The high-end bias - A decision-maker preference for premium over economy innovations

Abstract

Deciding which new product concepts to develop is an important strategic management decision. One part of it is to decide whether to develop “premium” products, priced above the average product on the market, or “economy” products, priced lower than the average product on the market. We hypothesize that, ceteris paribus, firms and individual decision makers prefer premium over economy innovation projects. Building on implicit attitude and status discrimination theories, we argue that the origin of the bias lies in the implicit decision-making system of the mind, such that decision-makers inherently prefer premium innovations and that this implicit high-end bias affects their explicit preferences. We use the results from one longitudinal set of archival sales data covering 2312 new product introductions and three experimental studies with decision makers, including practicing managers, to provide evidence for the high-end bias. With these findings, we extend status theory as well as discrimination theory from well researched personnel decisions to managerial decisions about inanimate objects such as product concepts. We further augment literature on low-end innovation by identifying an important constraint for managers and researchers who work on inclusive innovation, frugal innovation, social responsibility, and Base of the Pyramid innovation.