Willingness to pay for innovative products : the effects of positioning strategies and personality traits

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Willingness to pay for innovative products:

The effects of positioning strategies and personality traits

Bachelor‘s thesis

Antonius Romwald Hoebe

6183778

Amsterdam, July 14, 2014

Thesis seminar Business Studies Supervisor: B. Kuijken

Academic year: 2013 – 2014 Semester 2, Period 3

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Abstract

The primary reason that consumers undervalue new innovations is uncertainty. Previous research suggests that consumers might valuate innovative products more favorably if they score high on the personality trait open to experience or if a positioning strategy is used. It is hypothesized that functional positioning reduces uncertainty but experiential positioning does not. Both functional positioning and experiential positioning are expected to increase the actual willingness to pay for an innovative product but this will be less for experiential positioning. Other hypotheses are that the personality trait open to experience positively relates to to-Pay and that it moderates the relationship between the Willingness-to-Pay and the two positioning strategies. The hypotheses are tested on a sample of 428 subjects by the use of real second-price sealed-bid auction experiment. Only two hypotheses were supported, suggesting that functional position reduces uncertainty but experiential does not, and only a combination of the two positioning strategies increased the willingness to pay for an innovative product. However, consumers that scored high on open to experience were not willing to pay a higher price for the innovative product. This would indicate that they do no react stronger to the stimuli of positioning strategies.

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Foreword

First, I would like to thank Hannah Berkers. It was because she marked my first version of my paper of Project 1 as unsatisfactory that I realized that I needed to work harder. She was of great assistance during the rewriting of my paper and helped me improve my academic writing skills. Next, I would like to thank Inge Wolsink for her Project 3 course. It helped me complete the skillset needed in order to successfully finish this thesis. Furthermore, I would like to thank my friend who proofread my thesis. Most of all I would like to thank my supervisor Bram Kuijken and his partner Anouar El Haji for giving me the opportunity to work with the Veylinx platform. Moreover, I would like to thank them for helping me with elaboration of the statistical data and effectuating the auction. Finally, I would like to thank them both for the promptness of their responses to my emails. Veylinx is a great platform and I think it rightfully won the Insight Innovation Competition.

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1. Introduction

It is argued that consumers do not appreciate the true value of a new innovative product, because there is a conflict between what innovators believe consumers want and what consumers truly desire (Gourville, 2006). Gourville (2006) states that consumers are biased and they accordingly overweight entrenched product‘s benefits. One reason for this is that consumers are uncertain about the new product‘s performance. Uncertainty arises when consumers lack access to sufficient, reliable and valid information to facilitate them in evaluating innovative offerings (Littler and Melanthiou, 2006). Consumers can be uncertain in two ways. First, uncertainty could exist because of the possibility that the product will not fulfill the consumer‘s expectations. Second, the product‘s ambiguity could also cause uncertainty (Lipshitz & Strauss 1997).

It is argued that a reduction of uncertainty will diminish the negative effects on the adoption of innovative new products (Marra, Pannell & Ghadim, 2003). A reduction of uncertainty therefore can increase the chance that consumers accept innovative new products as the status quo (Marra, Pannell & Ghadim, 2003; Gourville, 2006). Moreover, it is shown that a reduction of uncertainty will increase the maximum price consumers are willing to pay for a product or service (Wang, Venkatesh & Chatterjee, 2007).

A way to reduce uncertainty is by product positioning strategies. Positioning strategies are ways of signaling the product‘s benefits (Noseworthy &Trudel, 2011; Wertenbroch & Dhar, 2000; Kahn & Meyer, 1991). Wertenborch and Dhar (2000) argue that product benefits can be the subjective importance of attributes that enhance or preserve a status quo. This reasoning is in line with Grouville (2006), as he argues that consumers evaluate new innovative products on the ability to enhance and preserve the status quo in comparison with the incumbent product‘s benefits. Kahn and Meyer (1991) show that by decreasing the uncertainty about a product‘s attributes more weight is given to enhancing attributes than preserving attributes in the consumer‘s evaluations of market goods. In other words, if attribute uncertainty is reduced it is more likely that consumers will evaluate products that have a relatively high amount pleasure potential more favorably (Kahn & Meyer, 1991; Wertenborch & Dhar, 2000).

Two positioning strategies that enhance consumer‘s evaluations will be discussed. Noseworthy and Trudel (2011) make a distinction between signaling functional benefits and experiential benefits. They elaborate this difference by giving the example of two competing shoemakers. On one side there is Sketchers that used functional benefits. It promoted the

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7 ‗Shape-ups‘ as strengthening user‘s back, core and leg muscles. On the other side there is Reebok that used experiential benefits. It promoted the ‗EasyTone‘ as the route to a ―nice booty‖ (Noseworthy and Trudel, 2011, pp 1008). Signaling functional benefits satisfies immediate and practical needs (Bhat & Reddy, 1998). Therefore, uncertainty about the functional attributes will be reduced. Moreover, the findings of Chitturi, Raghunathan and Mahajan (2008) show that only after consumers have established a product‘s functionality will they engage in the product dimension of consumption that relates to the pleasure potential of a product. Signaling experiential benefits satisfies higher-order aspirations of pleasure, aesthetics, or esteem (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011). If an innovative product is positioned on experiential dimensions, it will increase the perceived pleasure potential of a product but it will not decrease uncertainty about the functional attributes. So, any degree of functional uncertainty will revoke most of the positive effects of experiential positioning (Noseworthy & Trudel, 2011). Nonetheless, experiential positioning is seen as a more sustainable positioning strategy (Pine & Gilmore, 1999). However, it is suggested that changing positioning strategies after one has been implemented can have negative consequences because of consistency reasons (Bhat & Reddy, 1998). So, it seems that innovative products cannot profit fully from the advantage of sustainability of experiential positioning, because the innovative nature of the product demands a decrease in uncertainty of the functional attributes (Noseworthy & Trudel, 2011).

A possible solution for the positioning of innovative products in an experiential way is by customer segmentation. Whelan and Davies (2006, p. 393) argue that there is potential in using human personality traits in order to identify different consumer segments. This study will use the accepted taxonomy for classifying personality traits of the ‗Big Five‘ as it is consider to be valid, reliable and generalizable (Whelan and Davies, 2006). For the sake of feasibility, only one personality dimension will be discussed in this study, namely: openness to experience. ―The label openness to experience is given to people who are imaginative, curious and broadminded and have a need for variety and unconventional values‖ (Barrick & Mount, 1993 as cited in Whelan & Davies, 2006, pp. 396). Therefore, consumers that perceive themselves as scoring high on the personality trait open to experience might be open to more perceived uncertainty or may be willing to try an unfamiliar product (Whelan & Davies, 2006).

