New Product Preannouncement as a Signaling Strategy: An Audience‐Specific Review and Analysis*

Firms in various industries with highly competitive environments use new product preannouncement (NPP) as one of the most effective and popular signaling tools. Preannouncements can bring both benefits and costs to firms. Extant research has studied NPP from different perspectives and tackled the questions, “Should a new product be preannounced and when?” and “What information should be preannounced and why?” However, the benefits and costs of preannouncements from an audience‐specific perspective are less well understood. It is important to notice that benefits and costs of a preannouncement vary among different audiences and firms need to apply group‐specific weights in assessing the overall benefits and costs prior to making new product preannouncements. The purpose of this article is to review the existing literature on new product preannouncements for commonly observed marketing problems and to develop a general approach focusing on the target audiences and the incentives in sending signals to each audience and the impacts of these signals. This paper first reviews the literature on marketing‐related NPP issues as well as the determinants and effects of various factors on NPP decisions. Then, it discusses the phenomenon of new product preannouncements linked to other marketing and economics problems: (1) product development and positioning; (2) product diffusion and adoption; (3) firm value; (4) vaporware and antitrust litigations; and (5) consumer welfare. In addition, this paper divides the target audience of the new product preannouncement into four groups: customers, competitors, investors, and distributors. Based on current signaling theory, it proposes an audience‐specific framework to analyze the determinants, incentives, and impact of new product preannouncements. The proposed approach may provide more comprehensive insights on NPP strategies to managers and industrial decision makers. Finally, the paper suggests a number of future research directions from four different perspectives (i.e., customer, firm, government/industry, and methodology).     

Complementarity,Compatibility, and Product Change: Breaking with the Past?

Product managers are caught between a rock and a cliche (or two). The market response to “new” Coke seems to support those who argue, “If it ain't broke, don't fix it.” On the other hand, rapidly shrinking product life-cycles lend credence to the notion that the only constant is change. Preserving the status quo places both the product and the company on a fast track to obsolescence. To remain competitive, companies need a structured approach to understanding and managing product change. Anirudh Dhebar offers such an approach by focusing on three interrelationships in which a product is involved. These interrelationships, or complementarities, are between a product and its users, other products with which the product is typically used, and databases that are created and repeatedly modified with the help of the product. These complementarities define the context in which the product is used. By understanding them, a company can better anticipate how a planned product change will affect consumers. In planning product changes, it is important to remember that effective use of the product requires compatibility between the product and its complements. A change that somehow disrupts the product's complementarities can be viewed as a break with the past. In other words, such a change creates a new version of the product which is incompatible with the old version. This type of change results in a switching cost for the consumer. That is, the consumer may have to invest time, money, and effort to reestablishing the complementarities that have been disrupted by the product change. For example, if a new software release includes significant changes to the user interface, consumers must weigh the potential benefits of any new features against the time and effort involved in relearning the interface. If these switching costs are too high, the new release will fail in the marketplace. When planning product changes, a company must recognize the extent of a product's complementarities, and assess how a break in any of them will affect consumers' switching costs. It is important to recognize that the switching costs and the perceived benefits of the new product version may not be the same for all consumers. Finally, careful consideration must be given to the implementation of the product change. For example, the company must decide whether to offer some sort of bridge that helps consumers make the break with the past. The company also needs to decide whether the change is implemented throughout the product line or only in selected models.     

The components of risk in new product development: Project New Prod

Although new product development is one of the riskiest activities of a modern corporation, relatively little account is taken of risk measurement in the R & D project selection literature. The existing consensus is that risk is measured by some combination of the total amounts at stake and the uncertainties of the situation. The paper describes a project aimed at more exactly identifying and defining the components of risk as perceived by a decision-maker within a firm undertaking new product ventures. The project is based on data from a study of the behaviour of 103 firms and 197 ventures.
The results show broadly that managers perceive risk to be highest when the product shows least synergy with the firm's current business. In contrast, the possibility of reducing uncertainty components of risk through information-seeking seems to be of little account in risk perception. The author concludes from this that decision-makers are much more influenced by factors that control the amounts at stake (in general, the less the synergy the greater the resources needed to back a new product entry) than by uncertainty as to the outcome. The latter must constitute an important element of risk in reality. Its neglect may be because managers find they can deal conceptually more easily with concrete matters like the amount at stake than with the intangibles of uncertainty reduction. This may explain why many firms fail to integrate information into their new product development process.     

