Study: Increasing product variety does not necessarily benefit company

Influencer marketing is not uncommon and many brands have been collaborating with influencers to promote products. However, customers are now able to tell whether a product endorsement is a sponsored content, or is purely based on high product quality. The Chinese University of Hong Kong's Business School has conducted research, examining how companies can tailor product variety to miximise influencer marketing. 

Entitled Opinion Leaders and Product Variety, the study was conducted by Liao Chenxi, assistant professor at CUHK Business School's department of marketing, in collaboration with professor Dmitri Kuksov of the University of Texas at Dallas. 

"With more alternatives available, it is more likely that an expert can find a variant that fits their personal preference, and post a positive product opinion," said Liao. 

She added that since consumers had expected that the quality would be higher when the expert opinion was positive, resulting in a higher willingness to pay a higher price.

It seems that increased assortment could benefit a company. However, when the number of product variants increases, consumers may expect that an expert can find a better fit. Such consideration would then reduce consumers' expectations of the product quality, which may lead to lower profits.

The researchers of this study have found out that there was a point beyond which increasing product variety had no significant benefits to a company.

Liao explained that there were two opposing forces when a company increased the variety. When product variety increased, it raised the probability of getting a positive expert opinion and therefore the product was recognised by consumers as of high quality. On the other hand, it also decreased certainty from the consumers that the product received a good review because of its inherent high quality.

She added, "The optimal number of product variants increases if the experts' unwillingness to provide a positive recommendation is higher." 

The research has also found that when a firm had a better understanding of how consumers would perceive the quality of its products, the firm with lower quality products might seek to hide its inferiority by limiting the information transmitted through expert opinions and mimicking the variety provided by a firm with a similar product but of a higher quality.

To promote products to opinion leaders also requires meticulous effort. Liao said that the promotion of a smaller number of products could make communications easier and clearer. When opinion leaders were more likely to be happy with a product regardless of its exact quality, a firm should offer a smaller product selection as well.

Lastly, consumers were unable to tell exactly how much of a positive product review as the product was suited to the reviewer's tastes. The situation is evolving as many websites are providing more detailed information regarding the reviewer's context. In these circumstances, the negative effect of having a large number of product variants will be diminished.