Most previous research has focused only on brand positioning (Bhat & Reddy, 1998; Whelan, Davies, 2006). However, Noseworthy and Trudel (2011) varied the mode of presentation (functional versus experiential) of a single product and found that it can lead to

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8 preference reversals. Previous studies used a combination of real and fictitious brands in a hypothetical consumer context. Therefore it does not incorporate the negative affect associated with the psychology of gains and losses (Gourville, 2006). Hence, this gap in the literature is addressed in a more realistic consumer context. Specifically, the relationship between the two different positioning strategies and the actual willingness to pay is examined by the use of a second price sealed bid auction. In addition, the relationship of the personality dimension open to experience on the actual willingness to pay is examined. Moreover, it is tested if the personality dimension moderates the relationship between the two positioning strategies and the willingness to pay. This thesis contributes to the academic literature by providing additional empirical evidence on the effectiveness of the two positioning strategies on different customer types and their actual willingness to pay. Furthermore, this is the first study that simultaneously investigates the relationship between the two different positioning strategies, the personality dimension open to experience and the actual willingness to pay. Therefore, managers may gain new insights in the effects positioning strategies have on different consumer segments on the actual willingness to pay. Hence, this study will investigate:

What the effects are of functional and experiential positioning strategies on the willingness to pay for an innovative product and how the personality dimension open to experience moderates this effect.

First, this paper will provide an overview of the academic literature concerning the way in which consumers adapt to innovations, how uncertainty is conceptualized by different authors, how uncertainty relates to the adoption of innovation, what is understood with willingness to pay, how the two positioning strategies increases the willingness to pay and the downside of experiential positioning, and how and why open to experience can be a base for segmentation. Second, the theoretical framework is discussed in which the hypotheses are presented. Third, the methodology of this research is described. Fourth, the results of the data analysis are described and discussed. Fifth, the key findings, the interpretation of the results, the implications and the limitations of this study are discussed and suggestions for further research are presented. Finally, a conclusion is given.

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2. Literature review

2.1 Consumer innovation adoption

The dominant perspective on the adoption of innovation is based on a view of the consumer as being thoughtful, analytical and rational (Rogers, 1983, 1995; Littler & Melanthiou, 2006). The adoption of innovation by consumers is argued to be a process consisting of several stages (Rogers, 1983, 1995). First, the consumer will search for relevant information in a cost effective way. Based on the found information an evaluation is made on the innovation‘s relative advantages and disadvantages. Depending on the outcome of this evaluation a decision is made based on the degree to which the consumer‘s requirements will be fulfilled and the ability of the innovation to meet these requirements (Rogers, 1983, 1995).

The rate of adoption is been shown to have a relationship with five factors (Rogers, 1983; Littler, 2001; Gourville, 2006). Firstly, to increase the rate of adoption a relative advantage needs to act as an incentive to change. However, the perceived relative advantage of the innovation will be lower due to loss aversion as the consumer will perceive the relative magnitude of loss greater than gain (Kahneman & Tversky, 1979). In the adoption of an innovation this can, for example, be combined with the loss of money or the loss associated with the discontinuation of its predecessor. Secondly, the innovation should not disrupt the status quo. The status quo bias states that there is a preference for the current state of affairs and therefore the firmly established innovations are being overweighed (Gourville, 2006; Samuelson & Zeckhauser, 1988). Thirdly, the level of complexity of the innovation should be limited so it requires little learning. Fourthly, evaluation should be aided by some form of trial. Lastly, the observable benefits of the innovation should be clear enough to assess the benefits independently (Rogers, 1983; Littler, 2001; Gourville, 2006). Unclear benefits are argued to be caused by ambiguity or vague options (Ellsberg, 1990).

Critique on the dominant perspective consists of the unrealistic assumption that consumers possess all the necessary information in order to evaluate an innovation prior to adoption (Littler & Melanthiou, 2006). Littler and Melanthiou (2006) argue that when information about the innovation‘s performance and effects is scarce uncertainty rises. Factors that have demonstrated to have a relationship with the rate of adoption support the idea that uncertainty acts as a barrier to innovation adoption. For instance, the factors relative advantage and status quo are linked with psychological biases that occur in uncertain settings (Kahneman & Tversky, 1979; Gourville, 2006; Samuelson & Zeckhauser, 1988). Moreover,

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10 the trial and understanding factors are ways to reduce uncertainty about the adoption of innovation (Mara, Panell & Ghadim, 2003, Rogers, 1983; Littler, 2001; Gourville, 2006).

To conclude, the dominant perspective on the adoption of innovation views consumers going through a process consisting of several stages in a rational way. Previous research also shows factors that relate to the rate of adoption. Critique exists on the dominant perspective as it presumes that consumers possess all the necessary information in order to evaluate an innovation. However, the factors relating to the rate of adoption underlie that uncertainty reduces innovation adoption. Therefore, this study will support this critique by looking at ways to reduce or cope with uncertainty during a purchase decision of an innovative product.

2.2 Uncertainty

In consumer behavior perceived risk emerges from the probability of negative consequences as a result of a consumer‘s purchasing decision (Bauer, 1960). These consequences include the costs associated with an outcome and the probability that it will actually happen (Kogan & Wallach, 1964; Littler & Melanthiou, 2006). Therefore, some consumer behavior researchers view risk as a single construct that consists of uncertainty about the consequences and uncertainty about the outcome (Taylor, 1974; Downling & Staelin, 1994). Perceiving risk will require a calculation of the expected utility, its perceived value and the probabilities for each possible outcome (Mitchell, 1995). The possible outcomes and the corresponding probabilities cannot be calculated when lack of information or knowledge exists (Knight, 1921; Peter & Ryan, 1976). In a consumer setting this can be caused by inadequate information provided by the supplier, the inexperience or lack of understanding of the user, and perceived ambiguity of the product (Knight, 1921; Peter & Ryan, 1976; Lipshitz & Strauss, 1997; Littler & Melanthiou, 2006; Walsh, Henning-Thurau & Mitchell, 2007). Therefore, some scholars make a distinction between the terms risk and uncertainty (Knight, 192; Peter & Ryan, 1976; Mitchell, 1999; Johnson, 2004). The term uncertainty is used when the outcomes and probabilities are hard to identify (Johnson, 2004). When sufficient information is accumulated to make a calculation or estimation uncertainty can be translated into risk (Knight, 1921; Hart, Tzokas & Saren, 1999). In research this can, for instance, be done by presenting respondents with a set of alternatives (Littler & Melanthiou, 2006).

