Spillover effects: from services to products

18 March 2014 16:15

(updated: 18 December 2016 16:22)

Spillover effects: from services to products

In their quest to increase market coverage, more and more companies are engaging in product or service extensions.

Firms that previously focus on manufacturing products begin to explore the service sector (e.g. Tide, a detergent brand, opened a line of dry-cleaning establishments), whereas service brands also expand to offer product-related categories (e.g. Google offers Google phones and Google glasses; Telenor is planning to launch a new smartphone). The discussion revolving around the success factors of these cross-sector extensions often focus on, among many other factors, the leveraging of the current brand equity. In my PhD dissertation, I seek to examine another potential mechanism for successful extensions by discussing the concept of spillover effects. The premise of this research is that consumers constantly make evaluations about products and services, and their evaluations are often affected by various factors. Indeed, it is a pervasive assumption in marketing research and practice that customers’ attitude towards an object is affected by their evaluations of other related or even unrelated objects. Termed as carry-over or spillover effects, this phenomenon occurs when information and existing perceptions influence beliefs that are not directly addressed by or related to the original information source or perception object.

As part of the Customer Care 2020 project led by Telenor and other CSI partners (e.g. DNB, Posten), the purpose of my PhD dissertation is to investigate whether customers’ attitudes towards services from a service brand influence their assessments of a newly launched product. My interest is to explore the underlying mechanism for the spillover and further to examine boundary conditions for spillover effects. Further, I seek to examine the variation in spillover effects between a branded versus non-branded extension. Companies such as Virgin, Apple, and Microsoft often expand into new categories under the same brand, while others such as Toyota always launches new offerings with different brand names (e.g. Scion, Prius, Lexus). While extensive research has focused on brand extensions, it would be interesting to discover processes that underline the success of extensions without branded element. The examination of spillover effects is particularly relevant for the understanding of the notion of seamless customer journeys and customer total experience, one of the main focuses of Customer Care 2020 project. With my dissertation, I hope my research will provide both theoretical and practical implications.