Upgrade Product Purchase Decision
Masmira Kurniawati and Tanti Handriana
Department of Management,Universitas Airlangga, Jl. Airlangga 4, Surabaya, Indonesia
Keywords: Upgrade Product, Product Review, Purchase Decision.
Abstract: Innovation has been a key to every company’s success, so has been upgrading company’s existing products.
However, market reaction to upgrade product could be unpredictable. This paper tries to explain consumer’s
tendency in purchasing upgrade product. Specifically, this paper tries to investigate consumer’s tendency in
purchasing upgrade product when it is similar vs. dissimilar with existing product and also when it is
alignable vs. non alignable with existing product. Product review of previous version of upgrade product
(positive vs. negative) is used to confirm that upgrade product evaluation is affected by performance of
previous version. Experimental design is used with 299 participants. The results show that when consumers
have purchased a product, a dissimilar upgrade product will more likely be purchased than a similar upgrade
product, while when consumers have purchased a product, a nonalignable product will more likely be
purchased than alignable upgrade product. Product reviews play an important role in this particular purchase
decision i.e. when consumers have purchased a product and receive a positive review on the previous
version of dissimilar product, dissimilar upgrade product will be more likely purchased than similar upgrade
product and when consumers have purchased a product and receive a positive review on the previous
version of nonalignable product, nonalignable product will be more likely purchased than alignable product.
Based on the result of this study, marketers would understand how consumers come into a purchase decision
of upgrade product so they can design the right marketing tools.
1 INTRODUCTION
With the rapid advancement of technology, new
product development process is getting easier and
easier. Market leader companies have always been
highly innovative companies in terms of product
development, such as 3M, Apple, and Samsung.
Moreover, in some industries, such as electronics
industry, sustainable product development is the key
to success in the competition. Okada (2006) found
that company’s increase in sales and business
development is not only determined by the number
of new consumers buying the products, but also
today's consumers who already had the product and
decided to buy the latest version of the product that
they have today before the product become obsolete.
iPhone 6 provides example for this when the launch
attracted the attention not only of consumers who
have never had an iPhone, but also iPhone owners
wanted to replace the previous version with the
latest version. As high-tech product is multiple
generation product, it is necessary to study factors
influencing consumers in adopting the upgrade
product.
Volckner and Sattler (2006) state that consumer
experience with previous product versions can be the
success determinant of the new version of the
product. This happens because the ideas and
impressions relating to a previous version will be
transferred to the latest version (Keller, 2003;
Situmeang et al., 2013) and also because of the
popularity of the previous version will build
anticipation and excitement to the latest version
(Dhar et al., 2012; Ho et al., 2009; Karniouchina,
2011). Thus, the latest version can benefit from
previous versions, but it is also possible the market
performance of the latest version is not as good as
the previous version. Anticipation and excitement
built by the previous version can cause too high
expectations for the latest version, which can easily
create customer low satisfaction levels (Grewal et
al., 2004) and will ultimately result in lower level of
sales than the previous version (Basuroy and
Chatterjee, 2008). Okada (2006) also found that
consumers prefer upgrade product that is different
from the product that they have already possessed. It
384
Kurniawati, M. and Handriana, T.
Upgrade Product Purchase Decision.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 384-389
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

is because consumers will find it useless to purchase
upgrade product similar to the product they have
already had. Consumers will only be willing to buy
the latest version of the product when they feel that
the latest version has features or attributes that are
different from current product (nonalignable). But
what Okada (2006) does not take into account is
when customers decide to purchase an upgrade
product that is considered different or nonalignable,
they actually face the same situation as new product
purchase. Therefore, consumers will search
information in order to reduce the uncertainties. One
of information used by consumers to assess the
performance of the new product is product review.
Product review may influence consumer purchase
decisions (Ghose and Ipeirotis, 2011; Zhu and
Zhang, 2010).
Situmeang et al., (2014) further found in the
context of sequel product that not only the reviews
related to the latest product may affect the response
of consumers, but also the review of the product
from the previous version. This is called peripheral
signal which means that consumers using signals
from the review of the product prior to evaluating
new products. Peripheral signal could be in form of
a product review or the sales performance of the
previous version. Given the nature of the review, a
positive product review on earlier products will
generate positive consumer response to the new
product, and vice versa.
Hence, this study investigates consumers’ trend
in purchasing upgrade product based on the level of
similarity with the previous version and the
interaction with product review of an earlier version.
