Marketers often attribute the premium charged on a luxury brand over a value brand to innovation in product form (Von Hippel 1986). One way of conveying this innovation is through the use of perceptual cues which use visual depiction of a product (Gregan-Paxton, Hoeffler, and Zhao 2005). Consequently, what we think of as high fashion or innovation in product form is essentially novelty in the perceptual cues of a product (Cox and Cox 2002) and it is known that moderate levels of novelty can increase complexity (or incongruity) of product design and is in general, favored by consumers (Cox and Cox 2002). However, despite the fact that novelty in form offered in high fashion or complex products is expected to bring value, we predict that novel designs are perceived as more favorable depending on their positioning as luxury (value) brands. In detail, we expect that value brands more than luxury brands benefit from novelty of form and that peripheral cues in product design informs a sense of brand authenticity which drives preferences. Past research showed that a product’s positioning in advertising moderates the effect of schema incongruence on product evaluation (Noseworthy and Trudel 2011). When products with a moderately incongruent design are positioned based on their functionality, they are evaluated more favorably. Conversely, when products are positioned based on experiential dimensions, this effect is reversed, and moderately incongruent designs are evaluated less favorably. We believe that these relationships can be explained using the perception of hedonic or utilitarian benefits offered by the product. In general, consumers are motivated by utilitarian concerns until they think that they have earned the right to indulge in hedonistic consumption (Kivetz and Simonson 2002). With congruent products, consumers may infer functionality from memory, and they are therefore liberated to indulge in hedonic pleasure. With incongruent products, however, consumers must work out the functionality of the product for themselves. Thus, we expect that brand positioning will influence the way novel designs are evaluated on functionality, such that novel designs are perceived as more functional in the value (vs. luxury) brand positioning (H1). Also, we predict that consumers of luxury brands will prefer prototypical designs to novel ones (H2). Recently, Stanton, Townsend, and Kang (2015) analyzed automobile market and showed that consumers prefer novel designs if their consideration set includes allpossible automobiles, but changed to prototypical designs, when the consideration set was entry-level automobiles. In addition, Hagtvedt and Patrick (2014) revealed that altering the form of a product has a more positive impact on product evolutions in a utilitarian context rather than a hedonic one. This is because luxury brands have a greater capacity to be extended into other product categories due to their hedonic potential, namely their ability to provide emotional benefits (Hagtvedt and Patrick 2009). Based on these findings, we postulate that brand positioning will moderate the influence of product design on functional evaluations and perceived comfort, such that only under the value (vs. luxury) brand positioning, individuals will prefer novelty over typicality. Lastly, given the consumers’ motivation of luxury brands for conspicuous consumption and desire for authenticity (Beverland and Farrelly 2010), we predict that consumers will avoid novel designs in a luxury brand. We believe this to be true because in order to convey the status which such consumers seek, the brand must be instantly and easily recognizable to others. In this case, a novel design can be a threat to this transmission of status, and may bring about less favorable evaluations of the brand. As a result, a novel design, even a moderately incongruent one, will be seen as a violation of the brand’s authenticity and the diminished authenticity will therefore explain the less favorable evaluations. Thus, we expect that for value (vs. luxury) brand positioning, brand authenticity will mediate the effect of product design on evaluations (H3). To test our hypotheses, a pilot study was conducted in advance to identify whether luxury positioning would influence the perceptions of functionality when evaluating the same novel design. Participants (N = 102; 63.7% female; Mage = 35.78) were recruited in an online panel and were randomly assigned to one of two conditions of brand positioning: a value brand positioning or a luxury brand positioning. The experiment was a between-subjects factorial design and from the pretest, Serafini brand was chosen as a luxury brand and New Balance brand was chosen as a value brand. Then, Participant saw an advertisement that featured the novel shoe design and indicated their perceived functional efficacy, the concept (value-luxury) of a presented product, and perceived status conferred by purchasing the product. As expected, participants saw Serafini as more of a luxury brand (M = 4.76) than New Balance (M = 3.92) and indicated that purchasing the same product by Serafini conferred more status to someone (M = 4.83) in comparison to purchasing the same product by New Balance (M = 4.22; t(100) = 2.18, p < .05). Importantly, participants viewed the novel design featured in the luxury brand advertisement of (Serafini) as less functional (M = 4.95) in comparison to the novel design featured in the value brand advertisement (New Balance; M = 5.50; t(100) = 2.19, p < .05) although the design of the two products were the same (H1 supported). Next, in Study 1, we intended to identify whether brand positioning would influence typical designs of a product in the same way that it would novel designs. Participants (N = 263; 59.7% female; Mage = 38.03) were recruited in an online panel and were randomly assigned to one of four conditions in a 2 (brand positioning: value vs. luxury) × 2 (product design: typical vs. novel) between-subjects factorial design. In this study, however, we used a fictitious watch brand (Dali) to manipulate the brand positioning. Manipulations were adopted from Hagtvedt and Patrick (2009). Like pilot test, pretestconfirmed that the manipulations worked as intended (Mvalue = 4.85; Mluxury = 5.67; t(39) = 2.19, p < .05) and participants rated Dali as having different abilities to confer status (α = .81; Mvalue = 4.43; Mluxury = 5.26; t(39) = 2.68, p < .05). After, each participant saw an advertisement that featured the new product and that corresponded to the randomized condition that they were assigned and responded to the questionnaires