Product Development Strategy: An Integration of Technology and Marketing

Although it seems obvious that a new product development strategy must bring together marketing and R&D strategies, the conceptual development of marketing and R&D strategies has taken place in relative isolation. More than ten years ago, when Professor Harry Nyström began his research program on product development in Swedish firms, he realized that the isolation wasn't an appropriate point of view. He began to construct a conceptual framework for analyzing product development strategies that incorporated many more variables than had traditionally been considered. The latest set of firms in the research program are four pulp and paper companies. They are in mature, process industries, quite unlike the earlier study firms. Yet many of the same propositions from the earlier research still hold. In this article, Professor Nyström presents the most recent version of his framework to help managers develop an integrated product development strategy.     

Which Tangible and Intangible Assets Matter for Innovation Speed in Start‐Ups?*

The launch of the first product is an important event for start‐ups, because it takes the new venture closer to growth, profitability, and financial independence. The new product development (NPD) literature mainly focuses its attention on NPD processes in large firms. In this article insights on the antecedents on innovation speed in large firms are combined with resource‐based theory and insights from the entrepreneurship literature to develop hypotheses concerning the antecedents of innovation speed in start‐ups. In particular, tangible assets such as starting capital and the stage of product development at founding and intangible assets such as team tenure, experience of founders, and collaborations with third parties are considered as important antecedents for innovation speed in start‐ups. A unique data set on research‐based start‐ups (RBSUs) was collected, and event‐history analyses were used to test the hypotheses. The rich qualitative data on the individual companies are used to explain the statistical findings. This article shows that RBSUs differ significantly in their starting conditions. The impact of starting conditions on innovation speed differs between software and other companies. Although intuition suggests that start‐ups that are further in the product development cycle at founding launch their first product faster, our data indicate that software firms starting with a beta version experience slower product launch. The amount of initial financing has no significant effect on innovation speed. Next, it is shown that team tenure and experience of founders leads to faster product launch. Contrary to expectations, alliances with other firms do not significantly affect innovation speed, and collaborations with universities are associated with longer development times.     

The Effects of Competition in Short Product Life‐Cycle Markets: The Case of Motion Pictures*

It is critically important to understand the relationship between new product launch strategies and their interaction with the competitive environment, which results in the successful introduction of new products. Deciding when to launch new products is among the most significant issues facing managers when formulating new products strategy, especially for products with short product life cycles. However, little extant research has focused on the interaction of product launch timing and the competitive market environment. This study explores the effects of four types of competitive threats on the market performance of short product life‐cycle products. Threats from new products and incumbents are possible. Also, products in the same category and those in related product categories exert competitive pressures. In this paper, a framework of competitive threats is developed, and research questions are constructed and empirically tested using the motion pictures industry as the focus of this research. A set of simultaneous equations was estimated using a sample of 2,948 movies introduced in the U.S. market between 1997 and 2004. The results show that all competition types have negative direct, indirect (as mediated by distribution intensity), and total effects on the performance of a new product. For a focal product, incumbent products exert a greater negative impact on performance than new entrants. Surprisingly, products in different, but related, categories are more harmful to the performance of products than products in the same category. The results have important implications for launch timing and new product performance.     

