GET IT? GOT IT. GOOD!

ENHANCING NEW PRODUCT ACCEPTANCE BY FACILITATING RESOLUTION OF EXTREME INCONGRUITY

October 2010

Ji Hoon Jhang Susan Jung Grant Margaret C. Campbell

Ji Hoon Jhang is a doctoral candidate in marketing (ji.jhang@colorado.edu), Susan Jung Grant is assistant professor of marketing (susan.jung.grant@colorado.edu), and Margaret C. Campbell is associate professor of marketing (meg.campbell@colorado.edu) at the Leeds School of Business, University of Colorado, Boulder. All three authors contributed equally to this project. The authors would like to thank Alice M. Tybout, Brian Sternthal and John G. Lynch for their feedback on previous versions of this manuscript.

2 ABSTRACT Highly innovative products may offer consumers greater benefits than incrementally new products, yet they have a higher failure rate. The present research addresses the challenge faced by new products that are extremely different from existing offerings by drawing on theorizing regarding the evaluation of schema incongruity. Specifically, the authors posit that consumers acceptance of extremely incongruent products will be increased by strategies that facilitate cognitive flexibility and thereby the likelihood that consumers will be able to make sense of incongruent new products. The authors examine the influence of three manipulations of cognitive flexibility positive affect, a future (vs. past) launch description, and a cognitive flexibility prime on evaluations of new products. Results from four experiments show that these factors enhance participants evaluations of extremely incongruent new products by facilitating ability to make sense of the new products. Results also indicate that understanding of the benefits provided by extremely new products, rather than affect arising from resolution, leads to higher evaluations of these products.

KEYWORDS: new products, incongruity, cognitive flexibility, innovation

3 Not only do new product launches have notoriously low rates of success failure estimates span 40% to 90%, depending on the product category (Gourville 2006) innovations that venture too far beyond expectations seem especially prone to failure. For example, recent product flops such as Crystal Pepsi, Colgate Kitchen Entrees, and Premier smokeless cigarettes, are remarkable for their incongruity with consumer expectations. Recent research supports the idea of the problematic success of extremely different new products, finding that consumers were four times more likely to choose an incrementally new product over a really new one (Alexander, Lynch and Wang 2008). In fact, for consumers who reported an intention to buy a new product (60% of the original 2,700 participants), an actual purchase was twice as likely for incrementally new as compared to really new products. Overall, research suggests that the more extreme the innovation, the more likely a new product is to fail. With the acceleration of marketplace change and demand for innovation, there are frequently strategic reasons for companies to introduce new products that deviate from consumers expectations. For instance, a firm may leverage existing technologies to new product categories to meet consumers needs, resulting in product attributes quite different from expectations. Dyson, for example, recently employed the wind-tunnel engineering from their bagless vacuum cleaners to launch a bladeless fan, thus introducing a highly unexpected point of difference. Adopting extreme incongruity as a point of difference can also allow new entrants to leapfrog incumbents and build awareness. Extreme incongruity is likely to attract attention to the brands position, thus fueling word of mouth and other viral communications. Further, adopting extremely incongruent innovations can contribute to a brands reputation for innovation. Given marketplace desire for innovation and high failure rates of new products that deviate from consumer expectations, it is important to gain insight into how to increase

4 consumer acceptance of such products. The literature on schema incongruity provides insight into moderate incongruity, but is silent on the question of how to enhance consumer perceptions of extreme incongruity. Theorizing by Mandler (1982) provides an understanding of the challenges related to extreme incongruity. He proposed that the processing that results from different degrees of congruity of a new item with an existing category schema influences evaluation of the new item. He proposed that congruent items conform to expectations and thus are not arousing, resulting in mildly positive evaluations due to familiarity (e.g., Tesser 1978). Moderate incongruity, however, evokes arousal as the consumer elaborates in attempting to resolve the incongruity. Because the moderately incongruent new item shares associations and connections with existing schema, the consumer is able to resolve the incongruity; the process of resolution is proposed to lead to stronger positive evaluation. Extreme schema incongruity, however, conflicts with existing schema knowledge and thus is difficult to resolve. Because of the lack of resolution, extremely incongruent items are less positively evaluated than moderately incongruent options. An implication of this theorizing is that new products that are extremely incongruent with consumers expectations are likely to receive lower evaluations than new products that are moderately incongruent with consumers expectations. Consumer research supports Mandlers theorizing, showing an inverted-U relationship such that moderately incongruent new products are often evaluated more positively than either congruent or extremely incongruent options (e.g., Maoz and Tybout 2002; Meyers-Levy, Louie and Curren 1994; Meyers-Levy and Tybout 1989; Peracchio and Tybout 1996) unless other factors, such as risk, limit enjoyment of resolution (e.g., Campbell and Goodstein 1999). Though not the focal domain of the current research, a body of work on brand extensions sounds a similar caveat: New products that depart more radically from

5 consumers notions of the parent brand BMW camera, Frito-Lay cereal, Levis business suit are evaluated less favorably than extensions that are moderately incongruent BMW lawnmower, Frito-Lay crackers, Levis casual pants (Aaker and Keller 1990; Park, Milberg and Lawson 1991). Overall, we see that new products that are extremely incongruent from consumers expectations are unlikely to be positively evaluated. Key to Mandlers theorizing and the work that followed is the idea that the lower evaluation of extremely incongruent as compared to the more positive evaluation of moderately incongruent options is driven by ability to resolve the incongruity. Consumers evaluate extremely incongruent products unfavorably because they are unable to resolve the departure from expectations and evaluate moderately incongruent options positively when they are able to resolve the incongruity (e.g., Campbell and Goodstein 1999; Maoz and Tybout 2002; MeyersLevy and Tybout 1989; Peracchio and Tybout 1996). Conceptualizing the problem of new product acceptance within this schema-incongruity framework provides a theoretical foundation for understanding how to overcome resistance to extremely incongruent new products. That is, we propose that facilitating incongruity resolution can increase evaluations of extremely incongruent new products. Specifically, we hypothesize that enhancing cognitive flexibility will lead to higher evaluations of extremely incongruent products by boosting consumers ability to resolve extreme incongruity. Our identification of how to increase evaluations of extremely incongruent options offers important contributions to both the schema congruity and the new product acceptance literatures. In the following section, we discuss sources of incongruity in new products to clarify our focus and contribution. We then discuss cognitive flexibility and how it can influence evaluations of extremely incongruent new products. This leads to a discussion of factors that

