Which Complementary Product Do You Like? Exploring the Effects of Complementary Products on the Patronage of Main Products
Seong-Yeon Park, Ku Yun Chung
The market of complementary products, also known as third-party products, is becoming a type of industry and economy. According to The Fiscal Times (Oct 18, 2011), the global market for mobile phone accessories is expected to rake in an estimated $34 billion in revenue in 2011 and is predicted to hit an estimated $50.2 billion by 2015. Beyond being simply related products, it even influences increasing the value of main products. The best example of this phenomenon is the case of iPod. Since the first introduction of iPod in December 2001, aftermarket or the market of complementary products has expanded along with the breaking out sales of main products. iPod created large scales of aftermarket and the sales of iPod-related accessories reached $700 million in 2005 just after 4 years of the introduction of iPod (CNN Money Jan 12, 2006).
Complementary product is getting more important as a new market. Blue ocean strategy by Kim and Mauborgne (2005) emphasizes the significance of providing complementary products and services that can affect the value of main products to reconstruct a market borderline. Therefore, studies on the influence of complementary products on main products are highly necessary and this study explores how perceived characteristics of complementary products influence the patronage of main products through the mediating variables such as the perceived value and switching cost of main products.
From the previous studies, this research adopts variety, compatibility and price as the important characteristics of complementary products that can affect the perceived value of main products. First, consumers prefer diversity and the variety of products increases consumer welfare (Brynjolfsson et al. 2003). According to Pae and Jung (2002), various complementary products with compatibility give positive effects on network externalities and increase the value of current technology. Finally, price has two different indicators: financial sacrifice to purchase a product and the perception of the quality of a product (Dodds et al. 1991; Sweeney et al. 1999). Perceived price gives positive effects on the perceived quality of products. Therefore, Hypotheses 1, 2 and 3 are derived: H1. Perceived variety of complementary products increases the perceived value of main products. H2. Perceived compatibility of complementary products increases the perceived value of main products. H3. Perceived price of complementary products increases the perceived value of main products.
Pae and Jung (2002) support that diverse complementary products increase the switching cost of present technology. However, Farrell and Klemperer(2007) identifies that consumers have less switching cost as the products have more compatibility. Incompatible complementary products cause financial loss (Burnham et al.2003). In other words, consumers get financial loss or financial switching cost if their complementary products do not work with their new product. Hypotheses 4, 5 and 6 are derived from this background literature: H4. Perceived variety of complementary goods increases the perceived switching cost of main products. H5. Perceived compatibility of complementary goods decreases the perceived switching cost of main products. H6. Perceived price of complementary products increases the perceived switching cost of main products.
According to Yoon et al. (2004), customer value affects the switching cost perceived by customers. It is very important in explaining switching cost. Also Kim and Cho (2004) confirm that the perceived value of products increases perceived switching cost. Therefore, Hypothesis 7 is derived from this background literature: H7. Perceived value of main products increases the perceived switching cost of main products.
Perceived value comes from the trade-off between perceived price and quality, which is the most important factor influencing purchase intention (Chang and Wildt 1994). Also, Kim and Oh (2002) support that perceived switching cost influences repurchase intention positively and increases supplier dependence. Customers experience psychological, economic and time costs in replacing a service provider, and this hampers replacing. Hypotheses 8 and 9 are derived: H8. Perceived value of main products increases the patronage of main products. H9. Perceived switching cost of main products increases the patronage of main products.
This research adopts iPod as the main product because it needs a main product that has many users and various complementary products. It uses a survey method, selects three hundred 10-30 years old man and women in Seoul, Korea, and uses 7 point Likert scales for the measurement of constructs. It runs reliability tests and factor analyses with SPSS 12.0 and performs structural equation modeling analysis with AMOS 5.0 to test the hypotheses.
Reliability tests of all the scales show Chronbach’s alpha above 0.7, which indicates enough internal consistency of all the scales used. In the results of construct validity test, exploratory factor analysis shows clear factor loadings for the constructs in the research model. It employs principal component analysis and varimax rotation for the factor analysis. To test the goodness of fit of the research model, it runs structural equation modeling using AMOS 5.0. It uses maximum likelihood method. All the goodness of fit indexes show acceptable fit of the model.
The results show that (1) the characteristics of complementary products, variety, compatibility and price, increase the perceived value of main products; (2) the perceived variety and price of the complementary products positively affect the perceived switching cost of main products; (3) the perceived compatibility of complementary products decreases the perceived switching cost of main products; (4) contrary to the hypothesis, perceived value of main products does not significantly increase the perceived switching cost of main products; (5) the perceived value and switching cost of main products positively affect the patronage of main products.
This study identifies the importance and the characteristics of complementary products, and examines the processes through which the characteristics of complementary products affect the patronage of main products. In terms of marketing practices, this study suggests that third-party products become significant means for customer retention and sales increase because they can increase the value and switching cost of the main product. Therefore, investment for the development of complementary products becomes a critical strategic decision to make in product development and the increase of product patronage.
Keywords: Complementary products, Perceived value of main products, Switching cost, Patronage of main products, Perceived compatibility