asking their perceived functional efficacy, overall attitudes toward the product, perceived comfort as well as the measures for the manipulation checks. As expected, result showed that in the absence of luxury brand positioning, the novel design was evaluated more favorably (M = 5.00) than the typical product design (M = 3.90; F(1, 259) = 18.74, p < .001). This effect was consistent with past studies that demonstrate the moderate incongruity effect (Noseworthy and Trudel 2011; Meyers-Levy and Tybout 1989; Mandler 1982). However, in the presence of the luxury brand positioning, this difference was not significant (Mnovel = 4.46 vs. Mtypical= 4.25; p = .41). Also, an analysis of functionality indicated that in the value brand condition, the novel design was perceived to be higher in functionality (M = 4.88) than the typical product design (M = 4.39; F(1, 259) = 4.25, p < .05). However, in the presence of the luxury brand positioning, this difference was not significant (Mnovel = 4.57 vs. Mtypical= 4.79; p = .35). Finally, analysis of comfort indicated that in the value brand condition, the novel design was perceived to have more comfort (M = 4.45) than the typical product design (M = 3.82; F(1, 259) = 6.97, p < .01). However, in the presence of the luxury brand positioning, this difference was not significant (Mnovel = 4.14 vs. Mtypical= 4.33; p = .44). Thus, the results supported H1 and H2. To replicate the observed effects and to identify the underlying mechanism, Study 2 was followed. Same recruitment method and experimental design in Study 1 was used with a fictitious camera brand OLEG. Pretest confirmed that the manipulations worked as intended. Experimental procedures were similar to Study 1. However, this time, brand authenticity was measured (Morhart et al. 2015) in addition to the measures used in Study 1. Again, result indicated that in the absence of luxury brand positioning, the novel design was evaluated more favorably (M = 4.85) than the typical product design (M = 3.92; F(1, 209) = 10.30, p < .005) and in the presence of luxury branding, this difference was not significant (Mnovel = 4.50 vs. Mtypical= 4.57; p = .80). Also, result showed that in the value brand condition, the novel design was perceived to be higher in functionality (M = 4.79) than the typical product design (M= 3.89; F (1, 209) = 11.75, p < .001) and in the presence of the luxury brand positioning, this difference was not significant (Mnovel = 4.44 vs. Mtypical= 4.51; p = .79). Regarding comfort, in the value brand condition, using the camera with the novel design was perceived to be more comfortable (M = 4.49) than the typical product design (M= 3.82; F(1, 209) = 6.34, p < .01). However, in the presence of the luxury brand positioning, this difference was not significant (Mnovel = 4.06 vs. Mtypical= 4.25; p = .46). Lastly, mediated moderation analysis (Hayes 2012; Model 8; bootstrapped with 10,000 draws) found that only when design presented was typical, was there mediation through authenticity (95% confidence interval [CI]: .07, .86), but not when presented with the novel design (95% CI: -.60, .24) and thus, provided support to H3.Overall, three studies showed that while product evaluations and functional inferences with novel designs are higher for value brands, they are not for luxury brands. Also, we provided perceived authenticity as an underlying mechanism. From our findings, we provide four theoretical contributions. First, by showing that only value, not luxury brands benefit from novel product design, we demonstrated that brand positioning is another moderator to the effect of schema incongruity that consumers prefer a moderately incongruent product design over a congruent design or an extremely incongruent design (Noseworthy and Trudel 2011; Meyers-Levy and Tybout 1989; Mandler 1982). Second, although the research in product design and innovation has shown that the novelty in perceptual cues may signal innovativeness to consumers and thus engender favorable product evaluations (Gregan-Paxton, Hoeffler, and Zhao 2005; Cox and Cox 2002), we found that such novelty in perceptual cues in product design may not work in certain circumstances – when the product is positioned as luxury. Third, this research contributes to the understanding of luxury branding by offering evidence that prototypical designs benefit luxury brands because they increase perceived authenticity. Fourth, we broaden the research on authenticity in the aspect that merely having a novel or fashion forward design may impair authenticity and cause unexpected results. Managerially, we provide guidelines in that although brands benefit from novel designs in general, the manager of a luxury brand should be cautious when changing the design of a luxury good, especially ones in which functionality and comfort are important attributes. In other words, a luxury brand manager should adopt fashion and design in a way that is beneficial to the consumer. Some luxury brands, such as Porsche, are well-respected for their innovation, while other luxury brands, such as Louis Vuitton create value through promotion of a particular lifestyle (Reddy and Terblanche 2005). For brands that are particularly sought for their functional benefits, like Porsche, the importance of the impact of novel designs on perceptions of authenticity is particularly important. In addition, managers must be aware that novelty is not always perceived the same way. Consumer inferences on functionality and comfort can be elicited for fashion forward designs for value brands, where the novelty of design is used as a strategic tool. Nevertheless, when it comes to the luxury products, this effect might not appear and impairs brand authenticity. To extend our research, potential future research may examine the effect of novel designs on inconspicuous luxury goods. When conspicuous consumption is decoupled from the luxury brand, it is doubtful that prototypical designs would still be favored among consumers of luxury brands. Also, future research could examine the effect of other kinds of innovation. In our research, we mainly examined the product form and design as a method of innovation. However, it is possible that other kinds of innovation method can be used (i.e., change in product concept) and thus, can be potential future research topics. Finally, we believe that how other kinds of positioning might influence the relationship that we revealed could be studied further. For example, there are instances where value brands try to create a luxury line. In such instances, the effect of authenticity may differ from what we observed.