Customer Preference Signaling Mechanism In The Context Of Customer Participation In Product Innovation

With the intensification of market competition,product innovation,as an important strategy to improve firms' performance and gain competitive advantage,has been paid more and more attention by firms.However,in the traditional product innovation,due to the poor communication between firms and customers,the blind innovation of firms leads to frequent innovation failures.In order to improve the success rate of product innovation,firms introduce customers to participate in the process of product innovation,hoping to obtain consumers' preference information through communication with customers,and solve customers' demand problems from the perspective of customers.Due to the great difference between the way of consumers participation in product innovation and traditional product innovation,researchers pay attention to the to the phenomenon of customers participation in product innovation.At present,some studies on customers participation in product innovation,on the one hand,reveal consumers' participation motivation,and study the strategic interaction between firms and customers from the theoretical perspective under the condition of complete information;on the other hand,the relationship between customers participation and firms' performance is given based on specific samples(that is,the communication and interaction between customers and firms has a substantial impact on firms' product innovation performance).However,researchers are lack of attention to the problems of customer preference asymmetry,thus theoretical analyses do not answer "how firms gain consumers' real preference information(to determine enterprise's production and pricing decisions,and promote enterprise's innovation performance)through the interaction with customers.Therefore,under the premise of considering the information asymmetry of consumer preference,this paper uses the dynamic game model of incomplete information to study the following problems.(1)In the case that customers participate in the front-end stage of product innovation,can firms obtain consumers' real preference information(thus determining the production decisions and product pricing decisions)based on consumers' direct preference signals?(2)can the conclusion of the problem(1)be extended to other operation situations(e.g.,the situation of considering customer have bargaining power when customer participate in the back-end stage of product innovation and deliver the direct preference signal to the firm,the situation of consumer' effort acting as an indirect preference signal,and the situation of considering customer have bargaining power when customer participate in the front-end stage of product innovation and deliver the direct preference signal to the firm)?(3)Under what conditions are firms willing to build a coinnovation platform and introduce consumers to participate in product innovation(in the front-end stage of product innovation)?The main conclusions of this paper are as follows.Firstly,under different co-innovation operation conditions,firms can obtain customers' real preference information according to customers' direct preference signals.In the case of customers' participation in the front-end stage of product innovation,if the net utility of customers' participation is sufficiently high,customers will send direct preference signals consistent with their real preferences to convey their preference type,and firms can accurately judge customers' real preference types(and produce products matching customers' preferences).Considering that customers have bargaining power and participate in the back-end stage of product innovation,when customers' bargaining power is low and participation net utility is high,customers will send direct preference signals consistent with their real preferences to convey their preference type,and firms can accurately judge customers' real preference types(and produce products matching customers' preferences),to achieve this preference information transmission way the customers' participation net utility threshold decreases as bargaining power increases;But considering that customers have bargaining power and participate in the front-end stage of product innovation,to achieve this preference information transmission way the customers' participation net utility threshold increases as bargaining power increases.When customers' reputation cost is high enough,customers will send direct preference signals contrary to their real preferences to convey preference information.Secondly,as long as the new product cost is sufficiently high,for any given innovation level of new product samples,different preference type consumers implement different effort levels.firms can accurately reveal the customers' preference types according to consumers' efforts.Thus,the firm decide the production decision according to the type of consumers preference: when the new product sample's novelty is low,the firm produces old product instead of introducing innovative product;When the new product sample's novelty is medium,the firm produces the product according to the customer's preference;when the new product sample's novelty is high,the firm produces the new product and prices the product according to the type of customer preference.Thirdly,for any given bargaining power,when the firm anticipates that the customer will send the preference information by the signal which is consistent with his/her preference type: if the participation net utility is large enough,the firm builds the coinnovation platform(and introduces the customer participation in the front-end stage of innovation);if the participation net utility is not large enough but the prior probability of customers' preference for new products is very high,the firm builds the platform;otherwise,the firm do not build the platform.when the firm anticipates that the customer will send the preference information by the signal which is contray to his/her preference type,the firm will build the co-innovation platform when the prior probability(different from the previous one)is high enough.In summary,this thesis mainly has three innovative contributions as follows:(1)considering the information asymmetry of customers preference,this paper studies the customers' direct preference signal transmission mechanism,which makes up for the lack of attention on asymmetric information of consumer preference in existing co-innovation theories;(2)this paper verifies the feasibility of firms to reveal consumers' real preference type according to consumers' effort(as an indirect preference signal),thus enriching the customers' preference sharing mechanism and methods.(3)this paper analyzes the decision about constructing the co-innovation platformand the corresponding decision conditions.The result provides a reference for firms to make decisions about platform construction in practice.Meanwhile,it is helpful to resolve the controversy about the relationship between the customers participation and the firms' performance.