She is also working with behavioral data provided by an online gaming company to understand how different factors (such as how easy the game is to win, and the influence of friends’ play) affect overall usage. “As more data become available, it becomes more and more important to understand consumers’ usage behavior,” she says. Managers who take this reality to heart will be more likely to enjoy increased, long-term revenues over the life of new products and services—not just the onetime bump of a sale.
By Julia Hanna
Dynamics of Multi-Feature Product Usage: Carryover, Spillover, and Social Effects
Tingting Fan, Peter N. Golder, and Eitan Muller (2014)
3 WAYS to GET CONNECTED
Employees of MSI Member Companies enjoy the benefits of complete online access to content, member conferences and networking with the MSI community.
Qualified academics benefit from a relationship with MSI through access to msi.org, conferences and research opportunities.
The public is invited to enjoy partial access to msi.org content, a free e-newsletter, selected reports and more.