6 increase cognitive flexibility. We employ three different manipulations of cognitive flexibility in four studies in order to provide convergent evidence for our hypothesis that increased cognitive flexibility leads to more positive evaluations of extremely incongruent new products. POSITIONING AND SOURCES OF INCONGRUITY Two important aspects of product positioning answer the questions: 1), what is it? by providing a frame of reference; and 2) what of it? by providing a point of difference (Keller, Sternthal and Tybout 2002). Both frame of reference and points of difference can be sources of incongruity. We draw this distinction to clarify that, whereas much of the extant research on new product acceptance focuses on the first question, examining category membership that is incongruent with expectations, the focus of our research is the second question. Existing research on really new products contributes important understanding of the first source of new product failure and ways to enhance consumer acceptance. For example, research shows that when a new product is difficult to categorize, consumer evaluations can be improved by facilitating inferences from multiple categories (Gregan-Paxton et al. 2005) and analogical reasoning (Gregan-Paxton et al. 2002; Moreau, Markman and Lehmann 2001; Roehm and Sternthal 2001), and providing opportunities for mental simulation (Hoeffler 2003; Zhao, Hoeffler and Dahl 2009). These approaches facilitate category understanding and hence enhance evaluations of the new product. Our research focuses on the second aspect of new product positioning, complementing the existing research by examining new product incongruity that arises from the novelty of a differentiating benefit. While providing a point of difference is critical to new product success, consumers often have difficulty appreciating the benefit provided by a product attribute that is extremely incongruent from their expectations. In these cases, consumers may understand the

7 category membership, but have difficulty reconciling the extremely incongruent attribute. For example, consumers understood that Crystal Pepsi was a soft drink, but the colorless nature of the product was incongruent with expectations for a cola and many consumers had difficulty understanding the benefit of the attribute. We contribute to the literature by exploring how to increase consumer response to new products that include differentiating attributes that are extremely incongruent with consumer expectations. Drawing from the literature showing that the ability to resolve moderate incongruity leads to positive evaluations of moderately incongruent products, we propose that consumer evaluation of a new product with an extremely incongruent attribute or benefit can be increased by facilitating resolution of the incongruity. We next propose that cognitive flexibility can lead to increased resolution of extreme incongruity. COGNITIVE FLEXIBILITY AND INCONGRUITY RESOLUTION In order to positively evaluate a product with an incongruent attribute, a consumer needs to achieve insight into the benefit provided by the attribute. When an attribute does not fit with the consumers schema, the consumer must engage in processing that results in connections between disparate schemata in order to understand the attribute and resolve the incongruity. We thus propose that cognitive flexibility, such that a multiplicity of perspectives and information can be considered and held in mind for judgment (e.g., Isen 2001), increases the probability of resolution of extreme incongruity. The cognitive flexibility to consider multiple facets increases the likelihood of making a connection such that the consumer can understand the extremely novel attribute, reconciling it with the product schema. Cognitive flexibility facilitates the consideration of associations that extend beyond concepts that are strongly linked to the product category. We propose that increased cognitive flexibility enhances the ability to resolve

8 incongruity, leading to more positive evaluation of an extremely incongruent option than without an increase in cognitive flexibility. Prior research on moderate incongruity provides some support for our proposition. Research shows, for example, that people who score high on dogmatism, tending to be closed to new information and perspectives, are less likely to rate moderately incongruent options favorably than less dogmatic people (Meyers-Levy and Tybout 1989). Similarly, the positive evaluation of moderately incongruent options does not appear when task involvement is low, such that flexible processing of information is unlikely (Maoz and Tybout 2002). These results suggest that some amount of cognitive flexibility is necessary to resolve even moderate incongruity. This lends support to the idea that increasing cognitive flexibility can enhance resolution of extreme incongruity, leading to more positive evaluations, Thus, we propose that cognitive flexibility moderates the relationship between incongruity and evaluation such that cognitive flexibility enhances evaluations of extremely incongruent new products. Proposition 1 formalizes our view on the role of cognitive flexibility. P1: Cognitive flexibility moderates the effect of incongruity on product evaluations such that evaluations of an extremely incongruent product will be more favorable when the consumer is, versus is not, cognitively flexible. Based on this proposition, we hypothesize that factors that foster cognitive flexibility can heighten evaluation of products that introduce attributes perceived to be extremely incongruent for the category. Identifying multiple ways of increasing cognitive flexibility and showing a commensurate increase in evaluation of extremely incongruent new products will provide convergent evidence for the proposed process underlying enhanced consumer evaluations. We

9 next discuss three factors that prior literature suggests increase consumers cognitive flexibility: positive (vs. neutral) affect, a future (vs. past) frame and a prime (vs. no prime) to think broadly. Positive Affect and Cognitive Flexibility A significant body of research has documented that positive affect can facilitate cognitive flexibility (e.g., Estrada et al. 1997; Isen 2001; Isen et al. 1985; Isen and Daubman 1984; Isen et al. 1987). For example, Isen et al. (1987) showed that people in a positive affective state performed better than people in a negative or neutral state on tasks that required creative problem-solving involving the ability to see the relatedness in divergent stimuli and identify connections in a purposeful way. Similarly, Isen and Daubman (1984) found that people experiencing positive affect tended to categorize stimuli more inclusively. Evidence likewise suggests that positive affect fosters greater openness to new information (Bakamitsos 2006; Roehm and Sternthal 2001), reduces the tendency to anchor prematurely (Estrada et al. 1997), enhances evaluations of brand extensions that depart from the parent brand (Barone, Miniard and Romeo 2000), and broadens consideration sets (Kahn and Isen 1993). Positive affect additionally leads to more relaxed and exploratory (Clore, Schwarz and Conway 1994) and more abstract, higher-level (Labroo and Patrick 2009) processing. Based on the strong support that positive affect can lead people to think more flexibly, increasing the likelihood of making novel associations and the ability to relate divergent materials in a useful way, we hypothesize that positive, relative to neutral, affect will increase the ability to resolve extreme incongruity, leading to more favorable evaluation of an extremely incongruent product. H1: Positive affect moderates the effect of incongruity on product evaluations such that evaluations of an extremely incongruent product will be more favorable when the consumer is experiencing positive versus neutral affect.

