The Impact of Product-Related Announcements on Consumer Purchase Intentions

ABSTRACT - This paper investigates the impact of brand, product, and industry announcements on consumers' intentions to purchase alternative brands of microcomputers. Results suggest that (1) negative announcements, in general, have a greater effect than positive announcements, (2) announcements regarding the entire industry tend to have a greater impact than announcements about a specific brand or set of brands, and (3) announcements are more likely to affect the evaluations of brands in the choice set than those of brands not in the choice set. Managerial implications of these results are discussed.

Citation:

Raymond R. Burke, Jaewun Cho, Wayne S. DeSarbo, and Vijay Mahajan (1990) ,"The Impact of Product-Related Announcements on Consumer Purchase Intentions", in NA - Advances in Consumer Research Volume 17, eds. Marvin E. Goldberg, Gerald Gorn, and Richard W. Pollay, Provo, UT : Association for Consumer Research, Pages: 342-350.

Advances in Consumer Research Volume 17, 1990      Pages 342-350

THE IMPACT OF PRODUCT-RELATED ANNOUNCEMENTS ON CONSUMER PURCHASE INTENTIONS

Raymond R. Burke, University of Pennsylvania

Jaewun Cho, Arizona State University

Wayne S. DeSarbo, University of Michigan

Vijay Mahajan, Southern Methodist University

[The authors wish to thank Oliver Heil and several anonymous reviewers for their comments and suggestions.]

ABSTRACT -

This paper investigates the impact of brand, product, and industry announcements on consumers' intentions to purchase alternative brands of microcomputers. Results suggest that (1) negative announcements, in general, have a greater effect than positive announcements, (2) announcements regarding the entire industry tend to have a greater impact than announcements about a specific brand or set of brands, and (3) announcements are more likely to affect the evaluations of brands in the choice set than those of brands not in the choice set. Managerial implications of these results are discussed.

Product-related announcements are formal communications that provide new information to consumers about a product's availability, features, applications, defects, or its discontinuation. Such announcements may be created by design or accident, and are originated by competitors, regulatory agencies, consumer and environmental groups, and many times by manufacturers themselves. Both favorable and unfavorable in nature, product announcements may consist of (Mahajan, Muller and Kerin 1984):

* Brand related information--such as the unintended acceleration problem with the Audi 5000 S (Manning 1987);

* Product category related information--such as the finding that aspirin can reduce the risk of heart attack (Dallas Morning News 1988a);

* Industry related information--such as the health and environmental effects of fluorocarbons in aerosol cans (Margolies 1 976).

In many instances, product-related announcements are made or encouraged by a manufacturer as part of a marketing strategy to create a more conducive environment for the acceptance of its product in the marketplace (Wind and Mahajan 1987). For example, a manufacturer may announce a new product well before it is ready for sale, hoping to get customers to wait for this product rather than buy a competitor's product in the interim (Porter 1980, p.77; Brock 1975). On the other hand, a competitor may announce-a new technology-based product hoping to redefine the attributes that customers use to evaluate the various brands that are currently available (e.g., IBM's announcement of its Personal System 2 computers, Mitchell 1987, or NutraSweet's announcement of a new low-calorie, low-cholesterol substitute for cooking oil, Dallas Morning News 1988b). In that context, such announcements can serve as market signals to preempt other competitors from the marketplace (Porter 1980, p.76).

Little effort has been made to systematically examine the effects product-related announcements on consumer purchase intentions. Through an understanding of this relationship, marketers can evaluate the usefulness of announcements as a strategic tool to influence consumer decisions. Eliashberg and Robertson (1988) report that a firm's expectations about consumer response to announcements are the main determinant of whether the firm will pre-announce new products. Furthermore, this information can be incorporated in consumer adoption and diffusion models to improve [ the prediction of consumer behavior (Midgley 1976; Mahajan, Muller, and Kerin 1984).

This paper attempts to empirically address a few basic questions about consumer response to product-related announcements. Do product-related announcements have an effect on consumers' brand purchase intentions>- Does the size of this effect depend on the direction or breadth of the message? Do product-related announcements affect the evaluations of all available brands or just a select few? Are consumers more likely to change their evaluations of brands in their choice sets than those of brands that are not? The next section of the ; paper details the propositions associated with these questions. The study design and empirical results are then presented. The paper concludes with a discussion of the implications, limitations, and future directions of this research.