Uncertainty is intrinsically linked to the stages of the adoption of innovation (Rogers, 1983, 1995). The search for relevant information is a reaction to knowledge uncertainty. By searching for information consumers try to reduce knowledge uncertainty by increasing their understanding of the product‘s features, functionalities and salient facts (Shiu, Walsh, Hassan

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11 & Shaw, 2011). During the evaluation stage evaluation uncertainty exists. This concerns the lack of procedural knowledge in order to integrate and use existing information (Shiu, Walsh, Hassan & Shaw, 2011; Anderson, 2013). After the different products and product attributes are evaluated the decision is made by the consumer whether the innovation will be adopted based on what degree the consumer‘s requirements will be fulfilled (Rogers, 1983, 1995). However, evaluation uncertainty disrupts the consumer‘s buying decision because he or she cannot with certainty state his preference (Akter, Bennet & Akhter, 2008; Fischer, Luce & Jia, 2000). Akter, Bennet and Akhter (2008) argue that this type of uncertainty is preference uncertainty. Others refer to this kind of uncertainty as choice uncertainty (Urbany, Dickson & Wilkie, 1989). It is argued that the consumers‘ ambiguity in their requirements create preference and choice uncertainty, even when perfect information about the product exists (Luce, 1959; March, 1978; Fischer, Luce & Jia, 2000; Wang, Venkatesh & Chatterjee, 2007). In conclusion, risk and uncertainty emerges from the probability of negative consequences that follow from consumer‘s actions. There are some inconsistencies between scholars in the way they view risk and uncertainty. This study will use the term uncertainty instead of risk when the outcomes and probabilities are hard to identify. The stages of adoption of innovation revealed different types of uncertainties which this study will use to operationalize uncertainty.

2.3 Willingness-to-pay

Willingness-to-pay, also termed as the floor reservation price, represents a consumer‘s value threshold (Davenport, 1902; Hauser & Urban, 1986; Moorthy, Ratchford &Talukdar, 1997; Varian, 1992; Wang, Venkatesh & Chatterjee, 2007). It is ―the maximum price a consumer is willing to pay for one unit of a product or service‖ (Wang, Venkatesh & Chatterjee, 2007, p. 201). In the economics literature willingness-to-pay is the combined economic value to a consumer of all the benefits that flows from the product (Ryan & Miguel, 2000). In the marketing literature it represents a direct monetary equivalent of a consumer‘s value for a product (Kalish & Nelson, 1991).

Willingness to pay is argued to be related with uncertainty. Wang, Venkatesh and Chatterjee (2007) show that when uncertainty increases the willingness-to-pay decreases.

2.4 Positioning strategies

A way to reduce uncertainty, and thereby increasing willingness-to-pay, is by positioning strategies (Noseworthy & Trudel, 2011). In marketing research a distinction can be made

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12 between traditional and experiential marketing. Traditional marketing uses functional positioning strategies, whereas experiential marketing uses experiential positioning strategies (Schmitt, 1999).

2.4.1 Functional Positioning

As the adoption of innovation perspective, traditional marketing considers consumers to be thoughtful, analytical and rational (Rogers, 1983, 1995; Littler & Melanthiou, 2006; Schmitt, 1999). Therefore consumer decision-making processes are viewed as consisting of the following steps: need recognition, information search, evaluation, purchase and consumption (Engel, Blackwell & Miniard, 1994). Some of these steps have close resemblance to the stages of the adoption of innovation that have shown to have a relationship with different types of uncertainty (Rogers, 1983, 1995; Wang, Venkatesh & Chatterjee, 2007). To reduce these types of uncertainty traditional marketing signals functional features and benefits (Noseworthy & Trudel, 2011; Schmitt, 1999). For example, a blender that is functional positioned may signal the benefit ―power of 250 watts‖ and the functional feature ―able to blend hot ingredients‖. Signaling functional benefits reduces uncertainty by satisfying immediate and practical needs (Bhat & Reddy, 1998).While features are characteristics that supplement the product‘s basic function (Kotler, Keller, Brady, Goodman & Hanser 2012).The assumption made by traditional marketers is that consumers rationally ―weigh functional features in terms of their importance, trade off features by comparing them, and select the one with the highest overall utility‖ (Schmitt, 1999, p.56). Therefore, product features are also used for differentiation purposes (Schmitt, 1999).

2.4.1 Experiential Positioning

Instead of the focus on benefits and functional features, experiential marketing focuses on customer experiences. In experiential marketing it is viewed that consumers take functional benefits and features, product quality and a positive brand image as given. Therefore, it is argued that functional values are replaced by experiences. This works under the assumption that next to rational decision making consumers are driven by emotions (Schmitt, 1999). So, it is argued that experiential signaling satisfies higher-order aspirations of pleasure, aesthetics, or esteem (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011). For example, a blender that is experiential positioned may signal: ―it does the cooking, so you can play the chef‖. This signal may satisfy the pleasure associated with cooking or satisfy the possible esteem needs associated with being able to cook.

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13 In experiential marketing the concept of a category is broadened and the meaning of the specific consumption situation is examined in its broader socio-cultural context (Schmitt, 1999). This thinking in the consumer‘s broader space of meaning makes experiential positioning seen as a more sustainable positioning strategy than the narrow focus of functional positioning (Pine & Gilmore, 1999). However, the downside of experiential positioning is that it does not satisfy immediate and practical needs and therefore will not decrease functional uncertainty (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011; Schmitt, 1999). Therefore, any degree of functional uncertainty will revoke most of the positive effects of experiential positioning. Hence it seems that innovative products, which by their nature score high on uncertainty, will not be able to profit fully from the advantages experiential positioning offers (Noseworthy & Trudel, 2011). Switching from functional positioning to experiential positioning after some uncertainty is reduced is suggested as unfavorable, because of consistency reasons (Bhat & Reddy, 1998).

2.5 Open to experience

A possible solution for the positioning of innovative products in an experiential way is by customer segmentation. Whelan and Davies (2006, p. 393) argue that there is potential in using human personality traits in order to identify different types of consumer segments. Individual personality traits of the consumer, such as the ability to tolerate risk, might influence the adoption of innovation (Littler & Melanthiou, 2006). Personality consists of a person‘s social reputation as well as their inner nature (Hogan, 1991). Social reputation concerns the way the person is perceived by the people around him or her. Inner nature refers to ―the structures, processes, propensities and dynamics inside a person that explain why he or she behaves in a particular way‖ (Whelan & Davies, 2006, p. 395). The latter explains why different people have a different preference in products (Whelan & Davies, 2006).