10 Temporal Frame and Cognitive Flexibility Recent findings suggest a second factor can influence cognitive flexibility and the breadth of information used in evaluations: whether the information is cast in the future versus the past. Jung Grant and Tybout (2008) find that people contemplating a future event are more likely to incorporate multiple sources of information than when thinking of a past event, in which case evaluations tend to be based on a single, salient cue. This work suggests that a future frame expands the information that receives consideration, leading to greater likelihood that the commonalities among disparate exemplars will be taken into account. Thus, we hypothesize that, by facilitating connections that lead to incongruity resolution, a future, relative to past, frame will lead to more favorable evaluation of an extremely incongruent product. H2: Temporal frame moderates the effect of incongruity on product evaluations such that evaluations of an extremely incongruent product will be more favorable when information is in a future versus past frame. Priming Cognitive Flexibility In addition to examining factors that give rise to cognitive flexibility (i.e., positive affect and a future frame), we also prime cognitive flexibility. Although there is no single definition, cognitive flexibility includes the ability to consider and hold in mind a multiplicity of perspectives and alternatives (see Isen 2001 for a review; c.f., Murray et al. 1990). Drawing from this, we propose that instructions to consider multiple aspects will engender more flexible cognition, fostering resolution, and thus more positive evaluations of extreme incongruity. H3: A cue to consider multiple perspectives moderates the effect of incongruity on product evaluations such that evaluations of an extremely incongruent product will be more favorable when the consumer is cued versus not cued.

11 OVERVIEW OF THE STUDIES The present research takes two approaches to exploring the proposition that cognitive flexibility increases evaluation of extreme incongruity. The first is a consumer-driven approach entailing interventions that enhance consumers cognitive flexibility so that they can make sense of extreme incongruity, leading to more positive evaluations. Thus, the first two studies test the role of positive affect (measured in Study 1 and manipulated in Study 2) in providing the cognitive flexibility that facilitates greater favorability toward extremely incongruent products. The second study also examines whether the resolution of the extreme incongruity mediates the effect of positive affect on the favorable evaluation of the extremely incongruent product. In Study 3, we manipulate temporal frame to examine the extent to which a future frame stimulates cognitive flexibility, thereby enhancing extremely incongruent product evaluations. The second approach is message-driven; ad copy provides a rationale for the incongruent attribute. This enables examination of whether higher evaluations stem from the enjoyment that results from resolving the incongruity, as previously theorized, or whether they are due to the persuasive impact of gaining insight into the incongruity. Therefore, we vary the availability of a benefit rationale for the extreme incongruity and test whether the presence or absence of a rationale affects evaluations when participants have been primed to think flexibly versus not primed. STUDY 1 The purpose of the first study was to examine whether positive affect moderates the impact of incongruity on new product evaluations. Evidence that respondents experiencing positive affect provide more favorable evaluations of an extremely incongruent product would

12 support our notion that positive affect facilitates incongruity resolution. We manipulated new product congruity and measured affect to examine the effects of these variables on evaluations. Stimuli Development Following Meyers-Levy and Tybout (1989), we developed three variations of a digital alarm clock with increasingly distant attributes. The congruent clock had an easy-to-read LED display, a snooze function, and adjustable volume. The moderately incongruent clock included an automatic Daylight Savings Time change function, a perpetual calendar, and a one-week weather forecast. The extremely incongruent clock was described as having voice-recognition technology, in addition to the Daylight Savings Time function and weather forecast. Participants and Procedure Sixty undergraduates in two sections of a marketing class read one of three product descriptions and evaluated it on three 9-point scales anchored by unfavorable/favorable, unappealing/appealing, and bad/good, with higher values indicating more positive evaluation ( = .93). Participants then rated the perceived incongruity of the product on two items anchored by atypical/typical and unusual/usual ( = .94), with higher values indicating greater perceived congruity. Affect was measured by having participants rate 10 unfamiliar words (e.g., ianthine, solferino) on 7-point scales anchored by unpleasant/pleasant and averaging the ratings; positive affect leads to higher ratings of unfamiliar words (Isen et al. 1985). The class section factor did not interact with any variables, so we collapsed across the sections for the analyses. Results Product evaluation. As expected, analysis yielded a main effect of product incongruity on evaluations (F(2, 57) = 13.28, p < .01). Replicating existing research, contrasts showed that the moderately incongruent clock was evaluated more favorably (M = 7.76) than both the congruent

13 (M = 5.60; F(2, 57) = 26.43, p < .01) and the extremely incongruent clock (M = 6.58; F(2, 57) = 7.71, p < .01). [Insert Table 1 around here] A marginal two-way interaction of product incongruity and affect ( = -1.27, t = -1.75, p = .08) qualified the main effect. Importantly, participants with higher affect scores rated the extremely incongruent product more favorably than did participants with lower scores. To explore the nature of the interaction, we compared evaluations of moderately and extremely incongruent products using a spotlight analysis at plus and minus one standard deviation from the mean of the affect score (Aiken and West 1991). This analysis revealed higher evaluations of the extremely incongruent product when affect was higher ( = 1.85, t = 2.76, p = .01). As expected, this difference did not emerge for evaluations of the moderately incongruent product ( = .58, t = 1.59, n.s.). Of note, higher affect participants rated the extremely incongruent product as favorably as the moderately incongruent one ( = .60, t = 1.14, n.s.). Participants with lower affect scores rated the moderately incongruent product more favorably than either the congruent ( = 2.07, t = 4.01, p < .01) or the extremely incongruent product ( = - 2.01, t = - 3.64, p = .01), replicating the inverted U-pattern observed in prior research. [Insert Figure 1 around here] Perceived schema incongruity. We next examined participants ratings of the perceived incongruity of the new products. There were two reasons for this analysis. First, we wanted to confirm that the new product descriptions manipulated perceived incongruity as intended. Second, we wanted to explore a potential alternative explanation for the observed pattern of evaluations. We propose that positive affect increases consumers flexible thinking, enhancing their ability to resolve extreme incongruity. Consumers perceive that the new product is

