Designing digital rollovers: managing perceived obsolescence through release times
File(s)poms.13459.pdf (456.57 KB)
Published version
Author(s)
Koca, Esma
Valletti, Tommaso
Wiesemann, Wolfram
Type
Journal Article
Abstract
When releasing a new version of a durable product, a firm aims to attract new customers as well as persuadeits existing customer base to upgrade. This is commonly achieved through arollover strategy, which comprisesthe price of the new product as well as the decision to discontinue the sale of the existing product (solorollover) or to sell the existing product at a discounted price (dual rollover). In this paper, we argue thatthe timing of the new product release is an important—but commonly overlooked—third lever in the designof a successful rollover strategy. The release timing influences the consumers’ perception of obsolescence, bywhich an existing product is considered obsolete merely by reference to a new product. This reinforces theupgrading behavior of existing customers, but it also necessitates deep discounts of the existing product tokeep its sale viable in a dual rollover. We analyze the impact of the release timing on solo and dual rolloversin markets for digital goods (i.e., where production costs are negligible) that are composed of naive andsophisticated consumers. Under the assumption that both the old and the new product would offer a similarutility if there was no perceived obsolescence, we show that in both markets a firm selecting the release timesfrom a continuous timeline can induce sufficiently large parts of its existing customer base to upgrade so thata solo rollover is optimal. We also characterize the resulting market segmentation, and we offer managerialas well as policy advice.
Date Issued
2021-10
Date Acceptance
2021-04-27
Citation
Production and Operations Management, 2021, 30 (10), pp.3698-3712
ISSN
1059-1478
Publisher
Wiley
Start Page
3698
End Page
3712
Journal / Book Title
Production and Operations Management
Volume
30
Issue
10
License URL
Identifier
https://onlinelibrary.wiley.com/doi/10.1111/poms.13459
Subjects
Science & Technology
Technology
Engineering, Manufacturing
Operations Research & Management Science
Engineering
product rollover
version management
perceived obsolescence
release time
STRATEGIC CUSTOMER BEHAVIOR
DURABLE-GOODS
PRICE-DISCRIMINATION
PRODUCT
CONSUMERS
CANNIBALIZATION
MONOPOLY
MARKET
IMPACT
Operations Research
0102 Applied Mathematics
1503 Business and Management
Publication Status
Published
Date Publish Online
2021-05-11