Performance typologies of new product projects

New product success is a vital but elusive goal for many firms. The last two decades have witnessed numerous studies into new product successes and failures in an attempt to uncover what makes a winner. Indeed, myriad characteristics, factors, and practices have been found that appear to discriminate between successful and unsuccessful new products.With few exceptions, much of this research has tended to view new product performance on a unidimensional continuum, usually financial performance (e.g., profitability). Whereas immediate profitability is no doubt an admirable goal, there are other ways of looking at a new product's performance—for example, degree of technical success, time-to-market, and its overall impact on the company.The current investigation takes a broader view of new product success. A number of measures of new product performance were captured, rather than just the single measure continuum; this resulted in a performance map with two major and quite independent underlying dimensions of performance. A typology of performance was then developed—a classification of new product projects by how well they performed: five scenarios or clusters of projects are identified on this map, each with its unique performance characteristics. We then investigate in detail each project type and probe what drives the performances of these five different clusters of projects: that is, what makes for new product success of these five project types, when success is measured in different ways. The study was undertaken in world class multinationals in the chemical industry in four countries, but its results appear to have validity across a broad spectrum of industry.     

Exploring Correlates of Product Launch in Collaborative Ventures: An Empirical Investigation of Pharmaceutical Alliances

This paper examines collaborative ventures leading toward the launch of new products in the pharmaceutical industry. These collaborative ventures are one of the most underresearched areas in the new product literature, yet the preponderance of these collaborative ventures makes it an area of great importance for scholars and practitioners alike. As such, the purpose of the study is to examine why some collaborative projects produce a favorable outcome (the launch of a product) whereas others do not. That is, what characteristics of partner firms in the collaborative ventures and what characteristics of the partnership lead to a successful launch of a new product in the pharmaceutical industry? Secondary data from the pharmaceutical industry are employed in a multinomial logit model. Data from 128 collaborative ventures from 1980 to 2004 are used in the analysis. The partner firms in the collaborative ventures are from various industries ranging from malt beverages to pharmaceutical preparations to electronic and other equipment among others. Of the 128 collaborative ventures, 66 were successful in leading to a new product launch, whereas 62 did not result in the launch of a new product. The results from the multinomial logit analysis suggest that combined marketing resources of parent companies, combined technological intensity of parent companies, and combined asset bases of parent companies contribute to the likelihood of an eventual product launch in a collaborative venture. However, the results of the analysis show that contrary to expectations, technological complementarity of partners in the collaborative venture is not a significant predictor of successful new product launch. The results of the study suggest certain aspects for managers to consider when establishing collaborative ventures. To maximize the possibilities of the collaborative venture leading to the successful launching of a new product, managers should be concerned with the resources potentially available to partners in the collaborative venture from parent firms. These resources are not only of financial nature but also of technological nature. The existence of these resources does not ensure provision of resources to the collaborative venture; however, without the possibility of these resources it appears that successful launch of a product is less likely.     

An Integrative Model of the New Product Development Process

Previous studies of new product development have identified a series of variables that are important determinants of new product success. The goal of this article is to demonstrate the nature of the complex interrelationships that exist among these variables. Roger Calantone and Anthony di Benedetto propose an integrative model of the new product decision process. They examine data gathered from a sample of industrial manufacturing companies and test their model empirically using three-stage least squares analysis. The article concludes with a discussion of implications for new product managers.     

The Role of Value‐Informed Pricing in Market‐Oriented Product Innovation Management*

Although the positive effect of a market orientation on new product success is widely accepted and the market orientation literature has increased its understanding of how a market orientation leads to performance, the extant literature has overlooked the role of value‐informed pricing in the relationship. Value‐informed pricing is a pricing practice in which the decision makers base the price of the new product on the customers' perceptions of the benefits that the product offers and how these benefits are traded by customers against the price (that has yet to be determined). Considering that pricing mistakes may hit hard on the profitability of product innovations, it is important to firms to have a good understanding of its role. This study develops a framework in which value‐informed pricing is integrated in the relationship between market orientation and new product performance. A distinction is made between customer and competitor orientations, and relative product advantage is also included in the conceptual model. The model is tested on data obtained from managers based on a cross sectional sample of 144 firms. The respondents were involved in a decision‐making process of the pricing of a new product. The model is tested using structural equations modeling. The results show that value‐informed pricing has a strong effect on new product performance. It also reveals that each component of a market orientation fulfills a specific role in a market‐oriented organization. Value‐informed pricing is found to have important mediating effects in the market orientation–new product performance relationship. Results show that firms with a strong customer orientation engage in value‐informed pricing and develop superior benefits to customers in an advantageous product. In turn, both value‐informed pricing and relative product advantage positively affect new product market performance. However, no significant effect of competitor orientation on value‐informed pricing is found. Combined with the finding that competitor orientation negatively affects relative product advantage, this suggests that competitor orientation may hurt new product performance when this orientation is not balanced with a strong customer orientation. The results also portray that value‐informed pricing leads to higher product advantage. Interestingly, this relation is contingent on the degree of interfunctional coordination within the firm. This suggests that the relationship between market orientation and new product performance is strongest if firms integrate value‐informed pricing in the new product development process. In this sense, a market‐oriented firm mirrors the customer value perception that makes a trade‐off between benefits and price.     