14 incongruent but are able to make sense of the new product. An alternative explanation that could produce the same pattern of evaluations is that positive affect signals that the environment is benign, allowing people to broaden their perspectives and pay attention to the big picture (Labroo and Patrick 2009). The big-picture view could increase categorization breadth by focusing attention on superordinate features, enhancing perceptions of similarity (Isen and Daubman 1984). If this were the case, perceptions of schema incongruity would be influenced by positive affect such that perceived incongruity would decrease as positive affect increased. We thus conducted a regression analysis with perceived schema incongruity as the dependent variable and product incongruity and affect as independent variables to examine the effects of the manipulations of incongruity and positive affect on the perception of incongruity,. Our analysis yielded only a main effect of product incongruity ( = -2.07, t = -10.29, p < .01) with no interaction. Contrasts revealed that the congruent product was rated as more congruent (M = 7.84) than the moderately incongruent product (M = 5.29), which was rated as more congruent than the extremely incongruent product (M = 3.92; all s > |1.59|, all ts > |2.71|, all ps < .01), supporting our congruity manipulation. Furthermore, contrasts at each level of product incongruity showed that perceived schema incongruity did not differ as a function of affect (all ps > .1). Taken together, our data suggest that perceived incongruity was successfully manipulated and that positive affect did not change perceptions of schema incongruity. Discussion Study 1 provides preliminary support for our primary hypothesis, demonstrating that affect moderated the effect of product incongruity on evaluations. Participants who were not experiencing positive affect evaluated the moderately incongruent product more favorably than either the congruent product or the extremely incongruent product, replicating the inverted-U

15 pattern found in prior research. Participants who were experiencing positive affect, however, evaluated the extremely incongruent product as favorably as the moderately incongruent product; positive affect attenuated the inverted-U pattern. Participants feeling positive affect evaluated the extremely incongruent product more favorably than did participants feeling less positive affect. Overall the results provide initial support that positive affect fosters cognitive flexibility, facilitating the resolution of extreme incongruity, and thus leading to higher ratings of the extremely incongruent product. The results also rule out a possible rival account. We find that positive affect does not influence ratings of perceived incongruity, a pattern that is incompatible with a big-picture explanation for the evaluations. While supportive of the proposed process, the data from Study 1 do not allow examination of the underlying resolution that we propose accounts for the increased evaluations of the extremely incongruent option. Therefore, the next study includes process-level measures. Additionally, because Study 1 measures rather than manipulates affect, we are unable to determine whether positive affect facilitated resolution or whether a successful resolution contributed to positive affect, a relationship first suggested by Mandler (1982). We manipulate affect in our next experiment to provide a cleaner test of the hypothesized causal relationship. STUDY 2 The primary objective of Study 2 is to provide evidence regarding the process by which positive affect leads to more favorable evaluation of extremely incongruent new products. Drawing on schema research (e.g., Meyers-Levy and Tybout 1989; Peracchio and Tybout 1996), we propose that resolution requires elaboration to reconcile the relationship between incongruent aspects of the product and active schema to make sense of the incongruity. In Study 2, we thus measure incongruity resolution by the participants ability to make sense of the new product

16 and examine whether our measure of resolution plays a mediational role in how manipulated positive affect enhances evaluation. Stimuli development. To increase ability to generalize, we developed and pretested new product stimuli (Appendix A). Participants (N=59) rated one of three products on two 7-point items anchored by atypical/typical and unusual/usual ( = .96); vitamin-fortified orange juice was perceived to be congruent (M = 5.71), vitamin-fortified coffee to be moderately incongruent (M = 3.71), and vitamin-fortified vodka to be extremely incongruent (M = 2.00). Differences among incongruity levels were significant (all ps < .01). Affect manipulation. Following a procedure used by Wright and Mischel (1982), affect was manipulated by asking participants to recall and write for 10 minutes about either an event that made them happy (positive affect condition) or one that made them bored (neutral condition). A pretest (N = 45, with 22 in the positive affect condition) verified the affect manipulation. Participants showed expected differences in feelings on four measures of positive affect (positive, exhilarated, good, happy, all Fs > 13, all ps < .01) and four neutral measures (bad, bored, unhappy, and neutral, all Fs > 11, all ps < .01). Participants and Procedure Participants were 125 undergraduates from an introductory marketing class in partial fulfillment of a course requirement. We conducted the experiment using a 2 (affect: positive vs. neutral) 2 (product incongruity: moderate vs. extreme) between-subjects design. (Because Study 1 successfully replicated and moderated the inverted-U across three levels of incongruity and our theoretical interest is in improving evaluations of extreme relative to moderate incongruity, we did not include congruent options in any of the rest of our studies.) Participants first wrote for 10 minutes about an event that made them either happy or bored as part of a study

17 of college students personal experiences. Then, as an ostensibly separate study, participants read a description of a new product and evaluated it on the same three 9-point items as used in Study 1 ( = .91). Perceived schema incongruity of the product was measured on the two pretest items ( = .82). Then participants were asked to what extent the new product made sense to them on a 7-point scale, anchored by makes no sense and makes sense. Results Perceived schema incongruity. Examination of rated product incongruity with a 2 (affect) 2 (incongruity) analysis of variance yielded only a main effect of incongruity (F(1, 121) = 15.43, p < .01), indicating that the incongruity manipulation worked as intended. Participants rated the moderately incongruent product, vitamin-fortified coffee, as more congruent (M = 3.44) than the extremely incongruent, vitamin-fortified vodka (M = 2.55; F(1, 123) = 15.27, p < .01). Importantly, there were no differences in perceived incongruity between the neutral and positive affect conditions across levels of product incongruity. Ratings of the incongruity of vitaminfortified coffee (M = 3.72) and vitamin-fortified vodka (M = 2.48) were no different for neutral than positive-affect respondents (Mcoffee = 3.17; F(1, 121) = 2.84, p = .09; Mvodka = 2.62; F(1, 121) =.19, p = .66; see Table 1). Note that while the contrast for the moderately incongruent product approaches significance, the direction of the comparison is opposite to what would be predicted by the big-picture account; the moderately incongruent product was perceived as directionally less congruent in the positive affect condition. As in Study 1, the adequacy of the big-picture explanation (Labroo and Patrick 2009) to account for our results appears unpromising. Product evaluation. Our analysis revealed the predicted interaction of product incongruity and affect on evaluation (F(1, 121) = 6.15, p = .02). Consistent with our hypothesis, vitamin-fortified vodka was evaluated more favorably in the positive-affect condition (M = 6.95)