ANNOUNCEMENT CHARACTERISTICS AND CONSUMER RESPONSE

Marketing researchers have had a long tradition of examining the impact of information on consumer decision-making. Considerable research suggests that additional product information can change consumers' perceptions and evaluations of brands (e.g., Lutz 1975). By providing new information about one or a set of brands, product-related announcements would likewise be expected to affect consumers' brand perceptions and purchase intentions. Research by Farquhar and Pratkanis (1987) provides some support for this hypothesis, indicating that one type of announcement, the new product pre-announcement, can influence consumer choice behavior. It is therefore proposed that:

P1: Product-related announcements affect consumers' intentions to purchase the various brands of 8 product.

One dimension on which announcements differ is the favorability of the message with respect to the brand. Unfavorable product-related information appears to have a much stronger influence than favorable product-related information on consumer decision-making (Arndt 1967; Burzynski and Baker 1977; Lutz 1975; Mizerski 1982; Richins 1983; Weinberger 1986; Weinberger, Allen, and Dillon 1981; Wright 1974). Individuals pay more attention to negative information (Fiske 1980), find it less ambiguous (Wyer 1973), and are more likely to recall it (Carlston 1980). Weinberger, Allen, and Dillon (1981) demonstrated that the impact of negative information persists even after the information has been refuted.

Various explanations of this "negativity bias" have been offered (see discussions by Kanouse 1984, and Kanouse and Hanson 1972). Negative information may attract more attention and be processed more extensively because it is more novel and distinctive than positive information (Fiske 1980, Kanouse 1984). In addition, since most brands are described in positive terms, negative information may be more useful for discriminating between brands at the time of choice (Kanouse and Hanson 1972). This leads to the expectation that:

P2: Negative announcements have a greater effect than positive announcements on consumers' purchase intentions.

As noted earlier, announcements also differ in terms of the breadth of the communication. Announcements about individual brands (if believed) would be expected to change consumers' brand perceptions, whereas industry announcements are more likely to change consumers' perceptions of the product category, redefining the criteria used to evaluate an entire set of brands. If industry announcements affect how consumers frame the choice decision then one would predict:

P3: Industry-level announcements have a greater effect than brand or product category announcements on consumers intentions to purchase various brands.

Research by Biehal and Chakravarti (1982), Johnson and Russo (1978), and Tversky (1972) indicates that information is processed more extensively for chosen than for unchosen alternatives. Raj (1982) reports that increased brand advertising has a greater impact on brand loyal consumers than brand switching customers. Similarly, Petty and Cacioppo (1979) report that individuals who are highly involved in a decision are more likely to process relevant message arguments. This suggests that consumers will be most likely to consider the implications of product-related announcements for brands that they are actively considering purchasing. It is therefore proposed that:

P4: Product-related announcements have a greater effect on the purchase intentions of brands in the choice set than on the purchase intentions of brands not in the choice set.

Finally, one would expect that when the focus of an announcement is selective, so would be its effects on purchase intentions. An announcement is expected to have the greatest impact on consumers' evaluation of its referent, although it may have a residual influence on the evaluations of other brands in the product class.

P5: Announcements have a greater effect on consumers' intentions to purchase brands and products directly referenced in the communication.

METHODOLOGY

A study was conducted to examine the effects of various types of product-related announcements on consumer purchase intentions for microcomputers. Given the competition for technological advancements and the fight for market share, manufacturers of microcomputers have been known to make announcements in order to influence consumer purchase decisions (see, e.g., Brock 1975; Mitchell 1987).

First-year MBA students enrolled in a core marketing management course at a major business school participated in the study. Before entering the MBA program, these students were required by the school to either purchase or lease an IBM-compatible computer system. Students also received computer literature from school administrators concerning various equipment options.

The volunteers from the course were asked to complete a questionnaire, requiring 3045 minutes of their time, concerning their buying preferences for microcomputers. The questionnaire consisted of four major-sections. The first section sought information on their current microcomputer equipment and usage. The second section asked for their assessment of the relative importance of the various microcomputer features. The third section was a conjoint task where they were asked to provide intention-to-buy ratings for eighteen hypothetical microcomputers in view of six different announcements. The orderings of brand profiles and announcements were randomized. The final section measured their prior familiarity with these announcements and requested some background information. Prior to its final administration, the questionnaire was given to 10 first-year MBA students to evaluate levels of comprehension and fatigue.

Respondents were screened in terms of having some familiarity with microcomputers. Students who completed the questionnaires were entered into a lottery for $400 worth of computer software. Thirty students provided completed questionnaires. All of the students reported having used a microcomputer for job-, home-, or school-related activities within the past year. Twenty-three individuals (77% of the sample) reported that they currently owned microcomputers. The remaining 7 subjects stated that they planned to purchase or lease a computer during the academic year. Those persons who currently owned computers reported spending an average of 7.8 hours per week using this equipment.