Consequences of New Product Development Speed: A Meta‐Analysis

Five meta‐analyses previously have been published on the topic of new product development involving the concept of new product development speed. Three of these studies have investigated antecedents to new product development success, of which just one was new product development speed. The other two studies used new product development speed as the dependent variable, and analyzed antecedents to achieving speed. This article extends previous empirical generalizations in this domain by using a meta‐analytic methodology to understand the link between new product development speed and new product success at a more granular level. Specifically, it considers the relationship with different dimensions of success as measured overall or compositely, operationally (i.e., the process measures of decreasing development costs and proficiently managing market entry timing and the product measures of technical product performance and product competitive advantage), and relative to external success outcomes (i.e., customer based and financial success). While the results indicate that, in general, new product development speed is associated with improving success outcomes, those relationships may diminish or even disappear depending upon a number of methodological design decisions and research contexts. A subsequent meta‐analysis of the antecedents of development speed provides a more holistic picture of development speed. These results are broadly consistent with those produced by another recent meta‐analytic investigation of the issue. Together, these findings have important implications for academics pursuing further research in this domain, as well as for managers considering implementing a program to increase new product development speed.     

The Impact of Market Orientation, Product Advantage, and Launch Proficiency on New Product Performance and Organizational Performance

Some scholars have suggested recently that a market‐oriented culture leads to superior performance, at least in part, because of the new products that are developed and are brought to market. Others have reinforced this wisdom by revealing that a market‐oriented culture enhances organizational innovativeness and new product success, both of which in turn improve organizational performance. These scholars do not reveal, however, through which new product development (NPD) activities a market‐oriented culture is converted into superior performance. To determine how critical NPD activities are for a market‐oriented firm to achieve superior performance, our study uses data from 126 firms in The Netherlands to investigate the structural relationships among market orientation, new product advantage, the proficiency in new product launch activities, new product performance, and organizational performance. We focus on product advantage—because product benefits typically form the compelling reasons for customers to buy the new product—and on the launch proficiency—as the launch stage represents the most costly and risky part of the NPD process. Focusing on the launch stage also is relevant because it is only during the launch that it will become evident whether a market orientation has crystallized into a superior product in the eyes of the customer. The results provide evidence that a market orientation is related positively to product advantage and to the proficiency in market testing, launch budgeting, launch strategy, and launch tactics. Product advantage and the proficiency in launch tactics are related positively to new product performance, which itself is related positively to organizational performance. Market orientation has no direct relationship to new product performance and to organizational performance. An important implication of our study is that the impact of a market orientation on organizational performance is channeled through the effects of a market orientation on product advantage and launch proficiency; subsequently through the effects of product advantage and the proficiency in launch tactics on new product performance; and finally through the effect of new product performance on organizational performance. These channeling effects are much more subtle and complex than the direct relationship of market orientation on organizational performance previously assumed. Another implication of our study is that the impact of a market orientation on performance occurs through the launch activities rather than being pervasive to all organizational processes and activities. A reason for this finding may be that NPD is the one element of the marketing mix that predominantly is the responsibility of the firm, whereas promotion and distribution often are in control of organizations outside the firm (e.g., advertising agencies, major retailers) and whereas the channel or the market often dictates the price. Both implications provide ample opportunities for further research on market orientation and NPD.     