18 than in the neutral-affect condition (M = 5.19; F(1, 121) = 12.38, p = .01). For vitamin-fortified coffee, however, there was no effect of affect (Mpositive = 6.19, Mneutral = 6.19; F < 1). Furthermore, in the positive-affect condition, the moderately incongruent (M = 6.19) and the extremely incongruent products (M = 6.95) were equally favored (F(1, 121) = 2.35, p = .13). In the neutral-affect condition, the moderately incongruent coffee (M = 6.19) was rated more favorably than the extremely incongruent vodka (M = 5.19; F(1, 121) = 3.91, p = .05; see Table 1), replicating earlier research. Taken together, these data support H1. Mediated moderation. To understand the underlying process, we examined whether the incongruity x affect effect on product evaluation was mediated by incongruity resolution. Following the procedure outlined in Muller et al. (2005), we tested whether the moderated effect was mediated by the makes-sense measure. (See equations below and least squares regression results in Table 2). (1) (2) (3) DV = 10 + 11 IV + 12 MO + 13 IV*MO + 1 ME = 20 + 21 IV + 22 MO + 23 IV*MO + 2 DV = 30 + 31 IV + 32 MO + 33 IV*MO + 34 ME + 35 ME*MO + 3

Note: DV(dependent variable) = product evaluation, IV(independent variable) = product incongruity, MO(moderator) = affect, ME(mediator) = makes-sense

[Insert Table 2 here] Results from the first equation replicated the ANOVA results, showing a main effect of product incongruity qualified by a two-way interaction of product incongruity and affect. The second equation supported the same pattern of effects for the makes-sense measure. There was a main effect of product incongruity qualified by a two-way interaction of product incongruity and affect. In the third equation, the coefficient for the product incongruity affect interaction was not significant and was reduced from equation 1 (from 1.75 to .82) while makes-sense significantly predicted product evaluation. Further, examination of the coefficients reveals that

19 the effect of product incongruity on makes-sense depends on affect (23 0, and the average partial effect of makes-sense on evaluation (i.e., 34 is nonzero; see Figure 2). [Insert Figure 2 here] We also used a bootstrap analysis to assess the indirect effect of product incongruity x affect (using the INDIRECT SPSS macro; Preacher and Hayes 2008). This revealed a positive (.87) and significant mean indirect effect, with a 95% confidence interval excluding zero (.146 to 1.71). The results indicate that the moderation (by affect) of the residual direct effect of product incongruity on evaluation is mediated by incongruity resolution (i.e., makes sense). Discussion In summary, our results replicate Study 1, showing that affect moderates the relationship between incongruity and new product evaluations; positive affect increased the evaluation of an extremely incongruent product relative to neutral affect. Furthermore, the results of Study 2 provide process-level insight into the role of incongruity resolution in mediating the relationship between positive affect and new product evaluations. By manipulating affect in Study 2, we were also able to rule out the possibility that incongruity resolution elevated participants affect, rather than affect affecting resolution. These results strengthen our view that cognitive flexibility facilitates incongruity resolution, leading to more positive evaluations of an extremely incongruent product. To further test that the effects are due to cognitive flexibility as opposed to some other aspect of affect we investigate two additional cognitive flexibility manipulations in the next two studies to test for convergent evidence. STUDY 3 Study 3 examined a second variable that increases cognitive flexibility to test whether the effects of positive affect observed in Studies 1 and 2 converge with an additional manipulation of

20 cognitive flexibility. Recent findings suggest that people use information more comprehensively when they evaluate a future rather than a past event (Jung Grant and Tybout 2008). Thus, we expect that a future frame will increase cognitive flexibility, helping consumers draw on more information to resolve the extreme incongruity, and thereby enhancing evaluations. A past frame fosters a narrow focus, and is not expected to encourage flexible thinking nor boost evaluations. Similar results for temporal frame as found for affect would support our interpretation that cognitive flexibility is the construct at work. Method In Study 3, 149 undergraduates participated in partial fulfillment of a course requirement. The experiment was a 2 (temporal frame: future vs. past) 2 (product incongruity: moderate vs. extreme) between-subjects design. We used the same product stimuli as in Study 2 and manipulated temporal frame by describing the product launch as a past or future event (adapted from Jung Grant and Tybout 2008). Participants evaluated the product ( = .91), rated the products perceived schema incongruity and indicated their ability to make sense of the product on the same measures as Study 2. Results Perceived schema incongruity. Participants perceived vitamin-fortified coffee as more congruent (M = 3.51) than vitamin-fortified vodka (M = 2.59; F(1, 147) = 15.93, p < .01). There were no differences in perceived schema incongruity as a function of temporal frame across either moderate (Mpast = 3.55 vs. Mfuture = 3.46; F(1, 145) < 1, n.s.) or extreme (Mpast = 2.57 vs. Mfuture = 2.61; F(1, 145) < 1, n.s.) incongruity. Thus, the incongruity manipulation was successful. Product evaluation. A 2 (temporal frame) 2 (product incongruity) ANOVA yielded a main effect of temporal frame (F(1,145)=7.16, p<.01), which was qualified by a two-way

21 interaction (F(1, 145) = 8.44, p < .01), indicating that temporal frame moderates the impact of product incongruity on evaluation. As expected, vitamin-fortified vodka was evaluated more favorably when the launch was in the future (M = 7.11) than the past (M = 5.51; F(1, 145) = 15.68, p < .01), whereas vitamin-fortified coffee was rated similarly in the future (M = 6.25) as in the past (M = 6.32; F(1, 145) < 1, n.s.). Though not anticipated, in the future condition, the extremely incongruent vodka was evaluated more positively (M = 7.11) than the moderately incongruent coffee (M = 6.25; F(1, 145) = 4.39, p < .05). In the past condition, the moderately incongruent product was rated more favorably (M = 6.32) than the extremely incongruent (M = 5.51; F(1, 145) = 4.05, p < .05; see Table 1). In sum, this pattern conceptually replicates Study 2. Mediated moderation. In order to gain insight into the underlying process, we tested mediated moderation with the three equations (Muller et al. 2005) and bootstrapping (Preacher and Hayes 2008) methods described in Study 2 (see Table 2). The results show that the makessense measure mediates the interaction of product incongruity and temporal frame. Specifically, 1) the effect of product incongruity on product evaluation is moderated by temporal frame (equation 1), 2) the effect of product incongruity on makes-sense is moderated by temporal frame (equation 2), and 3) the product incongruity temporal frame effect on evaluation is reduced while makes-sense is highly significant (equation 3). Further, examination of coefficients revealed that temporal frame moderates the path from product incongruity to makessense. Finally, the bootstrap test of the indirect effect of product incongruity x temporal frame was positive (.74) and significant, with a 95% confidence interval excluding zero (.17 to 1.60). These analyses demonstrate that the temporal frame moderation of the residual direct effect of product incongruity on evaluation is mediated by incongruity resolution. Discussion

