Digitized Physical Products - Exploring Consumers Responses Toward Digital Feature Upgrades for Physical Products

New technologies enable firms to connect physical products to the internet and to adapt them remotely. This offers firms the opportunity to expand the products functionalities digitally, and to sell these additional functionalities through a digital upgrade processa practice the author terms digital feature upgrades. Despite its growing prevalence and relevance for marketing managers, knowledge about this novel phenomenon remains limited. While scholarly research is still lacking, practitioner reports focus predominantly on technological and legal requirements. Consumer acceptancecrucial for innovation successhas received even less attention. The three articles of this cumulative dissertation aim to narrow this research gap. Article 1 explores how and under which conditions digital feature upgrades impact consumers firm evaluations. One pre-study (based on a sentiment analysis of actual Tesla Tweets following Hurricane Irma), one lab experiment (conducted using a Virtual Reality simulation) and six online experiments provide evidence that digital feature upgrades can adversely affect consumers firm evaluations. This effect is driven by consumers feelings of entitlement that arise from owning a physical product: because consumers feel entitled to the full capabilities of products that they own, they infer manipulative intent from firms who offer digital feature upgrades for an additional charge. Consequently, consumers evaluate the firm less favorably. Article 2 focuses on the upgrade process and explores how the digital upgrade format influences consumers value perceptions. Five online experiments reveal that features are less likely to be purchased when they are offered through a digital upgrade process than through a physical upgrade processdespite the first being more convenient while essentially providing access to the same final feature. Because a digital upgrade process grants immediate access to features at the simple touch of a button, consumers associate the features with lower value and are therefore less willing to buy them. Article 3 synthesizes the empirical findings to offer managers insights into the potential negative implications of enabling feature upgrades through a digital upgrade process. Furthermore, drawing on agency theory, this article examines two mechanisms that firms could use to mitigate the negative effect of a digital upgrade process: consumer agency and transparency about the firms value creation processes. The results show that if firms grant consumers a sense of agency, or make their processes transparent, consumers appreciate the value of the feature and become more willing to buy the upgrade.