Category Expectations, Category Spanning, and Market Outcomes

Abstract

Abstract The growth of research on the cognitive origins of market performance has focused on the impact of categories as a primary cognitive mechanism by which exchange occurs. In this research, performance outcomes are typically reduced when firms and products fail to meet audiences’ expectations about membership into categories. The ensuing literature has focused on spanning categories as evidence of not meeting audience expectations while largely ignoring the specific study of expectations themselves. This chapter argues that expectations for market behavior are important in their own right, and can impact market outcomes even when categorical boundaries are respected. Using the market for engagement rings as a setting, I show how lack of adherence to expectations can both increase and decrease market value even as the engagement rings adhere to categorical boundaries. Rather than simply focusing on category spanning as evidence that audience expectations have not been met, the findings suggest that expectations should be considered explicitly, with implications for competitive strategy.