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Rice University researcher discovers what makes a tech product stand out in a crowd

Turns out, timing is everything when launching a new tech product, this reacher found for Rice Business Wisdom. rawpixel.com /Pexels

From smart phones to video games to virtual reality toys, new products roll forward as relentlessly as the tides. So what, and how, should you tell consumers about your product to avoid being swept away in a sea of similar wares?

To answer this question, Rice Business professor Amit Pazgal and colleague Yuanfang Lin of Conestoga College dove into the particulars of how companies differentiate their products by informing consumers about a new product's quality.

The rush of new products, they note, is particularly intense in technology, where innovations are constant — which means consumers constantly need information about them. Traditionally, tech companies make the case for their products using advertising, free sample, product trials and splashy product demonstrations. (See your local Apple Store).

But how does a consumer's wish for information interact with their ultimate buying decision?

Timing, Pazgal and Lin found, plays a powerful role in the type of information that best influences consumers. Suppose, for example, Firm 1 offers a new product, say a smartphone with innovative features. This makes Firm 1 a pioneer. For a certain golden period, Firm 1 might hold a monopoly in the market, since there's simply no other smartphone like theirs. This is the moment, the researchers say, to offer consumers information that reveals the product's true quality and uniqueness. Because no similar product is out there, Firm 1 has the power to establish the parameters for judging its invention.

Inevitably, of course, another company (call it Firm 2) will come up with something comparable. Thanks to the heavy lifting in innovation by Firm 1, Firm 2 has the luxury to create a phone of equal or greater quality. And this is when the tide starts to turn. One might assume Firm 2 would just inform consumers of the superior quality of its product. But, surprisingly, Pazgal and Lin found that in most cases Firm 2 will instead focus on educating consumers about their preference for quality — in effect, leaving it up to the buyer to decide which of the two phones they really wants.

However, if another firm emerges with a similar product of lesser quality, its marketing will likely take yet another turn. Instead of trying to claim better quality, late entry companies offering an inferior product typically admit outright that their product isn't as well made as other versions.

That's because such firms calculate that if customers discover this themselves, they'll react badly. By telling the truth and pricing appropriately, a firm can find a calm stretch of water elsewhere in the market, someplace where it's not clashing directly with the earlier, higher quality products.

Whether it's Alexa, a smart TV or a virtual reality game, Pazgal and Lin explain, when a product enters the market for the first time, consumers need to be shown how it works. When a second product in the same line is introduced by a different company, the marketing task changes: it's now more important to show consumers how to identify a quality product, and then let them choose for themselves.

Any time a company launches a device or service into the world, in other words, it needs to trust consumers' ability to learn — and not drown them with too much information. Informed what good quality looks like, Pazgal and Lin conclude, consumers will swim on their own to the item they truly want.

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This article originally appeared on Rice Business Wisdom.

Amit Pazgal is Friedkin Chair in Management and Professor of Marketing and Operations Management at Jones Graduate School of Business at Rice University.

The Rice Management Company has broken ground on the renovation of the historic Midtown Sears building, which will become The Ion. Natalie Harms/InnovationMap

The Ion — a to-be entrepreneurial hub for startups, universities, tech companies, and more — is, in a way, the lemonade created from the lemons dealt to the city by a snub from Amazon.

In 2018, Amazon narrowed its options for a second headquarters to 20 cities, and Houston didn't make the shortlist.

"That disappointment lead to a sense of urgency, commitment, and imagination and out of that has come something better than we ever could have imagined," David Leebron, president of Rice University, says to a crowd gathered for The Ion's groundbreaking on July 19.

However disappointing the snub from Amazon was, it was a wake-up call for so many of the Houston innovation ecosystem players. The Ion, which is being constructed within the bones of the historic Midtown Sears building, is a part of a new era for the city.

"Houston's on a new course to a new destination," says Mayor Sylvester Turner.

Here are some other overheard quotes from the groundbreaking ceremony. The 270,000-square-foot building is expected to be completed in 18 months.

“We have the capacity — if we work together — not only to make this a great innovation hub, but to do something that truly represents the Houston can-do, collaborative spirit.”

— David Leebron, president of Rice University. Leebron stressed the unique accomplishment the Ion has made to bring all the universities of Houston together for this project. "When we tell people the collaboration that has been brought together around this project, they are amazed," he says.

“The nation is seeing what we already know in the city of Houston. That this city has the greatest and most creative minds. We are a model for inclusion among people and cultures from everywhere. We are a city that taps the potential of every resident, dares them to dream big, and we provide the tools to make those dreams come true.”

— Mayor Sylvester Turner, who says he remembers shopping in the former Sears building as a kid, but notes how Houston's goals have changed, as has the world.

“When this store opened in 1939, it showcased a couple of innovations even back then: The first escalator in Texas, the first air conditioned department store in Houston, the first windowless department store in the country.”

— Senator Rodney Ellis, who adds the request that The Ion have windows.

“Many people ask us, ‘why not just tear down the old building and start new?’ We actually see this as a very unique opportunity for companies and entrepreneurs to be located within a historic building, while benefiting from an enhanced structure, state-of-the-art technology, and Class A tenant comforts.”

— Allison Thacker, president of the Rice Management Company. She describes the environment of being a beehive of activity.

“[As program partner for The Ion,] our mission is to build the innovation economy of Houston one entrepreneur at a time.”

— Gabriella Rowe, CEO of Station Houston. Rowe describes Station's role as a connector between startups, venture capital firms, major corporations, and more.