2 REVIEW LITERATURE AND
HYPOTHESIS DEVELOPMENT
2.1 Upgrade Product Purchasing
Bayus (1991) states that demographic factors,
attitudes, perceptions, and information search
activities will affect consumers in determining the
time to purchase replacement product. Kim et al.
(2001) found on their model on consumers
repurchase probability that the following factors
significantly affected consumers’ decision: the
history of consumers’ purchases, consumers’
expectations for the latest version, and preferences
for available other options.
One of the factors that shape consumer
expectations for the latest version and preferences
for other available options is product review.
Signalling theory states that product review reflects
the quality of the product (Kirmani and Rao, 2000;
Connelly et al., 2011) and can be used to reduce
uncertainty faced by consumers with regard to the
purchase of new products. This theory assumes that
product reviews in consideration is the one that
directly related to the product. However, in the case
of multiple generation product, consumers'
assessment on the latest version will be strongly
influenced by product review of the previous
version. Thus, the signals used by consumers to
evaluate the latest version of a product derived from
product review of the previous version. This is
called peripheral signal which means that the signal
consumers use to evaluate products is not the one
that directly related to the products. Peripheral signal
could be in form of a product review or sales
performance of the previous version. Therefore, a
positive product review of the previous version will
produce a positive consumer evaluation for the latest
version, and vice versa (Situmeang et al., 2014).
2.2 Similar vs. Dissimilar Upgrade
Product Purchasing
When the consumer decides to purchase upgrade
product, they do mental accounting through the
process of categorization (Thaler, 1985) where
consumers will conduct mental accounting
separately for products that are similar and
dissimilar (Henderson and Peterson, 1992) and
current purchase decision will be affected by past
purchase of products in the similar category (Heath
and Soll, 1996). For example, consumers will
categorize tablet and laptop more similar than a set
of dining table. Thus, consumers will not buy a
tablet in the near future after buying a laptop
because he would feel spending money too much on
electronics category. But they will not mind buying
a set of dining table with a price that is not too much
different from the laptop in adjacent time. Thus, the
purchase of a tablet would be greatly influenced by
the purchase of a laptop because the two are similar,
while the purchase of a dining table is not too
affected by the purchase of a laptop because the two
are not identical.
Hypothesis 1: When consumers have purchased a
product, a dissimilar upgrade product will more
likely be purchased than a similar upgrade product.
Upgrade Product Purchase Decision
385

2.3 Alignable vs. Nonalignable
Upgrade Product Purchasing
Tversky (1977) states that two products will be
considered similar if they both have same attributes
and not similar if some attributes can only be found
in one product and not in other products. The same
attributes found in two or more of the products
referred to as alignable attributes, while attributes
only found in single product are called nonalignable
attributes (Markman and Medin, 1995). Products
with alignable attributes that tend to be in the same
category (Markman and Gentner, 1993). Referring
to Okada’s research (2006), alignable upgrades
product is a product with improvements on existing
attributes, while nonalignable upgrade product is an
upgrade product with addition of new attributes.
Based on Tversky’s research (1977) about similarity,
nonalignable upgrade product will make previous
versions considered more similar than the newest
version alignable upgrade product.
Hypothesis 1 posits that consumers will be more
likely to buy dissimilar upgrade product than similar
one. As nonalignable attributes make the latest
version of the product becomes increasingly similar
to previous versions, then consumers will have a
more positive response to the nonalignable upgrade
product than alignable one.
Hypothesis 2: When consumers have purchased a
product, a nonalignable product will more likely be
purchased than alignable upgrade product.
2.4 Product Review in Purchasing
Upgrade Product
For consumers who will purchase dissimilar
products, their situation will resemble the purchase
of new products. Therefore, it requires information
about the product. With the availability of product
reviews on previous version, consumer will be able
to reflect on the conditions of the latest version of
the product available in the market as peripheral
signals theory explained. The more positive reviews
it receives, the more likely consumers will adopt the
latest version of the product, and vice versa
(Dellarocas et al., 2007). Thus, it is expected that
consumers will be more interested in purchasing the
latest version of dissimilar product when they are
exposed to a positive product review, but negative
product review will make them think twice to
purchase dissimilar products. The same case for
nonalignable upgrade product purchase situation
when consumers face a similar situation as
purchasing new products as consumers assume that
the products are not similar to the previous version
of the product. Thus, for nonalignable upgrade
product, consumers will search information about it
and product review on previous version of
nonalignable product will give a signal about the
quality of the latest version.