The Contingent Value of Responsive and Proactive Market Orientations for New Product Program Performance*

While the benefits of being market oriented are largely accepted, a group of scholars and managers remain skeptical. Marketing scholars have sought to counter the criticisms leveled against market orientation (MO) by arguing that it has both responsive and proactive dimensions. However, few studies have empirically examined the complexity of the effects of these dimensions on firm performance. Drawing on theories of resource‐based advantage and organizational search behavior, this article advances understanding by arguing that responsive and proactive market orientations have curvilinear effects on product development performance, that their interaction may be positively related to product development performance, and that their effects on new product program performance are moderated differentially by the organizational implementation conditions and marketing function power. Survey results of 175 U.S. firms indicate support for most of the hypotheses. Specifically, whereas responsive MO has a U‐shaped relationship with new product program performance, proactive MO has an inverted U‐shaped relationship with new product program performance. Contrary to the arguments presented here, the interaction of both orientations is negatively related to new product program performance. This study finds that both orientations are needed; however, new product program performance is enhanced when one is at higher level and the other is at lower level. Finally, responsive MO is only positively related to new product program performance under specific conditions such as when strategic consensus among managers is high. On the other hand, the positive effect of proactive MO on new product program performance is further strengthened when learning orientation and marketing power are high. Overall, this study suggests that the effects of responsive and proactive MO on new product program performance are more complex than previously theoretically argued and empirically examined.     

Principles of New Product Management: Exploring the Beliefs of Product Practitioners

Conventional wisdom might lead us to conclude that the various disciplines involved in product development and management are often at cross-purposes. For example, practitioners from R&D and engineering have been known to suggest that marketing fails to understand the technical trade-offs involved in product management decisions. Conversely, marketing professionals sometimes complain that their technology-oriented colleagues pursue product development initiatives without adequate market awareness. And practitioners from both sides of this debate have asserted that research on new product development tends to be of the ivory tower variety, with little or no relevance for industry. Are such complaints valid? Perhaps it is time for a reality check. By searching academic literature on product development, Roger J. Calantone, C. Anthony Di Benedetto, and Ted Haggblom have compiled a list of 40 fundamental principles of new product development. This list forms the basis for a survey of new product practitioners from marketing and technical disciplines. The study provides a means for assessing whether practitioners agree with the fundamental principles of new product development that are identified in current academic literature. By obtaining responses from both marketing and technical professionals, the survey also sheds light on whether those two groups hold fundamentally different beliefs regarding new product development. The survey results reveal strong overall agreement among practitioners regarding these fundamental principles of new product management. Managers believe that 80% of the principles are either usually or almost always true. In other words, the survey results support the idea that the academic community is pursuing research issues that are relevant to practitioners, and that they are reaching valid conclusions. There are only a few cases in which the responses from the technical and marketing practitioners differ. Those disagreements probably result from differences in the basic orientations of the two groups. For example, it is not surprising that marketing managers would be more likely to agree that “product users and the marketplace form the most important source for new product ideas,” while technical managers more strongly support the idea that “radically new technologies constitute an important source of new product ideas.” The respondents noted overall disagreement with only a few of the 40 principles. In many of these cases, the academic literature has reached mixed conclusions. In other words, these “principles” might actually be oversimplifications, and further research is probably needed before we can fully understand the issues involved.     

Contingent contingency: Knowledge heterogeneity and new product development performance revisited

This paper re-conceptualizes the meaning of knowledge heterogeneity—an important but under-developed collective-level concept that influences innovation. The new conceptualization extends the construct of knowledge heterogeneity beyond the traditional assessments of variability in professional background. This research further explores the quadratic relationship between knowledge heterogeneity and new product development performance. Drawing on and synthesizing knowledge clarity and uncertainty avoidance literature to consider work context, the possibility of a positive quadratic, rather than a linear or a negative quadratic, relationship between knowledge heterogeneity and innovation is suggested. This relationship is explored using data collected from 128 new product development teams from companies in knowledge-intensive and innovation-oriented industries located in Taiwan. Results are discussed in terms of the hypothesized positive quadratic relationship. The outcome of the study is discussed in terms of the influence of the knowledge structure and cultural factors, which suggest potential contingent contingencies across different contexts.     

