Reports

Dynamics of Multi-Feature Product Usage: Carryover, Spillover, and Social Effects

Tingting Fan, Peter N. Golder, and Eitan Muller, 2014, 14-118

Today, companies invest billions of dollars in developing multi-feature products. While the value of such products (e.g., electronics, and social networks) is closely related to people’s usage, few studies have focused on multi-feature product usage after purchase.

In this study, Tingting Fan, Peter Golder, and Eitan Muller track people’s feature usage on smartphones and an online social network (Renren.com). They build a structural model to simultaneously address feature usage incidence and duration.

They find that the usage of a feature increases as past usage increases (carryover effect), as other features serve as complements (spillover effect), and as friends’ usage of a feature increases (social effect). They find that one feature can be a complement with a second feature, yet a substitute with a third feature. For example, the text messaging feature functions as a complement to the camera feature, yet a substitute for the voice calling feature. They also find a significant interaction effect between the spillover effect and social effect: a 1% increase in friends’ usage of a feature can result in a 0.47% increase in the usage of the entire product.

Marketing implications

These results provide iFensights into the development of multi-feature products. First, the spillover effect suggests that when considering which features should be added to a product, managers should consider the externality one feature may exert on other features. Adding a feature with a positive (negative) spillover effect may promote (hurt) users’ usage of other features. When limited resources are available to develop a product, managers should focus on features that exhibit a strong positive spillover effect.

Second, the social effect suggests that managers should embed social sharing components into product features. For example, the iPhone gives users the option to send photos via text message. Another way is to promote word-of-mouth for feature usage. For example, online video game service providers can let friends share their usage experience in chat rooms.

These results also provide insights into how managers maximize profits from multi-feature product usage. For example, the carryover effect suggests that managers promote deeper and broader feature usage when people first start to use their products. Firms can charge a low fee or even offer free trials to promote early feature usage. A higher fee can be charged later on when people begin to use the features regularly. Second, the spillover effect suggests that firms charge low usage fees for features with a positive spillover effect and earn profits from the increasing usage of the entire product. Moreover, the social effect suggests that firms try to promote friends’ usage by lowering usage fees among friends.

Overall, these findings can help companies increase the usage of multi-feature products and the revenue resulting from that usage.

Tingting Fan is Assistant Professor of Marketing, Business School, Chinese University of Hong Kong. Peter N. Golder is Professor of Marketing, Tuck School of Business, Dartmouth College. Eitan Muller is Professor of Marketing, Stern School of Business, New York University.

Acknowledgments

The authors thank MSI for the research funding support. The authors also want to thank Bryan Bollinger, Sue Ryung Chang, Tulin Erdem, Anindya Ghose, Gary Lilien, and Joel Steckel for their comments.

Related links

Starting Solutions Improve Product Customization (2015) [Article]

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