This study will use the accepted taxonomy for classifying personality traits of the ‗Big Five‘ as it is seen as valid, reliable and generalizable (Goldberg, 1990; Barrick & Mount, 1991; McCrea & John, 1992; Whelan & Davies, 2006). It organizes personality traits into five broad domains comprising Extraversion, Neuroticism, Open to Experience, Agreeableness, and Conscientiousness (Goldberg, 1990). For the sake of feasibility, only one personality dimension will be discussed in this study, namely: Openness to Experience. The label Openness to Experience is given to people who are imaginative, curious and broadminded and have a need for variety and unconventional values (Barrick & Mount, 1991; McCrea & John, 1992 as cited in Whelan & Davies, 2006, p. 396). Therefore, consumers that perceive

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14 themselves as scoring high on ‗Open to Experience‘ might be open to more perceived uncertainty or may be willing to try an unfamiliar product (Whelan & Davies, 2006). Olver and Mooradian (2003) hypothesized the link between Open to Experience and the pleasure potential of a product. They found no evidence for a relation between the two. Matzler, Bidmon and Grabner-Kräuter (2006, p. 428) contribute this to ―the fact that they measured value priorities in general and not values in a specific situation‖. In the study of Matzler, Bidmon and Grabner-Kräuter (2006) the focus is on a specific consumption situation and they argue that because of this the values will have a stronger meaning to the consumer. In contrast with previous research empirical evidence is found by Matzler, Bidmon and Grabner-Kräuter (2006) for the relationship between Open to Experience and the pleasure potential of a product. Moreover, evidence is also found for the relationship between Open to Experience and Brand Affect. Brand Affect could be defined as ―a brand‘s potential to elicit a positive emotional response in the average consumer as a result of its use‖ (Chaudhuri & Holbrook, 2001, p. 82).

Thus, it is suggested that the consumers that score high on Openness to Experience respond stronger to affective stimuli (Matzler, Bidmon and Grabner-Kräuter, 2006). In other words, consumer segmentation based on the personality trait Open to Experience could open the way for innovative products to be experientially positioned.

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3. Theoretical framework

3.1 Positioning Strategies and the actual Willingness-To-Pay

While some researchers studying positioning strategies focused mostly on brand positioning (Bhat & Reddy, 1998; Whelan & Davies, 2006) others (Noseworthy & Trudel, 2011) found evidence that supports the idea that positioning strategies on a single product can lead to preference reversals. Previous studies used a combination of real and fictitious brands in a hypothetical consumer context. Therefore those studies did not incorporate the negative affect associated with loss aversion, in which the relative magnitude of a loss is greater than a gain (Kahneman & Tversky, 1979; Gourville, 2006). More specifically, there was no risk of actually having to buy a real product and therefore losing money in the exchange. Hence, this gap in the literature will be addressed in a more realistic consumer context. Specifically, the relationship between the two different positioning strategies and the actual willingness to pay will be examined.

3.1.1 Functional Positioning

The traditional marketing literature sees consumers as being thoughtful, analytical and rational (Rogers, 1983, 1995; Littler & Melanthiou, 2006; Schmitt, 1999). One of the problems that consumers face is that they do not possess all the necessary information, knowledge and experience in order to evaluate an innovation prior to adoption. It is argued that this causes uncertainty (Littler & Melanthiou, 2006). A way to reduce part of this uncertainty is by satisfying immediate and practical needs. This can be done by signaling functional benefits and features (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011; Schmitt, 1999). Previous research has shown that when uncertainty increases the willingness-to-pay decreases (Wang, Venkatesh & Chatterjee, 2007). Therefore, if signaling functional benefits and features reduces uncertainty it should increase the willingness to pay for an innovative product. Moreover, as features also supplement the product‘s basic function and are commonly used for differentiation purposes, it is also expected that this aspect of functional positioning adds to the increase of the willingness to pay for an innovative product (Schmitt, 1999; Kotler, 1994).

Hypothesis 1: Functional Positioning will lead to a significant decrease in the uncertainty about an innovative product.

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Hypothesis 2: Functional Positioning will lead to a significant increase in the Willingness-To-Pay for an innovative product.

3.1.2 Experiential Positioning

In experiential marketing it is viewed that consumers take functional benefits and features, product quality and a positive brand image as given. Therefore, it is argued that functional values are replaced by experiences (Schmitt, 1999). So, instead of satisfying immediate and practical needs experiential signaling satisfies higher-order aspirations of pleasure, aesthetics, or esteem (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011). Satisfying these higher-order aspirations opens up differentiation opportunities that make that experiential positioning is seen as a more sustainable positioning strategy (Pine & Gilmore, 1999). The downside of experiential positioning is that it does not satisfy immediate and practical needs and therefore will not decrease uncertainty about the product (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011; Schmitt, 1999). So, if a product has a low perceived uncertainty it would be a suitable strategy. However, for innovative products, which have high perceived uncertainty, it is expected that the functional uncertainty will revoke most of the positive effects of experiential positioning.

Hypothesis 3a: Experiential Positioning will lead to a significant increase in the Willingness-To-Pay for an innovative product.

Hypothesis 3b: The Willingness-To-Pay for an innovative product will be higher for a positioning strategy that uses Functional Positioning compared to an Experiential positioning strategy.

3.1.3 A combination of both positioning strategies

This study proposes that using a positioning strategy that uses both functional and experiential positioning considering that the suggestion not to differ after a concept is selected might only hold in a branding situation (Bhat & Reddy, 1998). In this way, not only the immediate and practical needs are satisfied but also the higher-order aspirations of pleasure, aesthetics, or esteem (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011; Schmitt, 1999). Therefore, the assumption is made that a positioning strategy using both functional and experiential positioning will increase the willingness to pay for an innovative product and that this increase is greater compared to a single positioning strategy.

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Hypothesis 4: A positioning strategy that uses both Functional and Experiential Positioning will have a positive effect on consumers’ Willingness-To-Pay for an innovative product.

3.2 Open to Experience as a Moderator

Individual personality traits of the consumer, such as the ability to tolerate risk, might influence the adoption of innovation so that it increases the willingness to pay for an innovative product (Littler & Melanthiou, 2006). Using the taxonomy for classifying personality traits of the ‗Big Five‘ the dimension Open to Experience is of particular interest as consumers that perceive themselves as scoring high on Open to Experience might be open to more perceived uncertainty or may be willing to try an unfamiliar product (Goldberg, 1990; Barrick & Mount, 1991; Whelan & Davies, 2006; McCrea & John, 1992). By focusing on a specific consumption situation previous research found a positive relationship between Open to Experience and the pleasure potential of a product. This suggest that consumers that score high on Open to Experience respond stronger to the affective stimuli of experiential positioning (Matzler, Bidmon & Grabner-Kräuter, 2006). Because of this stronger response to experiential signals and because, as suggested, these consumer types might be open to more perceived uncertainty or may be willing to try an unfamiliar product, it is expected that Open to Experience positively moderates the relationship between Functional Positioning and the Willingness-To-Pay for an innovative product.