An Exploratory Analysis of the Impact of Market Orientation on New Product Performance

For many firms, emphasizing the importance of market orientation has taken on a mantra-like quality. Mission statements and memos, policies, and procedures all highlight the importance of staying in touch with the customer. It is also widely assumed that the relationship between market orientation and new product performance depends on environmental conditions and product characteristics. To date, however, little empirical evidence has been presented to support the assumption that market orientation influences new product performance. Kwaku Atuahene-Gima addresses this research need in a study of 275 Australian firms. In addition to exploring the relationship between market orientation and new product development activities and performance, his study examines the effects of environmental conditions and product characteristics. Specifically, the study investigates whether the relationship between market orientation and new product performance depends on the degree of product newness to customers and the firm; the intensity of market competition and the hostility of the industry environment; and the stage of the product life cycle at which the new product was introduced. The survey results provide strong support for the basic proposition that market orientation influences new product performance and development activities. The results show a strong positive relationship between market orientation and a new product's market performance. Market orientation is also shown to have a strong positive effect on proficiency of predevelopment activity, proficiency of launch activity, service quality, product advantage, marketing synergy, and teamwork. Although market orientation is generally found to be an important factor in the success of new products, its influence varies depending on the type of new product—that is, radical versus incremental. Market orientation appears to have greater influence on new product performance when the product represents an incremental change to both the customers and the firm. However, this does not mean that a market-oriented approach is unnecessary in the development of radically hew products. Market orientation also has a greater effect when the perceived intensity of market competition and industry hostility are high, and during the early stage of the product life cycle. Because market competition and industry hostility typically intensify as the product life cycle progresses, these findings suggest that the effects of market orientation are pervasive. In other words, managers should not limit their expectations of market orientation to specific projects or specific stages of the development process and product life cycle.     

An Ecological Perspective on New Product Failure: The Effects of Competitive Overcrowding

Practitioners and researchers have carefully explored the causes of new product failures. Studies have been conducted, results analyzed, and recommendations offered. Yet despite these efforts, new product failure rates have not decreased. In fact, they appear to be increasing in some product categories. Are we missing something? Noting that most research on new product failures has focused on a firm's activities in specific projects, William H. Redmond proposes that new product outcomes might also be influenced by macro-level or environmental factors. By focusing on environmental factors rather than a firm's activities in specific projects, we might better understand why competent firms in one industry consistently experience higher failure rates than those of firms that are no more competent, but operate in a different industry. For example, failure rates for new food products are consistently higher than those for new industrial products. With no evidence that product development professionals in industrial firms are simply superior to their counterparts in the food industry, Dr. Redmond suggests that we need to look beyond specific product development projects and consider the effects of the market in which these products are introduced. Encouraged by past successes, many firms in the food manufacturing business seek sales growth through the development and introduction of additional new products. Over time, this creates a market in which customer demand is fragmented into increasingly small niches and distribution channels are flooded with product choices. As a result, the failure of a new product is more likely than it might have been under less crowded conditions. In much the same way that the population of deer on an island is limited by the available food and physical space, food products are apparently faced with the market equivalent of natural selection. In the absence of available market niches and a clear competitive advantage, a new product's chances for success are meager. In a market that is overcrowded by existing products and new product introductions, it becomes increasingly difficult and uneconomical to identify opportunities for meaningful differentiation. On the other hand, industrial products face a much different set of environmental conditions. Compared to the food manufacturing business, relatively few new industrial products are introduced, and those introductions are typically successful. In most cases, the new products are simply replacements for inefficient or obsolete products. In such an environment, failed introductions are probably the result of errors in the product development process.