A High-Tech Product Market Share Model with Customer Expectations

In a product category based on dynamic technology, new products enter the market in rapid succession, and the competitive situation changes almost daily. Because technological features of available products tend to improve while prices tend to decline, customers develop expectations that may influence their purchase decisions. We model the impact of customer expectations regarding price and technology on product market share in the personal computer industry, finding significant nonlinear effects of both. These effects are observed when actual product price and/or technology differ from expectations by a threshold amount. Our results suggest implementable implications for high-tech product managers: in particular, price and technology should meet, but not exceed, customer expectations. This does not mean that managers should strive for mediocrity; rather, continuous improvement should be implemented so that product development efforts lead customer expectations.

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