Hypothesis 5: There is positive relationship between Open to Experience and the Willingness-To-Pay for an innovative product.

Hypothesis 6: Open to Experience positively moderates the relationship between Functional Positioning and the Willingness-To-Pay for an innovative product.

Hypothesis 7: Open to Experience positively moderates the relationship between Experiential Positioning and the Willingness-To-Pay for an innovative product.

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18 Conceptual model Functional Positioning Willingness to Pay Open to Experience H2 + H6 + H5 + Functional Positioning Uncertainty H1 + Experiential Positioning Willingness to Pay Open to Experience H3 + H5 + F + E Positioning Willingness to Pay H4 + H7 +

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4. Methodology

4.1 Research Design

In order to test the hypotheses a manipulation of the independent variables Functional Positioning and Experiential Positioning needed to be made. Therefore, an experimental setup was chosen in this study. The controlled context of an experiment makes it that any effect on the dependent variable can be attributed to the intervention (Saunders et al., 2007). Moreover, previous research on positioning strategies employed an experiment strategy as well (Bhat & Reddy, 1998; Whelan & Davies, 2006; Noseworthy & Trudel, 2011). However, they used a hypothetical product and context which reduces the external validity of their research (Saunders et al., 2007).

Unlike previous research, this study used a realistic consumer context by incorporating a real product and measuring the actual willingness to pay of consumers. To incorporate the realistic consumer context the auction platform Veylinx.nl was used. This auction platform was designed and made available to students by two PhD candidates at the University of Amsterdam. The purpose of the platform is to conduct research. The platform works by inviting the subscribers by e-mail to participate in a real auction. All products are real and all bids are legally binding.

To measure the actual willingness to pay this study used a second price sealed-bid Vickrey auction (Vickrey, 1961). This kind of auction is designed so that the highest expected outcome is realized, because truthful bidding dominates over- and underbidding (Riley & Samuelson, 1981; Vickrey, 1961). The auction works by giving participants a time constraint of a few minutes to place a maximum of one bid without knowing the bids of others. The highest bidder wins the auction but only has to pay the second highest bid.

Critique on the Vickrey auction consists of two aspects. First, it is argued that competitive bidding might lead to overbidding (Kagel, Hardstadt & Levin, 1987). This was coped with the random allocation of participants to the different treatment groups. Therefore, overbidding should affect all treatments equally. Secondly, previous research shows that participants need to learn that the best strategy in a Vickrey auction is to bid their actual willingness to pay for that product (Coppinger, Smith & Titus, 1980; Cox, Roberson & Smith; Vickrey, 1961). Therefore, an info graphic was presented at the participant‘s first auction and on the Veylinx website. In addition, the auction took place near the end of the thesis research period; therefore it is probable that a higher percentage of the auction participants had already participated in a similar auction.

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4.1.1 The Innovative Product

In search of an innovative product some criteria where set up. Firstly, the product should be relatively new. Secondly, the product should not be too expensive because the auction participants might be more willing to bid on something that is affordable. Thirdly, there should be some sort of review about the innovativeness and appeal of the product. Reason for this is that this will eliminate the need for a pre-test to test if the product is truly innovate, which for time restraints was not feasible. Lastly, the product should be able to be positioned on either a functional or experiential way or both at the same time.

The product found to be suitable for auction was: Tuls Ollie Titanium (figure 1). It is a titanium multi-tool in credit card size. It consists of: bottle opener, standard ruler, 1/8‖ hex drive, Standard Square, 9mm – 14 mm Metric wrench, 0.078‖ –.234‖ Standard drill guide, Pry bar, 1.5mm – 6.5mm Metric drill guide, Metric ruler, Metric Square, Protractor, 5/16‖ - 1/2‖ Standard wrenches and a Spoke wrench. The actual price was around 33 dollars or around 24 euros, which meets the price criteria. It was found on the crowd funding website Kickstarter. This means that the product is new and seen as creative, because only creative projects are accepted on the website (Kickstarter, 2014). Also, the innovativeness and appeal of the product where positively reviewed by the funders as they pledged more than twenty-five times the needed funding goal of fifteen hundred dollars (Kickstarter, 2014). Moreover, the product is still not available in the Netherlands which adds to the newness of the product for Dutch consumers. Besides that, the product is a useful tool that can solve consumption related problems which make it suitable to position it in a functional way. Moreover, the product is able to give some sensory pleasure, variety and a cognitive stimulation (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011). The sensory pleasure comes from the aesthesis of the product and from it being made out of a rare and valuable kind of metal. The variety comes from it being a multi tool and the cognitive stimulation can come from the experience of always having a multi tool with you. These three tings make it that Tuls Ollie Titanium is also suited to be experientially positioned.

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Fig 1.Tuls Ollie Titanium

4.1.2 Treatments

In total four different treatments where made (table 1). Each treatment auctioned two products, so in total there were eight separate auctions. Having two separate auctions per treatment gave the participants more chance to obtain the product at a lower price. By increasing the probability that products get auctioned below the market price, it is believed that this will increase the amount of subscribers and the willingness of subscribers to participate in an auction.

The first treatment (appendix A-1) was the control. It consisted of the title ‗MULTITOOL‘, a picture of the product lying on a leather wallet on a wooden table, and the specifications of the product. The picture of the product gave an overall idea of the product‘s functionality and the leather wallet helped determine the product‘s scale. The specifications consisted of the weight, dimensions and material of the product. The second treatment (appendix A-2) consisted of the same things as the control but nine functional attributes were added between the title and the picture that consisted of the Dutch translation of the tools from which Tuls Ollie consisted. The third, treatment (appendix A-3) consisted of the same things as the control but the experiential slogan: ―Altijd klaar voor elke klus‖ was added. Translated this means: ―always ready for every job‖. This should give participants a positive emotional feeling of the experience of always having a tool with you. The fourth treatment

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22 (appendix A-4) consisted of a combination of the second treatment combined with the slogan of treatment three.