22 Drawing on theorizing that predicts differences in cognitive flexibility by temporal frame, we find that evaluations of an extremely incongruent product are enhanced when it is described as a future (versus past) launch. Similar to positive affect, the future frame manipulation facilitated resolution, yielding more favorable evaluations. Together, Studies 1-3 support our hypothesis that cognitive flexibility, whether arising from positive affect or a future frame, increases the likelihood that consumers will resolve extreme incongruity leading to enhanced evaluations. Cognitive flexibility affects the ability to reconcile an innovation that does not fit with existing schema, and resolution, in turn, increases evaluations. Having established that cognitive flexibility affects the ability to resolve extreme incongruity and that resolution results in more favorable evaluations of extremely incongruent new products, we now turn to the question of why resolution of the extremely incongruent new product results in more favorable judgments. Prior literature on moderate incongruity suggests that positive affect from the process of resolution (i.e., enjoyment) lifts attitudes and subsequent evaluation (Mandler 1982; Maoz and Tybout 2002; Meyers-Levy and Tybout 1989; Peracchio and Tybout 1996). However, to our knowledge, there is no strong evidence that resolution produces positive affect that drives evaluations. Peracchio and Tybout (1996) examine pretaste affect and posttaste affect, but these are, in fact, evaluation, measured by how appealing, tasty, desirable, high quality, and appetizing the subjects perceived the stimulus (cake) to be. Maoz and Tybout (2002) provide directional evidence that levels of incongruity and involvement influence task satisfaction but do not show mediation. Furthermore, when participants thoughts were analyzed, no difference in positive and negative thoughts (e.g., Meyers-Levy and Tybout 1989; Peracchio and Tybout 1996) suggests that affect valence may not differ by resolution.

23 We propose that a second way in which resolution could lead to more positive evaluations is by a more cognitive route. The outcome of resolution is insight into or understanding of the new product benefits. That is, making sense of the incongruity results in understanding; this insight alone could drive higher ratings. We propose that insight into why an incongruent product makes sense, rather than the rewarding feelings from resolution, drives more favorable evaluations. To compare the two accounts, we manipulate cognitive flexibility and vary the presence of a benefit rationale in advertising copy for an extremely incongruent new product. We present the benefit rationale as advertising copy, giving participants a reason for the extreme incongruity such that they gain insight into why the new product attribute makes sense without personally experiencing resolution. Because each account makes different predictions for effects of benefit rationale, this design allows us to explore the two ways in which resolution could lead to more positive evaluations. The existing process-satisfaction account predicts that positive affect from resolution drives more positive evaluations. This suggests that cognitively flexible consumers, who are able to resolve on their own, will rate the product less favorably when ad copy presents a benefit rationale, than when no such rationale is provided; this is because giving a benefit rationale to cognitively flexible consumers deprives them of the pleasure of the process of resolving. Furthermore, providing people who are not cognitively flexible with the answer would not increase evaluations because they would not gain affect arising from experienced resolution. The proposed insight-based account predicts a different pattern of effects such that evaluations of cognitively flexible consumers will not be affected by the presence or absence of a benefit rationale. Whether they make sense of the product by thinking flexibly or by having the

24 insight provided by a rationale, cognitively flexible consumers will evaluate the extremely incongruent product relatively favorably. Evaluations by consumers who are not cognitively flexible will be increased by the presence of a benefit rationale. As in the first three studies, consumers who are not cognitively flexible will not resolve the extreme incongruity, and thus evaluate the extremely incongruent product relatively unfavorably. The presence of a benefit rationale will provide insight, allowing cognitively inflexible consumers to make sense of the extreme incongruity. Thus, we propose that cognitively inflexible consumers will evaluate an extremely incongruent product more favorably in the presence, relative to absence, of a benefit rationale in the advertising copy. Proposition 2 formalizes the insight-based account. P2: The effect of cognitive flexibility on evaluation of an extremely incongruent product is moderated by the presence of a benefit rationale. With cognitive flexibility, evaluation of an extremely incongruent product will be relatively positive regardless of the presence or absence of a benefit rationale. Without cognitive flexibility, evaluation of an extremely incongruent product will be higher when a benefit rationale is present versus absent. STUDY 4 The primary goal of Study 4 is to examine whether resolution facilitates more favorable evaluations due to process satisfaction or due to insight per se. In addition, we primed cognitive flexibility to further corroborate that it is cognitive flexibility that drives the effects of the psychological variables of positive affect and temporal frame found in the previous studies. Method As part of a course requirement, 134 undergraduates participated in a 2 (cognitive flexibility: no prime vs. flexible prime) x 2 (advertising copy: benefit rationale absent vs. benefit rationale present) between-subjects study. Given that cognitive flexibility includes the ability to

