New products are often incongruent with consumer expectations. Researchers have shown that consumers prefer moderately incongruent products, while being adverse to extremely incongruent products. Evidence from three studies suggests that this phenomenon is highly influenced by a consumer’s state of arousal. Specifically, low arousal decreases preference for moderate incongruity while increasing preference for extreme incongruity, whereas high arousal decreases preference for any form of incongruity. Underlying these effects are discrete emotional states brought on by a physiological response to incongruity. Varying arousal subsequently varies the severity of the emotion, be it negative (anxiety) or positive (curiosity), which in turn varies evaluations for the product. This suggests that creating excitement around a product launch may be good for incremental innovation, but it may not be a good idea for something truly innovative.