Table 1. Different treatments

1 2 3 4

1 Control X

2 Functional Positioning X X

3 Experiential Positioning X X

4.2 Sample

Some extreme values have been removed in participant‘s age and in bid duration. Also, some subjects did not fill in the questionnaire at the end of the auction. However no participants have been removed. It was strived to get a resemblance of the Dutch population. Of the 428 subscribers that participated in the experiment 55,4 percent were male. Compared to the Dutch population, which consist of 49,5 percent males, the males are overrepresented. The mean age of the male subjects was 44 years, whereas the mean age of the males in the Dutch population is close to 40 years. The mean age of the female subjects was 41 years, though the mean age of females in the Dutch population is close to 42 years. This can be explained by the difference in the age groups of the sample compared to the Dutch population. 93,2 percent of the subjects in the sample comprised the age group between 20 and 65 years, whereas this age group represents 60,1 percent in the Dutch population in 2013 (CBS, 2013).

4.3 Measurements

4.3.1 Dependent variable Willingness-to-Pay

The actual Willingness-to-pay for Tuls Ollie Titanium will be measured by the bids of the auction participants using his or her auction bid value. The use of a second price sealed-bid Vickrey auction should ensure that the sealed-bids are as close as possible to the maximum price a consumer is willing to pay for one unit of a product (Vickrey, 1961; Wang, Venkatesh & Chatterjee, 2007).

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4.3.2 Independent and moderating variable Open to Experience

To operationalize Open to Experience this study resorted to part of the Big Five Inventory (BFI). The original BFI consists of a 44 item inventory questionnaire to be self-administered. It measures an individual on the Big Five Factors dimensions of personality. It comes with scoring instructions and a SPSS syntax. Only the items that measure Open to Experience were used in this study. Respondents should indicate on a 5-point Likert scale the extent to which they agree or disagree with that statement (John, Donahue & Kentle, 1991; John, Naumann & Soto, 2008). Because this study was targeted on Dutch participants a validated translation of the BFI was used (Denissen, Geenen, Aken, Gosling & Potter, 2008).

The self-administrated questionnaire would take place after participants would have placed their bid. Only a limited amount of questions could be asked so that it would not be tedious for the participants. Therefore, only four of the ten items that measured Open to Experience were used. They were selected based on the highest factor loadings, commonalities with the Dutch BFI items and the possibility of negatively keying an item. Question three is a negatively keyed. Translated back to English, they were as follows:

1. I value artistic, aesthetic experiences

Totally agree (1) (2) (3) (4) (5) Totally disagree 2. I am inventive

Totally agree (1) (2) (3) (4) (5) Totally disagree 3. I have few artistic interests

Totally agree (1) (2) (3) (4) (5) Totally disagree 4. I like to reflect, play with ideas

Totally agree (1) (2) (3) (4) (5) Totally disagree

Note that all the items were transformed afterwards so that a high score indicates a consumer type that scores high on Openness to Experience.

4.3.3 Control variable Uncertainty

To operationalize uncertainty three questions were asked on top of the four questions relating to the variable Open to Experience. Again the auction platform only allowed a limited amount of questions that could be asked. However, it was not possible to also add a 5-point Likert scale as this was seen to tedious to the participants by the auction platform

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24 administrator. So it was agreed upon to incorporate the following three polar questions, which are translated from Dutch (appendix B-1):

5. Are you sure about what you can do with the product? (Yes) (No)

6. Was it completely clear what you can do with the product? (Yes) (No)

7. Can you easily place the product into a category? (Yes) (No)

Question number five was posed in order to verify if knowledge uncertainty exists about the product‘s functionality. The sixth question like the fifth concerns knowledge uncertainty, but has a higher emphasis on the information provided. The last question measures evaluation uncertainty. If a product cannot be placed into a category easily existing information cannot be integrated in such a way that the consumer is confident about the buying decision (Shiu, Walsh, Hassan & Shaw, 2011; Anderson, 2013).

4.4 Procedure

In return for the right to use the Veylinx platform each bachelor student had to convince hundred people to subscribe to Veylinx. The students were given a limited time frame of about a month to complete this task. The majority of the hundred new subscribers were collected by convenience sampling. First, the close network of family, friends and colleagues were approached to subscribe. They were approached either by word-of-mouth or e-mail. In turn, they were asked to find others that were willing to subscribe to the website. Next to the use of the close network, a number of unknown people were approached that mostly consisted of students. This was mostly done by word-of-mouth at locations of the University of Amsterdam. Another way of approaching was by the use of electronic channels. Early on a post was set up on the blackboard page of the Thesis and Seminar Business Studies requesting fellow students to subscribe. Moreover, some threads were created on multiple forums. These, however, did not yield the desired results. Next to the contribution of new subscribers by this study, the other new subscribers contributed by other students were added to the existing pool of subscribers. Moreover, subscription on Veylinx is open for everyone and some promotion is being done, so there will also be some self-selection.

Participation to the auction was on voluntary basis. Each subscriber gets an invitation by e-mail about twice a week to participate in the auction. Therefore, the respondents will

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25 consist of the entire pool of subscribers that choose to participate in the auction on that day. To motivate subscribers to participate in the auction a lottery system had been implemented into the Veylinx platform. Only subscribers that participated in at least half of the auctions will take part in the lottery.

4.5 Analyses & Predictions

First the bid auction data will be tested for normality. Necessary measures will be taken so normality can be assumed. Next, the scales will be tested for reliability using Cronbach‘s α. Subsequently, a correlation test will be used to find out if there is a relationship between Uncertainty, Open to Experience and the Willingness-To-Pay for an innovative product. Predictions are that there will be a positive correlation between the variable Uncertainty and the variable Willingness-To-Pay. Moreover, it is expected that there will be a positive correlation between the variable Open to Experience and the variable Willingness-To-Pay. To test the mean difference of uncertainty between the different treatments a One-way ANOVA will be used. It is expected that all treatments with a functional positioning of the product will have significantly less uncertainty about the innovative product compared to the other treatments. To test which kind of positioning will lead to a significant increase in the Willingness-To-Pay for an innovative product a One-way ANOVA is used as well. Predictions are that both treatments with functional positioning will have a significant increase in the Willingness to pay for an innovative product. Otherwise, it is expected that the treatment with only experiential positioning will not have a significant increase.

The moderation will be tested trough three linear regression analysis. First, it is predicted that there is a positive effect of the independent variables Functional Positioning and Experiential Positioning on the dependent variable Willingness-To-Pay in the first linear regression analysis. Second, it is assumed that there is a positive effect of independent variable Open to Experience on the dependent variable Willingness-To-Pay in the second linear regression analysis. Third, it is predicted that there is a positive effect of the interaction variable on the dependent variable Willingness-To-Pay in the third linear regression analysis.

