MIT Sloan Management Review

Corporate Strategy

Speeding High-Tech Producer, Meet the Balking Customer

By Anirudh Dhebar

January 15, 1996

INCREASINGLY, HARDWARE PRODUCERS AND SOFTWARE DEVELOPERS ARE FALLING OVER EACH OTHER TO BE FIRST TO MARKET WITH EVEN NEWER AND EVEN MORE IMPROVED versions. To use IT-intensive products effectively, consumers often must make long-term financial and nonfinancial investments in the product or in the overall system; they expect to be able to use the product for an extended period before having to repeat the investment. The rapid introduction of new and improved versions can make a consumer regret a previous purchase, hesitate over any new purchase, and agonize over similar purchases in the future. It is not in a producer’s long-term interest if consumers balk. The author articulates the underlying reasons for — and the consequences of — adverse consumer reaction to rapid product improvement and offers suggestions for mitigating some of these reactions.

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In the mid-1980s, I purchased my first car (a Honda Civic) and my first personal computer (an IBM PC AT) at about the same time and for about the same price ($6,000 to $7,000; the price of the computer included a monitor and a printer). Both products were what economists call “durable goods.” Both were used in larger systems consisting of the user, complementary products, and infrastructure. Both required me to master complex user interfaces and protocols. And, in both cases, the manufacturers followed up the initial models with a sequence of “new and improved” versions. My experiences owning and replacing the two were, however, very dissimilar.

An annual stream of new and improved Civics notwithstanding, I used my car for eleven years, for the most part with satisfaction, and easily disposed of it for just under a third of the original purchase price. As basic transportation goes, the new car I purchased as a replacement was not much more superior, but it was much more expensive and, given the rate at which car prices were rising, I was glad I replaced my car when I did and not later.

My experience with the personal computer was very different. I could barely squeeze three years out of it (not because the computer itself was wearing out, but because soon it was not powerful enough for me,... To read the complete article, login or sign-up using the form below.

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