There is a surprisingly high number of new products and services that fail soon after they reach the market: because of the unsatisfactory levels of diffusion and customer acceptance that they experience, their sales are discontinued very early in the life cycle. Although launch strategy and tactics research has investigated the impact of commercialization decisions on new product performance, no systematic analyses have been carried out so far to understand their impact on early diffusion and survival. This article investigates how early market survival is affected by the maturity of the technology on which the innovation is based and by the use of two commercialization tactics, namely investments in advertising and involvement of external organizations in the commercialization process. Using a dataset comprising more than 9,600 new mobile Value Added Services (VAS) launched in Italy between 2003 and 2006, the article finds that the more novel the technology on which an innovation is based, the higher the likelihood of incurring in early failure. Product and marketing managers who are willing to reap the potential advantages of commercializing an innovation based on technologies in a very early stage of their life cycle (i.e., higher margins, expanded market, increased reputation, opportunity to establish a new standard in the industry) should be well aware of the challenges that this strategic launch decision implies, and should pay particular attention to adopt appropriate commercialization tactics to overcome the risk of early failure. In particular, to increase the chances of early market survival for innovations based on very novel technologies, our analysis indicates that it is more effective to partner with external organizations during the commercialization process than invest money in advertising the brand of the firm or the new product or service. Expenditures in corporate advertising seems instead to be an effective tactic to improve early market survival of innovations based on mature technologies, where customers’ uncertainty regarding expected benefits and transaction costs is minimal and the expectations of the innovating firm in terms of early sales growth rate are particularly demanding.
Launch decisions and the early market survival of innovations: an empirical analysis of the Italian mobile Value Added Services (VAS) industry
DELL'ERA, CLAUDIO;FRATTINI, FEDERICO;RANGONE, ANDREA
2010-01-01
Abstract
There is a surprisingly high number of new products and services that fail soon after they reach the market: because of the unsatisfactory levels of diffusion and customer acceptance that they experience, their sales are discontinued very early in the life cycle. Although launch strategy and tactics research has investigated the impact of commercialization decisions on new product performance, no systematic analyses have been carried out so far to understand their impact on early diffusion and survival. This article investigates how early market survival is affected by the maturity of the technology on which the innovation is based and by the use of two commercialization tactics, namely investments in advertising and involvement of external organizations in the commercialization process. Using a dataset comprising more than 9,600 new mobile Value Added Services (VAS) launched in Italy between 2003 and 2006, the article finds that the more novel the technology on which an innovation is based, the higher the likelihood of incurring in early failure. Product and marketing managers who are willing to reap the potential advantages of commercializing an innovation based on technologies in a very early stage of their life cycle (i.e., higher margins, expanded market, increased reputation, opportunity to establish a new standard in the industry) should be well aware of the challenges that this strategic launch decision implies, and should pay particular attention to adopt appropriate commercialization tactics to overcome the risk of early failure. In particular, to increase the chances of early market survival for innovations based on very novel technologies, our analysis indicates that it is more effective to partner with external organizations during the commercialization process than invest money in advertising the brand of the firm or the new product or service. Expenditures in corporate advertising seems instead to be an effective tactic to improve early market survival of innovations based on mature technologies, where customers’ uncertainty regarding expected benefits and transaction costs is minimal and the expectations of the innovating firm in terms of early sales growth rate are particularly demanding.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