The eighteen hypothetical brand profiles included in the third section of the questionnaire were based on seven major factors (product features) and their associated levels (listed in Table 3). The selection of these factors was done after consulting several knowledgeable MBA students and the school administrators who were directly responsible for recommending the various equipment configurations to the students. The selected levels for the various factors and their combinations were also checked with suppliers for their feasibility. The seven factors were combined into a 37 fractional factorial design (cf. Addelman 1962), resulting in 18 brand profiles. A fractional factorial design was used in order to reduce the number of profiles presented to a single respondent. As is common in most conjoint studies (see Cattin and Wittink 1986), interactions between brand attributes were assumed to be nonsignificant. However, the design does allow the estimation of interactions between the announcement manipulation and brand attribute factors.

Respondents were initially asked to report their likelihood of purchasing each of 18 microcomputers on a 5-point rating scale, with 1 indicating "definitely would not purchase" and 5 indicating ''definitely would purchase." After completing this task, they were given six randomly-ordered product-related announcements, one at a time, and asked to provide new ratings of the same 18 profiles in view of the information conveyed by each announcement (see Table 1). While evaluating the 18 profiles for each announcement, subjects were asked lo ignore any previous announcement(s) given to them. They were told that university officials were the source of these announcements.

The six announcements used in the study were taken from the actual evolution of the microcomputer industry. At the time of the study (Fall 1986), this information was relatively new and unfamiliar. The announcements were planned according to a 2 x 3 design where announcements were developed to convey positive or negative information about a specific brand, the product category, or the entire industry. In order to establish the perceived direction (positive or negative) and referent (brand, product, or industry) of the six announcements and to assess the announcements' effects on purchase intentions, the announcements were pretested with a group of MBA students and industry experts. Students' prior awareness of each announcement was also measured. The pretest results confirmed the intended perception of the six announcements.

RESULTS

Overall Announcement Effects

Table 2 presents (a) means and standard deviations of subjects' purchase intentions across all brand profiles for the various types of announcements and (b) ANOVA results testing the overall effect of announcements on subjects' purchase intentions for the 18 brand profiles. The main effect of product announcement was highly significant, p < 0.0001. Mean purchase intentions ranged from 1.94 in the negative industry announcement condition to 2.35 in the positive product announcement condition (Table 2a). These results suggest that consumers' intentions to purchase any of the available brands of a product can be influenced by product-related announcements, supporting Proposition 1.

Direction of the Announcement

As summarized in Table 2a, relative to the no-announcement control condition, the negative announcements produced an overall downward change in evaluations of 0.21 while the positive announcements produced an upward change of only 0.06. The difference in the size of these effects is significant, F(1,29) = 4.54, p < 0.05. Individually and as a group, the brand profiles in the negative announcement conditions were rated significantly lower (x = 2.12, 2.10, and 1.94, for the negative brand, product, and industry announcements, respectively) than those in the no-announcement control condition (x = 2.26), F(1,174) = 19.62, p < 0.0001. On the other hand, although the mean purchase intentions in the three positive announcement conditions were higher (D = 2.32, 2.35, and 2.30 for the positive brand, product, and industry announcements, respectively) than the no announcement control condition, these differences were not significant, F(1,174) = 1.77, p > 0.10. These results indicate that the negative product-related announcements have a greater effect than positive announcements on overall brand evaluations. This finding supports Proposition 2, and is-consistent with past research showing that negative information has a greater impact on judgment than positive information.

Breadth of the Announcement

Table 2a reports the overall mean change from the no-announcement condition for the brand, product and industry announcements. The size of the announcement effect did not differ significantly across the three announcement types (Ax = 0.10, 0.12, and 0.18, for the brand, product, and industry announcements, respectively), F(2,58) = 1.81, p > 0.10. However, there was a significant interaction between the type of announcement and its direction, F(2,58) = 4.76, p < 0.02. In the negative announcement conditions, the effect size depended on the focus of the announcement (p c 0.03), with the industry-level announcement producing greater change (Ax = 0.32) than either the brand or product-level announcements (Ax = 0.14 and 0.16, respectively; p < 0.05). This was not the case in the positive announcement conditions (p > 0.10).

TABLE 1

MICROCOMPUTER ANNOUNCEMENTS

When compared to the no-announcement control condition, the product and industry announcement effects were both significant (p < 0.05). The brand announcement had only a marginally significant overall effect (p < 0.10). These results are consistent with Proposition 3, and suggest that product-related announcements that relate to the entire industry tend to impact consumer purchase intentions more than the announcements that relate to a specific brand or a set of brands.