Hypothesis 3a: When consumers have purchased
a product and receive a positive (negative) review on
the previous version of dissimilar product, dissimilar
upgrade product will be more likely (unlikely)
purchased than similar upgrade product
Hypothesis 3b: When consumers have purchased
a product and receive a positive (negative) review on
the previous version of nonalignable product,
nonalignable product will be more likely (unlikely)
purchased than alignable product
3 RESEARCH METHOD
This study uses experimental design. Participants are
students of a business school in Surabaya, Indonesia
who get extra credit for their participation in the
experiment. There are 299 participants. Data are
analysed using independent sample t-test.
Independent variables are similar vs. dissimilar
upgrade product, alignable vs. nonalignable upgrade
product, and positive vs. negative product reviews.
Dependent variable is intention to purchase an
upgrade product. For similar product, tablet vs.
laptop are used. For dissimilar product, laptop vs.
camera are used. For nonalignable and alignable
upgrade product, cell phone is used. For positive
(negative) product review, a review from an
electronic magazine on previous version of the cell
phone is shown to participants. To measure purchase
intention, participants are asked about the possibility
they will purchase the product in the future.
3.1 Study 1
To test hypothesis 1 and 3a, a total of 150
participants are given scenario where they recently
bought a laptop. Of the 150 participants, 77
participants are conditioned to the situation of
purchasing similar upgrade product. Participants are
told that a leading electronics store is opening new
store and first 100 buyers will be given an
opportunity to purchase a tablet in a very cheap
price. While to the 73 participants who are in a
group of dissimilar upgrade products are told that
the electronic shop provides the opportunity to
purchase a DSLR camera with a very cheap price.
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
386

In the next stage, 73 participants in group of
similar upgrade product are divided into two groups.
Thirty-six participants will receive a positive
product review regarding a DSLR camera, while 37
other participants will receive a negative product
review on the DSLR camera. After reading the
review, participants will be asked to state how likely
they would purchase the product upgrade on a scale
of 1-5 (1 = Very Unlikely - 5 = Very probably).
3.2 Study 2
To test Hypothesis 2 and 3b, a total of 149
participants are given scenario where they already
have the latest version of iPhone mobile phone.
Seventy-five participants are exposed to the
conditions of purchasing alignable upgrade product
in the form of the latest version of iPhone with
improvements in screen resolution and battery life.
While 74 other participants are exposed to the
condition of purchasing nonalignable upgrade
product in the form of the latest version of the
iPhone with the added feature of hologram that are
capable of displaying three-dimensional images.
Participants then asked about their intention to
purchase the upgrade product.
In the next stage, 74 participants in the group of
nonalignable upgrade product are divided into 2
groups. Thirty-seven participants will receive a
positive review about their existing iPhone while 37
other participants will receive a negative review
about their existing iPhone. After reading the
review, participants are asked to state how likely
they would purchase the product upgrade on a scale
of 1-5 (1 = Very Unlikely - 5 = Very probably).
4 RESULTS AND DISCUSSION
4.1 Pre-test
To ensure that participants consider laptop vs. tablet
as similar products and laptops vs. camera as
dissimilar products, questionnaires are distributed to
40 respondents to ask their opinion on the degree of
similarity/dissimilarity of those products. The
results, as shown in Table 1 indicate that participants
perceive laptop and tablet are similar products while
laptop and camera are dissimilar. Hence, these
objects are used in this study.
Table 1: Pre-test result.
Item
Respondents’ Answer
Laptop vs. Tablet
Very Similar = 38 (95%)
Similar = 2 (5%)
Laptop vs. Camera
Very Dissimilar = 40 (100%)
4.2 Result of Study 1
After the participants were exposed to the conditions
of purchasing upgrade product according to the
scenario, the results are then analyzed using t-test
independent sample. The results confirm that
contrast to participants in the similar upgrade
product groups, participants in dissimilar upgrade
product groups have different level intention to
purchase (t = -14.8; p = 0.000), where the intention
to purchase of participants in the group of similar
products is lower (M = 2.87) than participants in
groups of dissimilar upgrade product (M = 4.42).
These results support Hypothesis 1. This is
consistent with previous research of Okada (2016)
and is also explained by sunk cost effect (Arkes and
Blumer, 1985) where consumers’ psychological cost
will be lesser when they perceive the upgrade
product is dissimilar with the existing product.
Therefore, when there are two new products that
may be equally attractive, consumers who already
have previous version will find that the one which is
more dissimilar with existing product to be more
attractive.