25 consider multiple sources of information and alternatives, we asked participants to think of either one explanation (no cognitive-flexibility prime) or multiple possible explanations (cognitiveflexibility prime) for an ambiguous situation. Participants read a short story adapted from a flexible thinking exercise in which a can of cola explodes inside a car on a hot day. Participants in the no cognitive-flexibility condition rated the likelihood of one given explanation for the explosion. In the cognitive-flexibility condition, participants generated as many explanations for the explosion as they could. Next, in an ostensibly unrelated study, all participants read about an extremely incongruent new product, vitamin-fortified vodka (same description as in Studies 2 and 3). While this was all that participants in the benefit rationale-absent condition read, those in the benefit rationale-present condition, also read the following additional ad copy, Why produce a vitamin-fortified vodka? Vodka is dehydrating; replacing lost vitamins can help people feel better. Participants then completed the same measures used in prior studies for product evaluation ( = .89), perceived schema incongruity ( = .89), and the extent to which the new product made sense. Lastly, participants responded to five 7-point measures of affect anchored by cheerful/depressed, sad/joyful, annoyed/pleased, happy/unhappy, and good/bad ( = .88). Results and Discussion Perceived schema incongruity. As expected, a 2 (cognitive flexibility) 2 (advertising copy) ANOVA of the manipulation check yielded no significant differences. Likewise, none of the contrasts was significant, indicating that neither the cognitive flexibility prime (Mflexible = 2.66 vs. Mnot flexible = 2.47; F(1, 130) < 1) nor the rationale (Mpresent = 2.54 vs. Mabsent = 2.57; F(1, 130) < 1) impacted participants perceptions of the vitamin-fortified vodkas incongruity. The low means and lack of effects support successful manipulation of extreme incongruity.

26 Product evaluation. Evaluations were examined with a 2 (cognitive flexibility) 2 (advertising copy) ANOVA, revealing a main effect of cognitive flexibility (F(1, 130) = 3.83, p = .05) qualified by an advertising copy cognitive flexibility interaction (F(1, 130) = 4.18, p = .04; Figure 3). In support of P2, when participants were primed to think flexibly, evaluations of the vitamin-fortified vodka were equally positive regardless of the rationales presence (M = 6.71) or absence (M = 6.86; F(1, 130) < 1). Participants without the cognitive flexibility prime, however, evaluated the vitamin-fortified vodka more favorably in the presence (M = 6.74) than absence (M = 5.70; F(1, 130) = 7.04, p < .01) of a rationale. The low evaluation of the extremely incongruent new product provided by the non-cognitively flexible participants in the no-rationale condition replicates prior studieswithout a rationale, those who are not primed to think flexibly do not resolve the extreme incongruitywhile insight provided by the rationale led to higher evaluations. Also consistent with our interpretation, when there was no rationale, flexible thinking led to higher evaluations of the vitamin-fortified vodka (M = 6.86) than when flexible thinking was not primed (M = 5.70; F(1, 130) = 7.69, p < .01). In the presence of a rationale, however, the vitamin-fortified vodka was equally favored, regardless of cognitive flexibility (Mflexible = 6.71 vs. Mnot flexible = 6.74; F(1, 130) < 1). [Insert Figure 3 here] Affect. Participants rated affect was also examined. Consistent with our insight-based account, a 2 (cognitive flexibility) 2 (advertising copy) analysis yielded no significant results. We found none of the contrasts to be significant, indicating that participants affect was not influenced by the presence or absence of the benefit rationale (Mflexible-rationale = 4.23, Mnot flexiblerationale

= 4.12, Mflexible-no rationale = 4.17, Mnot flexible-no rationale = 4.11, all Fs <1).

27 Mediated moderation. Given that affect from the resolution process does not explain the evaluation results, we tested whether making sense of the product, whether through own resolution or a rationale provided in the copy, mediated the interaction between cognitive flexibility and ad copy, following the same methods described in the previous studies. Regression results (see Table 2) showed: 1) an effect of cognitive flexibility on product evaluation moderated by advertising copy (equation 1); 2) an effect of cognitive flexibility on makes-sense moderated by ad copy (equation 2); and 3) that the effect of the cognitive flexibility ad copy interaction on evaluation was reduced while makes-sense significantly predicted product evaluation (equation 3). Further, the bootstrap test revealed a negative (-.62) and significant indirect effect, with a 95% confidence interval excluding zero (-1.37 to -.08). Taken together, the analyses provide strong evidence that the moderation of the residual direct effect of product incongruity on evaluation is mediated by incongruity resolution. In summary, the results provide additional support that cognitive flexibility, in this study manipulated with a prime instruction, facilitates resolution, leading to more positive evaluations of extremely incongruent new products. By using an instruction to consider multiple possibilities, this study provides convergent evidence that positive affect (Studies 1 and 2) and future frame (Study 3) facilitated resolution by increasing cognitive flexibility. Importantly, Study 4 results further demonstrate that insight, not positive affect generated from the resolution process, drives the more positive evaluations. GENERAL DISCUSSION Our findings extend work on schema incongruity by moving beyond positive evaluation of moderately incongruent and negative evaluation of extremely incongruent options, to identify conditions under which extremely incongruent options can be evaluated positively. Like Meyers-

28 Levy and Tybout (1989) and many others, we find relative preference for moderately incongruent new products and disfavor for extremely incongruent ones under typical processing conditions. Additionally, we propose and demonstrate that increasing cognitive flexibility enables consumers to make sense of incongruity, which results in more positive evaluations of extremely incongruent new products. Specifically, eliciting cognitive flexibility by positive affect (Studies 1 and 2), a future frame (Study 3), and prior generation of multiple explanations for a situation (Study 4), increased participants ability to resolve extreme incongruity such that extremely incongruent new products were evaluated more favorably than when participants experienced less positive affect, focused on a past frame, or did not consider alternatives. In fact, under each manipulation of cognitive flexibility, participants rated the extremely incongruent products at least as favorably as the moderately incongruent ones. This work is the first to show ways to increase evaluations of extremely incongruent new products. This work provides additional clarification of the role of resolution in the evaluation of incongruent new products. First, we demonstrate that participants ability to make sense of, or resolve, incongruity systematically influences product evaluations. Second, we offer evidence in Study 4 that the understanding provided by resolution, whether self-generated or provided by the marketer, is critical to fostering acceptance. This finding sheds light on a question raised in prior work. Existing literature surmises that incongruity resolution is rewarding and that positive affect arising from the resolution process contributes to the favorableness of product evaluation. On the contrary, findings from Study 4 show that external provision of a benefit rationale resulted in equally positive evaluations of an extremely incongruent product, even though the insight was achieved without the process of resolving for oneself. It is the insight that the resolution yields, rather than positive affect arising from resolution that influences favorableness. Additionally, our