TABLE 2

EFFECTS OF PRODUCT-RELATED ANNOUNCEMENTS ON CONSUMERS' BRAND PURCHASE INTENTIONS

Announcement Effects On Choice-Set Brands

Given the 5-point rating scale, brand profiles rated as 4 or S in the no-announcement condition were considered to define the relevant choice set for each respondent (see Urban and Hauser 1980, Chapter 11). The overall mean change in brand purchase intentions was modeled as a function of announcement type and profile grouping using ANOVA. The interaction between the type of announcement and profile grouping was highly significant, F(6,174) = 6.05, p < 0.0001. While the simple main effects of announcement were significant for both the choice-set and non-choice-set profile evaluations (p c 0.01), the pattern of effects for each group was different.

Profiles in the choice set were significantly affected by each of the three negative announcements (*x = -0.80, -0.58, and -0.82 for the negative brand, product, and industry announcements, respectively), while the remaining profiles were only affected by the negative industry announcement (*x = -0.20). The announcements produced considerably more absolute change in the evaluations for profiles in the choice set (* = 0.50) than for those that were not (* = 0.17), F(1,29) = 24.68, p < 0.0001. These results indicate that product-related announcements are more likely to affect consumer purchase intentions for the brands that are included in the choice set than for brands that are not included in the choice set, as predicted by Proposition 4.

TABLE 3

EFFECTS OF PRODUCT-RELATED ANNOUNCEMENTS ON BRAND ATTRIBUTE EVALUATIONS

Selective Effects on Brand-Attribute Evaluations

Although the negative announcements generally tended to decrease ratings and the positive announcements generally tended to increase ratings, the effect of these announcements was very selective. The industry negative announcement (availability of Intel's 80386 micro-processor) influenced most of the brand profiles, but the effect of other announcements varied from two brand profiles (brand positive) to four brand profiles (product negative). The selective nature of the announcement effect is supported by a significant interaction between the type of announcement and brand profile, F(102,29. 8) = 10.35, p < 0.0001. When the ratings of the brand profiles were decomposed into the evaluations of the seven brand attributes, each attribute entered into a significant interaction with the product-related announcement variable (p < 0.0001). The significant differences in the purchase intentions between the no-announcement control condition and the six other announcement conditions are reported in Table 3. For all of the reported pairwise contrasts, significance tests are adjusted to maintain the overall Type I error rate (Dunn 1961).

The brand-negative announcement (IBM PC/AT 20 MB hard disk crash) led respondents to decrease their evaluations of the IBM brand, the AT model, and the 20 MB hard disk. Subjects also negatively evaluated the short (3 month) warranty, the 512 KB RAM-memory, the enhanced color monitor, and the $3,000 price. While the latter effects were not expected, they are not surprising since this particular combination of attributes was associated with the profile describing the IBM PC/AT with the 20 MB hard disk.

The product-negative announcement (PC model discontinued) caused subjects to lower their evaluations of the PC model, as well as their ratings of the IBM and Compaq brands. As with the brand-negative announcement, the product-negative announcement had a number of additional, unexpected effects on subjects' evaluations of product attributes. Once again, the combination of attributes was associated with a single brand profile which was strongly negatively evaluated.

The industry-negative announcement (Intel 80386 processor forthcoming) had a widespread negative effect on subjects' interest in purchasing any of the described brands. Consequently, each level of each attribute was rated significantly lower than in the no-announcement control condition.

As noted earlier, the positive announcements had much less of an impact on rated purchase likelihood than did the negative announcements, although a number of the effects on individual attributes were significant. The brand-positive announcement (Compaq speed enhancement) had the expected positive effect on the evaluation of the Compaq brand. The product-positive announcement (80286 accelerator board) increased the evaluation of the PC model, as expected, and also raised the evaluation of the 256 RAM-memory attribute. The industry-positive announcement (statistical package availability) had no effect on the evaluations of any of the microcomputer attributes. In general, these results support the prediction that announcements have the greatest effect on brands and products directly referenced in the communication (Proposition 5).

DISCUSSION

This research examined the impact of product-related announcements on consumers' purchase intentions for the various brands of a product. In the battle for market share, the key question is, "Can product-related announcements shift the balance of-market share equilibrium? Can product-related announcements be used as a strategic tool to influence consumers' purchase intentions for the brands of a product?"