In the next stage, of the 73 participants who are
in similar upgrade product group, 36 participants
receive a positive product review about new upgrade
product (DSLR camera), while 37 other participants
receive a negative product review. The analysis
confirm that contrast to participants in dissimilar
upgrade product, participants in similar upgrade
product group and receive positive review have
different level of intention to purchase (t = -12.6; p =
0.000), where the intention to purchase of
participants in the similar upgrade products is lower
(M = 2.87) than participants in group of dissimilar
product upgrades (M = 4.39) that receive positive
review about the upgrade product.
Whereas the analysis of participants in similar
upgrade product group who receive negative reviews
about upgrade products confirm that their intention
to purchase upgrade product is different from the
group of participants in dissimilar upgrade product (t
= -2.6; p = 0.001), where the intention to purchase of
participants in the group similar upgrade product (M
= 2.87) is lower than the participants in group of
dissimilar upgrade product (M = 3.24) with negative
product review.
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387

These results support H3a. As expected, when
consumers buy dissimilar product, basically they
face a similar situation with buying new product.
Therefore, consumers require information about the
product. Here, product review will help consumers
in making purchase decision. The more positive
reviews it receives, the more likely consumers will
adopt the latest version of the product, and vice
versa (Dellarocas et al., 2007).
4.3 Result of Study 2
The analysis of Study 2 confirms that 75 participants
in alignable upgrade product group alignable have
different level of purchase intention than 74
participants in nonalignable upgrade product group
(t = -9.3; p = 0.000), where the intention to purchase
of participants in the group of alignable upgrade
product is lower (M = 3.13) than participants in
nonalignable upgrade product group (M = 3.96).
These results support the Hypothesis 2. This is
also consistent with previous research of Okada
(2016). Adding some features will make the latest
version of product look different than previous
version. Therefore, the mental cost of buying
upgrade product will be mitigated when the
enhancements are nonalignable.
Out of 74 participants who are in the group of
nonalignable upgrade product, 37 participants
receive positive product review about the new
upgrade product, while the other 37 participants
receive a negative review about the product. The
analysis confirm that contrast to participants in
nonalignable upgrade product, participants in
alignable upgrade group and receive positive
reviews have different level of intention to purchase
(t = -6.9; p = 0.000), where the purchase intention of
participants in the group of alignable upgrade
product is lower (M = 3.13) than participants in the
group of nonalignable upgrades product (M = 3.95)
and receive positive reviews about the product
upgrades.
Whereas the analysis of participants on
nonalignable upgrade product group who receive
negative reviews regarding the upgrade product
shows that their purchase intention is different than
participants in alignable upgrade product group (t = -
9.1; p = 0.000), where the purchase intention of
participants in the group of alignable upgrade
product is lower (M = 3.13) than the participants’ in
the group of nonalignable upgrade product who
receive negative reviews (M = 3.97).
These results support H3b. As nonalignable
products are new to consumers, they will try to seek
information to reduce uncertainty. Therefore, for
nonalignable upgrade product, consumers will
search information about it and product review on
previous version of nonalignable product will give a
signal about the quality of the latest version. The
more positive reviews it receives, the more likely
consumers will adopt the latest version of the
product, and vice versa (Dellarocas, Zhang, and
Awad, 2007).
5 CONCLUSIONS
It is important for the marketer to understand how
consumers come into purchase decision. High
involvement products like technology-based product
which usually come with higher price need a deeper
thought before consumers finally decide to purchase
it. As in upgrade product, consumers may face
different purchase situation, namely when the
upgrade product is similar vs. dissimilar and when it
is alignable vs. nonalignable. This study finds that
consumers have different purchase intention toward
them. Consumers consider similar and alignable
upgrade product are the same as product they
already had in the present. That is why their
purchase intention is low as they think it is useless to
purchase new product that is not different from their
current product. Meanwhile, the dissimilar and
nonalignable upgrade product are considered
different. That is why consumers have higher
purchase intention toward them. When consumers
decide to purchase dissimilar and nonalignable
upgrade product, they actually face the same
condition as purchasing new product. Therefore,
they need information to ensure that they make the
right decision. Here, product review plays an
important role. In the situation of buying dissimilar
or nonalignable upgrade product, consumer will seek
information both about current and previous version.
Hence, marketers need to ensure that their new
upgrade product are considered good and different
by consumers. Various promotional tools could help
the marketers to reach that goal.
ACKNOWLEDGEMENTS
This work was supported by Faculty of Economics
and Business, Universitas Airlangga research grants.
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388

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