Wednesday, April 22, 2020

Similar but Better: When Product Comparisons Are Traps

One of the oldest forms of advertising innovative products and services is the comparison with existing ones. Whenever a firm can argue that its innovation is similar to an existing product, but better, two things happen. First, the similarity makes acceptance easier. Second, the improvement makes changes to the innovative products easier. What could go wrong?

Research by Greta Hsu and Stine Grodal published in Administrative Science Quarterly gives one answer to how a strategy of comparison can go wrong. They looked at the growth of electronic nicotine delivery products – vape devices – and how the makers of such products took steps to get them quickly accepted. These steps in turn led them into a trap of their own making.

The starting point is that the cigarette industry is large and highly profitable. After all, even taking taxation into account, cigarettes are vastly overpriced wrapped dried leaves. Cigarette customers are addicted customers (at least addicted to the product category), which is even better than having loyal customers. The only problem for cigarette makers is that the health damages are well known, and the industry is shrinking. Smokers do not quit in great numbers – the product is addictive after all – but more old customers die than new customers appear.

Actors outside the cigarette industry invented superior systems for delivering nicotine and other flavored vapors through well-controlled electronic devices. They then faced the dilemma of how to market this innovation. What to name it? How to have it regulated, or try to avoid regulation? How to market it? A series of decisions led them onto the path to “similar but better,” including naming these devices e-cigarettes.

In many ways this was a natural path because cigarettes are also delivery systems for nicotine and other flavored vapors. The new systems were more complex but also much more controllable, so they really were similar but better. But positioning them that way instead of emphasizing distinctiveness was still a choice, and it turned out to have a series of consequences. On the positive side, some of the innovators got acquired by major cigarette makers and earned greatly from that. Also on the positive side, the major cigarette makers added their marketing muscle and made e-cigarettes widespread very quickly.

Then there was the negative side. The e-cigarettes are efficient nicotine delivery systems, which is a problem because the addiction to smoking comes from nicotine, not from other parts of the cigarette. So, these devices were similar in addictive properties and better at delivering nicotine, a point that anti-smoking activists immediately understood. They were also quick to notice that one maker started adding tastes that made e-cigarettes appealing to youth, as a way of recruiting new users. As a result, campaigning against e-cigarettes increased, and public opinion has turned against them. A good thing too, because a while after these products became popular, a wave of deaths from vaping THC additives showed that these products can be dangerous in ways that regular cigarettes are not.

So “similar but better” is a choice, and when the basic product is bad for health or for any other part of life that we value, it is not obvious that it is the best choice. If over time we confirm that these products actually are healthier than regular cigarettes, then calling them e-cigarettes and making other comparisons has been a serious mistake. An alternative name was easily available, after all. Using e-cigarettes is called vaping (a simplification of “vaporizing”), and the devices could have been called vapers. Instead, a vaper is now someone using an e-cigarette. Just words, you may say, but words have consequences.

Hsu, G., S. Grodal. 2020. The Double-edged Sword of Oppositional Category Positioning: A Study of the U.S. E-cigarette Category, 2007–2017. Administrative Science Quarterly, forthcoming.