29 demonstration of the mediational role of incongruity resolution rules out the possibility that enhanced evaluations result because positive affect or future frame alters perceptions of extreme incongruity so that it is regarded as moderate incongruity; this limits the plausibility of a rival explanation drawn from the big-picture theory. Although our results indicate that process-based affect did not provide an incremental benefit to evaluations of extreme incongruity, care should be taken in generalizing this finding. Research shows that the affect generated by meta-cognitive experience serves as the primary basis for judgments in some instances (e.g., Tybout et al. 2005; Wanke, Bless and Biller 1996) and that the big-picture theory accounts for some evaluations (Labroo and Patrick 2009). Furthermore, Tybout et al. (2005) suggest that people are less likely to base evaluations on process-based affect when relevant knowledge is inaccessible. It is plausible that relevant knowledge is less accessible when consumers reflect on extremely incongruent innovations, as compared to moderately incongruent new products. Thus, favorable evaluations of moderate incongruity could be based on affect, whereas positive judgments of extreme incongruity could be driven by content. This idea merits further testing. MANAGERIAL IMPLICATIONS This research has important implications for marketing managers. While innovation and new product introduction are important to business success, new products have a notoriously high failure rate. This research offers multiple potential methods for increasing new product acceptance. Demonstrating that positive affect, future frame, consideration of multiple alternatives and a benefit rationale increase evaluations of really new products suggests that managers should consider influencing each of these when introducing new products. First, managers might adopt marketing communications with positive emotional appeals, rather than

30 purely cognitive ones, when introducing incongruent new products. The ads that Apple used to introduce the iPod, for example, featured dancing silhouettes against brightly colored backgrounds with upbeat music focused on creating positive affect. Second, launch preannouncements, such that processing of a new product is in a future frame, could benefit the company when extreme incongruity is involved. Third, marketing communications for a new product launch could encourage consideration of multiple alternatives and perspectives such that consumers are more cognitively flexible as they consider the new product. Lastly, it appears that providing consumers with a benefit rationale could be a powerful tool for fostering more favorable evaluations. When launched in 1992, Crystal Pepsi announced its superiority without a benefit rationale. Advertising referenced taste, uniqueness, and modernity, but it did not provide a rationale that could help consumers resolve the incongruity. When Dyson launched the Air Multiplier, the firm offered the rationale that, unlike fans with blades, bladeless fans do not cause unpleasant air buffeting. Importantly, our research suggests that providing a compelling benefit rationale in communications about a new, incongruent product, is likely to increase consumer acceptance overall. This research offers guidance to firms pursuing growth through innovation. Instead of focusing on new product categorization (what is it?) and consumer learning, as many have, the present research addresses product innovations that involve an incongruent differentiated benefit (what of it?). Scant research has focused on the second of these important questions. Our work leverages the schema-congruity framework to provide increased understanding of the question of how to gain acceptance of new products that are counter to consumers expectations.

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37 FIGURE 1

Study 1: Spotlight Analysis

38

FIGURE 2

Mediated moderation model

Positive Affect

Makes Sense

Product Incongruity

Product Evaluation

39

FIGURE 3 Results of Study 4: Evaluation of Vitamin-Fortified Vodka as a Function of Benefit Rationale and Cognitive Flexibility

Higher values indicate more favorable overall evaluation on 1-9 scale.

39

40 TABLE 1

Summary of evaluation means by condition from Studies 1-3

Congruent Study 1 Positive affect (measured) Neutral affect (measured) Positive affect (manipulated) Neutral affect (manipulated) Future frame Past frame 5.82 5.38 Moderately Incongruent 8.1 7.46 6.19 6.19 6.25 6.32 Extremely Incongruent 7.5 5.46 6.95 5.19 7.11 5.51

Study 2

Study 3

Higher values indicate more favorable overall evaluation on 1-9 scale.

40

41 TABLE 2 Least Squares Regression Results for Mediated Moderation in Studies 2-4
Equation 1 (criterion PE) t -.991 -1.976* (11) 7.321E-15 .000 (12) 1.752 2.478** (13) Equation 2 (criterion MS) t -1.517 -3.600** (21) -.133 -.312 (22) 1.338 2.254* (23) Equation 3 (criterion PE) t .049 .107 (31) .568 .496 (32) .819 1.317 (33) .686 5.651** (34) -.085 -.453 (35) -.089 -.264 (31) -.483 -.486 (32) .941 1.990* (33) .718 7.021** (34) .036 .213 (35) .877 2.367* (31) -.950 -.990 (32) -.584 -1.142 (33) .438 3.578** (34) .284 1.614 (35)

Study 2

Predictors PI A PI x A MS MS x A

Study 3

PI TF PI x TF MS MS x TF

-.807 (11) -.066 (12) 1.665 (13)

-2.011* -.162 2.904**

-1.000 (21) .298 (22) 1.009 (23)

-3.031** .892 2.141*

Study 4

CF AC CF x AC MS MS x AC

1.159 (11) 1.039 (12) -1.185 (13)

2.774** 2.654** -2.044*

.645 (21) .950 (22) -1.087 (23)

1.787 2.810** -2.171*

PE = product evaluation, PI = product incongruity, A = affect, MS = makes sense, TF = temporal frame, CF = cognitive flexibility, AC = advertising copy, * p < .05. ** p < .01.

41

42 APPENDIX A PRODUCT DESCRIPTIONS USED IN STUDIES 2-4 Vitamin-Fortified Orange Juice [a congruent product] Founded over half a century ago, this respected company follows an uncompromised passion for the highest quality. The company is introducing a specially-formulated beverage. This enhanced orange juice is fortified with extra vitamins and omega-3. Made with the freshest oranges, this juice maintains world-class taste while including vitamins A and D and is a rich source of omega-3 EPA and DHA. Vitamin-Fortified Coffee [a moderately incongruent product] Founded over half a century ago, this respected company follows an uncompromised passion for the highest quality. The company is introducing a specially-formulated beverage. This enhanced coffee is fortified with extra vitamins and omega-3. Made from expertly roasted coffee beans, this coffee maintains world-class taste while including vitamins A and D and is a rich source of omega-3 EPA and DHA. Vitamin-Fortified Vodka [an extremely incongruent product] Founded over half a century ago, this respected company follows an uncompromised passion for the highest quality. The company is introducing a specially-formulated beverage. This enhanced vodka is fortified with extra vitamins and omega-3. Made from European potatoes, this vodka maintains world-class taste while including vitamins A and D and is a rich source of omega-3 EPA and DHA.

42