The reported results indicate that product-related announcements can be used to influence consumer behavior. The analyses further suggest that, by means of an announcement, a competitor can affect intentions to purchase a brand or a set of brands if that brand or brands are included in the consumer's choice set. Furthermore, since product-related announcements can influence certain brands more than others, they can be designed to woo customers from competitors in order to command a competitive advantage in the marketplace.

The results are also consistent with the considerable literature indicating that people tend to weight negative information more heavily than positive information in product judgments. Consumers may find negative announcements to be more novel, distinctive, and interesting than the positive information (cf. Fiske 1980, Kanouse 1984). As a result, they may pay more attention to negative announcements, using them to screen out undesirable alternatives.

Limitations

The six announcements used in this study reflect actual developments in the microcomputer industry. While this increased the external validity of the study, it may have reduced the study's internal validity. As noted earlier, a pretest was conducted with both MBA students and industry experts to establish the perceived direction and referent of the announcements. However, the announcements may have differed in strength. As a consequence, the negative and industry announcements may have produced greater effects than the positive and brand announcements because they represented more significant developments in the microcomputer industry. The present findings should therefore be replicated with a broader range of announcements, pretested and selected to be of equivalent strength. Another valuable extension would be to independently manipulate the reference object and content of the announcement, so that the separate effects of these factors can be estimated. To avoid possible carryover effects across announcements, future research should insert a distractor task between the sequence of announcements/ratings, or use a between-subjects design.

A second limitation regards the short time interval between consumers' exposure to announcements and their brand judgments. Although the results suggest that purchase intentions can be influenced by means of product-related announcements, from the competitive strategy point of view, the question is can this influence be sustained? How does the length of effect vary by the nature of the product-related announcement defined both in terms of its direction and its referent?

A third consideration is the study's sample of MBA students. Considerable effort was made to ensure that the selected product was relevant for the sample and that the sample size was sufficient to detect the effects of the within-subject manipulations (Ferber 1977). A controlled laboratory experiment with a relatively homogeneous sample is appropriate for the evaluation of the five theoretical propositions (Calder, Phillips, and Tybout 1981). However, a field experiment with a larger, representative sample would be necessary to generalize the descriptive results on brand purchase intentions, attribute importance, and the absolute size of the announcement effects.

Future Directions

The reported study presents several opportunities for future research. This paper has examined the effects of various types of product-related announcements on consumer behavior. The source of the announcements, company reactions, and audience characteristics were not manipulated. Yet, prior research indicates that these factors may moderate the announcement effects.

The communication literature suggests that the message source will interact with message content to determine the overall impact of an announcement (cf. Eagly, Wood, and Chaiken 1978, Mizerski 1982). Spence (1974) contends that large selling organizations will acquire and maintain reputations for the accuracy of their product-related announcements. By correctly signaling forthcoming events, firms can establish high signaling credibility and thereby enhance their future abilities to communicate to and influence consumers and competitors. Conversely, manufacturers can hurt their reputations by communicating false signals. For example, some software manufacturers are noted for missing deadlines and have developed reputations for marketing "vaporware." Signaling reputations are less likely to be a factor when there are a large number of signalers and any one will not be on the market for a long period (Spence 1974, p.107).

The receiver's interpretation of and response to the announcement may also depend on the accounts or explanations offered by the firm. Some announcements put the firm in a predicament because they are embarrassing, undesirable, illegal, antisocial, or disruptive. Accounting is the firm's attempt to describe or interpret the product announcement and its consequences in desirable terms (cf. Schlenker 1978). Schlenker (1978) discusses two types of accounts: excuses and justifications. "Successful excuses allow one to escape from the predicament by minimizing personal responsibility, while successful justifications allow one to escape by minimizing the aversive consequences" (Schlenker 1978).

Likewise, if the announcement reflects positively on a firm, the firm may attempt to increase its association with or responsibility for the announcement through acclaiming (cf. Schlenker and Schlenker 1975). Two common acclaiming tactics are "entitling," where the company attempts to increase consumers' perceptions of its responsibility for the desirable action or its consequences, and "enhancements," which involve attempts to increase the apparent positivity of the action's consequences (Schlenker 1978). These responses may increase consumers' favorability towards the firm's brands.

Finally, consumer response to product-related announcements is likely to depend on consumers' past experiences and beliefs. The higher the discrepancy between the product announcement and the receiver's prior beliefs and the higher the level of product involvement, the greater the likelihood of message rejection (Sherif and Sherif 1967). As noted earlier, consumers learn and revise their beliefs through feedback on the accuracy of market signals (Spence 1974). This will affect their future responses to product announcements.

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