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5. Results

5.1 Descriptive Statistics

Table 2 shows the descriptives of the mean auction data.

Table 2. Descriptives Mean Auction Data

1 2 3 4

M 358,35 449,36 377,50 448,74

SD 509,88 613,88 502,46 457,20

Note. N=428. In euro cents.

A visual inspection of the histograms containing the frequency distribution of the total amount of bids unveils that the sample is skewed to the right. This indicates that many subjects were not interested in the product and placed a bid of zero or close to zero. Therefore, the top fifty percentile was taken. Table 3 shows the descriptives of the top fifty percentile.

Table 3. Descriptives Mean Auction Data Top 50 percentile

1 2 3 4

M 692,86 874,92 732,08 805,74

SD 559,83 647,43 514,34 401,21

Note. N=208. In euro cents.

Even though the sampling distribution can be approximated by a normal distribution because the sample size is larger than N=30, normality was visually and quantitatively assessed (Field, 2009). Both the Kolmogorov-Smirnov test and Shaprio-Wilk test were significant, therefore normality could not be assumed. In an attempt to normalize the data the bid values were transformed into LN of the bid values. A visual inspection of the normality curve was satisfactory, therefore normality was assumed.

5.2 Reliabilities & Correlations

Two variables have been tested for reliability. Table 4 shows the Cronbach‘s alpha of the independent variable Uncertainty and independent variable Open to Experience. Both alphas are considered to be reasonable. Furthermore table 4 shows the correlations between the variables Uncertainty and Open to Experience with the willingness to pay for an innovative product. It turns out that uncertainty and the willingness to pay for an innovative product do

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27 not relate to each other, r (199) = 0,101, p= n.s.). However, the results show a significant positive correlation between the personality trait Open to Experience and the perceived uncertainty about the product, r (199) = 0,167, p= 0,019). This indicates that people that score high on the personality trait Open to Experience are more certain about the innovative product. Furthermore no relationship has been found between the personality trait Open to Experience and the willingness to pay for an innovative product, r (199) = 0,118, p= n.s.).

Table 4. Descriptives, Cornbach's Alphas and correlations

M SD α WTP Uncertainty

Uncertainty 0,53 0,05 0,756 0,101

Open to Experience 2,58 0,23 0,663 0,118 0,167*

N 403 400 403/400 199 199

Note. *p< 0,05. WTP= Willingness to pay for an innovative product measured in LN bid value.

5.3 Hypotheses testing

5.3.1 Uncertainty

Hypothesis 1 stated that Functional Positioning will lead to a significant decrease in the uncertainty about an innovative product. To test this hypothesis a One-way ANOVA was carried out. Figure 2 shows the means of uncertainty for the different treatments. A mean score close to 1 indicates a high amount of certainty about the product, whereas a score close to 0 indicates a high amount of uncertainty about the product.

In both treatment 2 and 4, in which the innovative product had been functionally positioned, the subjects appeared to be more certain than in treatment 1 and 3, in which the innovative product was not functionally positioned. Table 5 shows the results of the LSD test. The outcome of treatment 2 is significantly higher than the results of treatment 1 and 3. In addition, the outcome of treatment 4 is significantly higher than the outcome of treatment 1 and 3. The results confirm the expectations and hypothesis 1 is accepted. This means that there is less uncertainty about an innovative product when it is functionally positioned compared to when no positioning strategy is used or an experiential positioning strategy is used.

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Figure 2.Means of uncertainty per treatment of top 50 percentile bid value

Note. 1= fully certain, 0= fully uncertain

Table 5. Uncertainty mean difference between treatments

1 2 3 4 1 -0,215* -0,001 -0,245* 2 0,215* 0,215* -0,029 3 0,001 -0,215* -0,244* 4 0,245* 0,029 0,244* Note. N=198. *p<0,05.

5.3.2 Positioning Strategies & Willingness-to-Pay

Hypotheses 2, 3 and 4 state that different ways of positioning will lead to a significant increase in the Willingness-To-Pay for an innovative product. To test these hypotheses a One-way ANOVA had been carried out. Figure 3 shows the means of the bid values of the different treatments. A high resemblance can be seen between the means of uncertainty (Figure 2) and the means of LN bid values (Figure 3). Table 6 reports the results of the LSD test. 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8

Treatment 1 Treatment 2 Treatment 3 Treatment 4

M e an o f Unc e rtaint y

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Figure 3. Comparison of the mean of the ln of the top 50 percentile bid values for the different treatments.

Table 6. LN bid values mean difference between treatments

1 2 3 4 1 -0,23 -0,023 -0,261* 2 0,23 0,206 -0,031 3 0,023 -0,206 -0,238 4 0,261* 0,031 0,238 Note. N=208. *p<0,05.

Hypothesis 2 stated that there is a positive relationship between Functional Positioning and the willingness to pay for an innovative product. Although graphically there seemed to be a difference, the results of the LSD test show no significant difference between treatment 2 and treatment 1. In contracts to the predictions no evidence is found for a positive relationship between Functional Positioning and the willingness to pay for an innovative product. So, hypothesis 2 was rejected.

Hypotheses 3 a, and b stated that there is a positive relationship between Experiential Positioning and the willingness to pay for an innovative product. Unexpectedly, the results show no significant difference between treatment 3 and treatment 1 and also not with treatment 2. Therefore, hypothesis 3 a, and b are rejected. This indicates that, compared to the other treatments, an experiential positioning strategy on an innovative product does not increase the willingness to pay.

6,15 6,2 6,25 6,3 6,35 6,4 6,45 6,5 6,55 6,6

Treatment 1 Treatment 2 Treatment 3 Treatment 4

M e an o f l n b id am o u n t

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30 Hypothesis 4 concerned how a positioning strategy that uses both Functional and Experiential Positioning will lead to a significant increase in the Willingness-To-Pay for an innovative product. The results show that there only is a positive and significant difference between treatment 1 and 4, mean difference (208) = -0,261, p< 0,05. So, hypothesis 4 was accepted. This shows that a positioning strategy that uses both functional and experiential positioning increases the willingness to pay for an innovative product compared to a product that is positioned without any positioning strategy.

5.3.3 Open to Experience

As shown in table 4, the results showed, as expected, a positive correlation between the personality trait Open to Experience and the perceived uncertainty about the product, r (199) = 0,167, p= 0,019). This indicates that people that score high on the personality trait Open to Experience are more certain about the innovative product. In contrast with predictions no evidence is found for a relationship between the personality trait Open to Experience and the Willingness-to-Pay for an innovative product, r (199) = 0,118, p= n.s.). Therefore, hypothesis 5 that stated that there is positive relationship between Open to Experience and the Willingness-To-Pay for an innovative product is rejected.

