Optimal distinctiveness across revenue models: Performance effects of differentiation of paid and free products in a mobile app market

Joey van Angeren, Govert Vroom, Brian T. McCann, Ksenia Podoynitsyna and Fred Langerak

Strategic Management Journal, 2022, vol. 43, issue 10, 2066-2100

Abstract: Research Summary The optimal distinctiveness literature highlights a fundamental trade‐off in product positioning within market categories: Products should be distinct to minimize competition, but similar to build legitimacy. Most recently, this research has focused on understanding sources of variance in the distinctiveness–performance relationship. We extend this literature with an examination of digital products and argue that the relationship depends on products' revenue models: We theorize the relationship is inverted U‐shaped for paid products but U‐shaped for free products, owing to heightened privacy concerns of free product customers. We further argue that this latter relationship becomes flatter for free products that provide greater monetization transparency by publishing a privacy statement or adopting a freemium revenue approach. Hypotheses are tested using a sample of 250,000‐plus Apple App Store apps. Managerial Summary How should firms in the digital space position their products for optimal performance? We study this question in the Apple App Store, and suggest that the optimal positioning of digital products depends on their revenue model. Paid products should be moderately differentiated from competing products. By contrast, free products benefit most from very low or very high levels of differentiation. We attribute the different performance effects of differentiation to customers' privacy concerns over free products. Firms can partially ameliorate those privacy concerns by providing greater monetization transparency by publishing a privacy statement or by adopting a freemium revenue approach, making moderate levels of differentiation more viable. Our findings help managers align choices of positioning and revenue model, two critical aspects of the firm's business model.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1002/smj.3394

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:stratm:v:43:y:2022:i:10:p:2066-2100

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-2095

Access Statistics for this article

More articles in Strategic Management Journal from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().