Provision of Optional versus Standard Product Features in Competition

Abstract

Competing brands differ in the extent to which they offer a given feature as standard or optional in their product lines. In this article, the authors study the competitive basis for this difference in brands’ product line strategies. Specifically, they analyze the relationship between a brand's quality image and its propensity to offer a wider product line, from a relatively stripped-down base model to a more feature-rich model. They develop a conceptual framework and hypotheses by considering an analytical model with two vertically differentiated firms: They show that a low-quality firm would offer a feature as optional—that is, it would offer both a feature-added product and a stripped-down base product—if it chose to add the feature to its product. In contrast, a high-quality firm would offer the feature as a standard component unless the cost of the feature was high. This asymmetry in the propensity of high- and low-quality firms to offer optional and standard features with their products is tested using data from the U.S. passenger car market; the authors find empirical support for their model.