To test for moderation there should be a significant main effect between the variable Open to Experience and the independent variable Willingness-To-Pay. However, no significant relationship had been found, which makes a regression analysis to test for moderation redundant. Both hypotheses 6 and 7 that stated that Open to Experience positively moderates the relationship between either Functional Positioning or Experiential Positioning and the Willingness-To-Pay for an innovative product are rejected.

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6. Discussion

First, this study examined if consumers are more certain about an innovative product if it is positioned in a functional way. Second, it investigated which positioning strategies would increase the willingness to pay for an innovative product. Third, it tried to discover if the consumer type that scores high on the personality trait Open to Experience would be willing to pay a higher price for an innovative product but also if this consumer type reacts stronger to the positioning strategies. These factors were investigated in order to answer the following research question: What are the effects of functional and experiential positioning strategies on the willingness to pay for an innovative product and how does the personality dimension open to experience moderates this effect?

6.1 Key Findings

The acquired data partially confirmed the prior formulated hypotheses. The first hypothesis, which stated that functional positioning will lead to a significant decrease in the uncertainty about an innovative product, was accepted. This suggests that signaling functional attributes and features reduces the uncertainty about an innovative product. The second hypothesis, which stated that functional positioning will lead to a significant increase in the willingness to pay for an innovative product was surprisingly rejected. Even though evidence was found that functional positioning reduces uncertainty no evidence was found that functional positioning significantly increases the willingness to pay for an innovative product. The third hypothesis, which stated that experiential positioning will lead to a significant increase in the willingness to pay for an innovative product was rejected. Moreover, the sub-hypothesis 3b was also rejected as no significant increase in the willingness to pay for an innovative product was found. This suggests that innovative products are not suitable to be positioned exclusively in an experiential way. The fourth hypothesis accepted, which stated that a positioning strategy that uses both functional and experiential positioning will lead to a significant increase in the willingness to pay for an innovative product was accepted. The results suggest that the willingness to pay for an innovative product can only be increased by using a combination of the two positioning strategies. The fifth hypothesis, which stated that there is positive relationship between the personality trait open to experience and the willingness to pay for an innovative product was rejected. Although it was found that the consumer type that scores high on the personality trait open to experience were more certain about the innovative product, the results suggests that they are not willing to pay a higher price for an innovative product. This finding grounded the rejection of both the seventh and the eight hypotheses,

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32 which stated that the personality type open to experience positively moderates the relationship between positioning strategies and the willingness to pay for an innovative product. This suggests that the consumer type that scores high on the personality trait open to experience also does not react stronger on the two different positioning strategies.

6.2 Interpretation of Results

The results confirm the finding of previous research that uncertainty about a product can be reduced by signaling functional benefits and features (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011; Schmitt, 1999). In contrast with previous research, this study found no evidence that the reduction of uncertainty will lead to a higher willingness to pay for an innovative product (Wang, Venkatesh & Chatterjee, 2007). This could be explained by the focus of previous research on brand positioning instead of a single product (Bhat & Reddy, 1998; Whelan, Davies, 2006). When the focus is on a single product this, presumably, will revoke the differentiation effects of a functional positioning strategy (Schmitt, 1999).

The results further suggest that uncertainty about a single innovative product was not reduced when this product was experientially positioned. This is in line with the concept of experiential marketing in which it is seen that consumers take functional benefits and features, and product quality as given (Schmitt, 1999). Therefore, it will lack the uncertainty reducing properties of functional positioning. The lacking of these properties might indicate that the differentiation opportunities of experiential positioning were shown not to be effective on a single innovative product (Pine & Gilmore, 1999).

As shown by Noseworthy and Trudel (2011), varying the mode of presentation of a single product instead of a brand could lead to preference reversals. This study tested the assumption that a positioning strategy that makes use of both functional and experiential positioning increases the price consumers are willing to pay for an innovative product. The results indicate that using a combination of functional and experiential positioning results in consumers willing to pay a higher price for an innovative product. This can be explained by the combination of the properties of the two positioning strategies. The functional signals reduced the uncertainty about the product but did not lead to the willingness to pay by itself. Otherwise, the experiential did not reduce the uncertainty about the product but its differentiation properties might have added to the appeal of the product.

A positive relationship was found between the consumer type that scores high on the personality trait Open to Experience and the perceived uncertainty (1= fully certain, 0= fully uncertain) of the innovate product. This finding indicates that the consumer type that scores

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33 high on the personality trait Open to Experience was more certain about the innovate product. This is in line with previous research that suggested that consumers that perceive themselves as scoring high on Open to Experience might be open to more perceived uncertainty (Whelan & Davies, 2006). However, the results do not support the assumption that these consumers are willing to pay a higher price in general. Therefore, this indicated that they would also not react stronger on the stimuli of the different positioning strategies.

6.3 Implications

6.3.1 Theoretical Implications

In contrast with previous research this study focused on a single product in a realistic context instead of the focus on brand positioning in a hypothetical context (Bhat & Reddy, 1998; Whelan, Davies, 2006). The results provide further evidence for the findings of Noseworthy and Trudel (2011) that show that consumers are more certain about innovative products that are functional positioned. In their research they suggest that functional positioning increases the customer evaluations of the product (Noseworthy & Trudel, 2011). However, the results show no increase in the willingness to pay for the innovative product. Therefore, this study suggests that the evaluations of consumers are not equal to the consumers‘ willingness to pay.

In addition, it contributes to the literature by confirming the assumption that experiential signaling does not decrease uncertainty about a single innovative product (Bhat & Reddy, 1998; Noseworthy & Trudel, 2011; Schmitt, 1999). This is seen as the most influential factor in the relationship between the experiential positioning of the innovative product and the lack of increase of the willingness to pay for that product. However, when the experiential positioning strategy was combined with the functional strategy, which has uncertainty reducing properties, it was found to increase the willingness to pay for an innovative product.

In accordance with previous research, evidence was found that the consumer type that scores high on the personality trait open to experience is more open to perceived uncertainty about an innovate product than the consumer type that scores low on the personality trait open to experience (Goldberg, 1990; Barrick & Mount, 1991; Whelan & Davies, 2006; McCrea & John, 1992). However, the results suggest that the consumer type that scores high on the personality trait open to experience is not willing to pay more for an innovative product.

Willingness to pay for innovative products : the effects of positioning strategies and personality traits