New Product Newness and Benefits : A Study of Software Products from the Firms’ Perspective

Abstract: It is widely believed among researchers as well as practitioners that there is a link between new product newness, or innovativeness, and benefits to the firm developing and marketing a product; more innovative products are generally expected to create more profit and growth. However, research findings are conflicting—positive-, negative-, and no-relationship have been reported between product newness and benefits by different researchers. Moreover, most research has been confined to hardware products. Software is a different kind of product. It is marked by low industry entry barrier, low marginal cost of production, intense competition for quick market leadership, subject to increasing rate of return, et al. An ever larger part of investments in new products consist of computer software, software that is used in PCs, control industrial processes and give products like mobile phones, cameras and cars new features. To what extent newness gives benefits in software development is however still un-researched. Thus, the purpose this study was formulated as: To explore effect of newness of new software products on the benefits to the firms. To fulfill this research purpose, first we had to find out “What are the relevant elements of (i) newness, and (ii) benefits of new products” in the context of firms that develop and market computer software products? This part of the study is reported in Part I. In a second step the effect of product newness on benefits was investigated quantitatively. This part of the study is reported in Part II. Part I is based upon semi-structured in-depth interviews of managers responsible for seven new software products in firms from Finland, India, Sweden and the US. Supplementary secondary data were collected from archival sources to write case descriptions of each software product. Within- and cross-case inductive analysis of seven-case database led to identification of relevant elements of newness and benefits. As newness elements, distribution technology, and complementary technological-, and marketing-resources were found to be vital; as benefits element, non-monetary benefits of new products stood out. Part II reports a quantitative study involving 321 Swedish software firms. Data were collected through a Web-survey, using a questionnaire based on findings of Part I, and analyzed through Factor Analysis and Structural Equation Modeling. Findings indicate that marketing fit, and technological familiarity enhance product-level benefits, whereas technological fit, and familiarity enhance firm-level benefits. From the three environmental factors only aggressive marketing practices was found to be of significance. Neither switching costs nor computer mediated transactions was found to have any moderating role on product newness and new product benefits relationship. Overall, this study extends previous research in the area of product newness-new product benefits and fills the gap in the literature (i) by developing grounded measures for operationalizing new product newness and benefits concepts in the context of software product firms, and (ii) by identifying significant elements of new product newness that affect new product benefits. By limiting to a particular industry, this study provides useful findings—for both researches of new product development, and for managers in software firms—such as marketing fit, and technological familiarity enhance product-level benefits, whereas technological fit, and technological familiarity enhance firm-level benefits.