Large trade-in incentives negatively impact the size of upgrade consumers choose. Ownership time has a positive relationship with the size of upgrade consumers choose. Brand loyal consumers upgrade to a larger degree than non-loyal consumers. Advertising magnifies the size of upgrade that brand loyal consumers choose.

1. From:
Factors that Influence Upgrading
Durable Goods at Re-Purchase
A study of vehicle trade-ins
Miller, Wiles, and Park (2019)

2. From:From:
When consumers make a re-purchase, they
can upgrade, downgrade, or remain neutral
depending on how the replacement
purchase compares to the previously owned
good.
Miller, Wiles, and Park (2019)
2010 Honda Accord
MSRP = $21,055
2018 Chevrolet Spark MSRP
= $13,220
2018 Honda Accord
MSRP = $23,570
2018 Acura TSLX
MSRP = $33,000
Replacement
Purchases
Neutral
Trade-in
New Purchase Options

3. From:From:
 Trade-in characteristics:
 How long the previous product was owned.
 Trade-in incentives
 New purchase characteristics:
 Perceived switching costs: Brand loyalty
 Perceived benefits: Characteristics of the new purchase (styling, number of seats, quality
ratings, etc.)
 Aspects of the transaction controlled by marketers: Promotional efforts, such as incentives
and advertising.
What influences consumers upgrade
decision?
Miller, Wiles, and Park (2019)

4. From:From:
 A study of over 300,000 trade-in transactions from “Cash for
Clunkers”
 Data matched with:
 Kelley Blue Book Used Car Values
 JD Power
 Consumer Reports
 Gross income
 Brand advertising spending
Research study
Miller, Wiles, and Park (2019)

5. From:From:
2010 Honda Accord
MSRP = $21,055
Trade-in
Ownership time
Brand Loyalty
Brand Loyalty x
Advertising
Trade-In
Incentives
Results: What influences upgrading?
Miller, Wiles, and Park (2019)
2018 Chevrolet Spark MSRP
= $13,220
2018 Acura TSLX
MSRP = $33,000
Upgrade
Downgrade
Relationships

6. From:From:
 Ownership time: As ownership becomes exceedingly long,
consumers build up a positive mental account balance that they
feel they can use to splurge in the next purchase. Thus, as
consumers use their previously owned durable goods for longer,
they upgrade to a larger degree.
 Brand loyalty: Brand loyal consumers upgrade a larger degree
than non-loyal consumers.
 Brand loyalty x advertising: Advertising spending magnifies the
degree of upgrade that brand loyal consumers choose.
 Trade-in incentives: When trade-in incentives become much larger
than what the trade-in is worth, consumers save the extra money
and downgrade.
Results
Miller, Wiles, and Park (2019)

7. From:From:
 Although researchers have shown trade-in incentives accelerate replacement
purchases, managers should be hesitant to use them for two reasons.
1. Consumers view large trade-in incentives as assets that they prefer to keep
rather than spend. Thus, they upgrade to a lesser degree than with small trade-in
incentives.
2. Trade-in incentives shorten ownership time (by accelerating a repurchase) and
thus negate the positive impact of ownership time on upgrading.
 Firms can use ownership time as a segmentation variable to identify consumers
who will be more inclined to upgrade.
 Firms should maximize their efforts to create brand loyalty within their customer
base because these consumers tend to upgrade more.
 Further, if firms can find additional ways to advertise to loyal customers they can
magnify the size of the loyal customers’ upgrade.
Recommendations
Miller, Wiles, and Park (2019)