Optimal distinctiveness across revenue models: Performance effects of differentiation of paid and free products in a mobile app market
Keywords: 
Differentiation
Legitimacy
Machine learning
Optimal distinctiveness
Revenue models
Issue Date: 
1-Mar-2022
Publisher: 
Wiley
ISSN: 
1097-0266
Note: 
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License
Citation: 
van Angeren, J., Vroom, G., McCann, B. T., Podoynitsyna, K., & Langerak, F. (2022). Optimal distinctiveness across revenue models: Performance effects of differentiation of paid and free products in a mobile app market. Strategic Management Journal, 43( 10), 2066– 2100. https://doi.org/10.1002/smj.3394
Abstract
The optimal distinctiveness literature highlights a fundamental trade-off in product positioning within market categories: Products should be distinct to minimize competition, but similar to build legitimacy. Most recently, this research has focused on understanding sources of variance in the distinctiveness–performance relationship. We extend this literature with an examination of digital products and argue that the relationship depends on products' revenue models: We theorize the relationship is inverted U-shaped for paid products but U-shaped for free products, owing to heightened privacy concerns of free product customers. We further argue that this latter relationship becomes flatter for free products that provide greater monetization transparency by publishing a privacy statement or adopting a freemium revenue approach. Hypotheses are tested using a sample of 250,000-plus Apple App Store apps.
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