The timing of new product launch

by: Goeksen Iyikoey and Kaisa Qvist

TABLE OF CONTENTS

1 INTRODUCTION 1

2 “IDENTIFYING THE KEY SUCCESS FACTORS IN NEW PRODUCT LAUNCH” BY DI BENEDETTO 1

3 “UNDERSTANDING MARKET ENTRY TIMING DECISIONS: THE PRACTITIONER-ACADEMIC GAP” BY DACKO  3

4 “FIRST-MOVER ADVANTAGES” BY LIEBERMAN AND MONTGOMERY 6

5 ”NEW PRODUCT LAUNCH STRATEGY FOR NETWORK EFFECTS PRODUCTS” BY LEE AND O’CONNOR 7

6 “TIMING, ORDER AND DURABILITY OF NEW PRODUCT ADVANTAGES WITH IMITATION” BY LEE, SMITH, GRIMM AND SCHOMBURG 8

7 “THE TIMING OF COMPETITIVE MARKET ENTRY – AN EXPLORATORY STUDY OF NEW INDUSTRIALIZED PRODUCTS” BY LILIEN AND YOON 10

8 “PREDICTING ORDER AND TIMING OF NEW PRODUCT MOVES - THE ROLE OF TOP MANAGEMENT IN CORPORATE ENTREPRENEURSHIP” BY SRIVASTAVA AND LEE 12

9 SYNTHESIS 15

9.1 The Order of New Product Launch  15

9.1.1 The first mover 15
9.1.2 The second and later mover  17
9.1.3 General tasks 17
9.1.4 Consequences of being the first- mover and later-mover 18
9.1.5 Discussion 18

9.2 The Exact Timing of New Product Launch 20

9.2.1 Product Life Cycle  20
9.2.2 Customer Demand 21
9.2.3 Company Resources 21

10 CONCLUSIONS 22

List of references

1 Introduction

The purpose of this paper is to review a couple of scientific articles and then make a synthesis of all of them. The seminal article for this study was “Identifying the key success factors in new product launch” written by Anthony Di Benedetto. The article deals with different factors that should be taken into account when a firm is launching a new product. Those factors are studied more specifically in the chapter 2. At the end of the article suggestions for further studies are given. It is stated that the timing of new product launch has been relatively underresearched topic despite of its high importance. That is why this paper focuses on this interesting topic more specifically. Six articles have been gathered that deal with timing of new product launch. All of the articles approach the subject from different angles but they still share some common characteristics. Points of interest include for example advantages and disadvantages of being a first-mover or later-mover and the different situations that require different actions from companies planning to launch new products. In the next seven chapters all of the articles will be shortly reviewed. Reviews focus mostly on the timing of new product launch even though the articles might include other issues as well. Chapter 9 links the articles together and chapter 10 draws conclusions about the topic.

2 “Identifying the Key Success Factors in New Product Launch” by Di Benedetto

A PDMA study of best practices by innovating firms has shown that, among the best performing firms, 49 % of sales are derived from new products. Among all other firms, the comparable figure was only 22%. Furthermore, launch is often the single costliest step in new product development. Therefore, effective product launch is a critical driver of top performance and there are many studies that show that a strong product launch greatly improves the chances of success. In this study, strategic, tactical and information-gathering activities were chosen as the focal points of the research. Strategic decisions were concerned with product and market issues such as how innovative the product should be, what kind of market the product should be launched to etc. Tactical decisions were the marketing mix decisions such as product and branding, pricing, advertising and distribution. Information-gathering activities included for example market research and testing activities which are required to obtain key information about customers and the effectiveness of the marketing activities undertaken as well as to provide feedback both during and after launch.

Background of the research is in previous researches. In literature review it is stated that “bad product launches are typified by poorly planned marketing strategies, resulting in incomplete product offerings, inadequate channel, poor targeting, no focus on effort and slow response to product flaws”. By comparison, a successful launch strategy includes objectives for all elements of the marketing mix, as well as statements of launch control, timing and speed, and likely competitive responses. Marketing tactical decisions at the product launch stage concern the development of the marketing mix: achieving appropriate distribution levels, determining acceptable price etc. Technical tactical decisions, in turn, include modification of the product and/or production process and they are made in consideration of the results of product and market testing. Furthermore, launch timing is a critical variable determining ultimate product success. If the firm waits too long in product development or testing, they allow competitors to launch similar products first successfully. Managers are also often under great pressure to accelerate time to market and they may not always see the risks involved.

In this study, a retrospective methodology was used, in which managers were asked to provide their perceptions regarding the launch activities and new product performance. Respondents chose one of their company’s most recent new product launches and then they aswered to 46 questions which dealt with the skills, resources and activities identified in the launch literature as most critical to new product launch. Four measures of perceived new product performance included overall profitability and perceived profitability, sales and market share relative to competing products on the market. The results of the research were not very surprising. It was found out that successful launches were related to perceived superior skills in marketing research, sales force, distribution, advertising and promotion, R&D and engineering. Especially having cross-functional teams make decisions concerning manufacturing, distribution/logistics and marketing/sales and having logistics involved in formulating distribution strategies, coordinating with sales management, developing inventory strategies and planning after-sale service, were regarded as very important for successful new product launches. The tactical activities that were perceived to be performed significantly better in successful launches were high quality of selling effort, advertising, service and technical support, good management of key aspects of the launch, good management of the support programs and launch timing relative to competition and customers. Also, better perceived performance on the informationgathering activities included in this study, were strongly related to success. Those activities included for example steps in market testing, studying feedback from customers regarding the product both during and after launch, planning and testing advertising and contracting out specialized research work to outside contractors. The results of the study also show that the timing of the launch is just as important as whether all the activities mentioned are performed. The authors state that a very significant finding of the study is the high perceived importance of launch timing, which has been comparatively under researched in previous studies. They also give suggestions to investigate the antecedents and effects of launch timing more closely.

3 “Understanding Market Entry Timing Decisions: the practitioner-academic gap” by Dacko

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