Preparing for Takeoff
Everdingen, I.; Fok, D.; Stremersch, Stefan
Publisher: American Marketing Association
Original document: Modeling global spillover of new product takeoff
Year: 2009
Language: English
The takeoff of new products has been an area of strong interest for market researchers over the past decade. Now scholars are taking this one step further by studying cross-national differences in time-to-takeoff.
In their article, “Modelling Global Spillover in New Product Takeoff,” published in the Journal of Marketing Research, Erasmus University professors Yvonne van Everdingen, Dennis Folk and Stefan Stremersch, a visiting professor at IESE, set out to create a model that captures international spillover of foreign product introductions and takeoffs on a focal country’s time-to-takeoff.
They aim to help managers identify ideal introduction countries that would not only be fast in time-to-takeoff, but also have a strong influence on other countries.
“Takeoff is a critical event in the life of a new product; moreover, takeoff is a signal of mass adoption, and knowing when it is most likely to occur helps managers to decide when or not to pull a plus on the product,” state the authors.
Based on prior research by Stremersch, and later with colleagues Tellis and Yin (2003), the authors built on a hazard model, adding three important factors.
- The authors incorporated inter-country distance – the economic, cultural and geographic distance between the relevant countries.
- The authors studied the different levels of susceptibility to foreign introductions and takeoffs.
- Lastly, foreign clout, or the impact of introduction and takeoff events in any given country on the takeoff event in other countries, was included.
Using this model, the researchers then examined the global spillover of foreign product introductions and takeoffs on a focal country’s time-to-takeoff, using a novel data set of penetration data for eight high-tech products across 55 countries.
Regional Variations
Dramatic differences were found in time-to-takeoff across regions, and even across countries within these regions.
The most innovative regions were Western Europe and North America, followed by Central and Eastern Europe. Within these regions, large differences were found in time-to-takeoff: In Western Europe, for example, time-to-takeoff ranges on average from 1.5 years for Switzerland to 5.67 years in Belgium.
The authors also found that a country’s size, in terms of wealth, population and exports, made it more or less attractive in terms of clout in the spillover process.
The larger the country, the higher its economic wealth and the more it exports, the more clout it has. In contrast, the poorer the country, the more tourists it receives and the higher its population density, the more susceptible it is to global spillover effects.
Furthermore, cross-country spillover effects are stronger the closer the countries are to one another, both geographically and economically, but not necessarily in terms of culture.
Using these criteria, Hong Kong and the United States are both candidate countries to launch a new product, because both show a fast time-to-takeoff and, at the same time, rank high on foreign clout.
In Europe, the authors found Germany, France, the U.K. and Switzerland to be interesting countries to consider when launching a new product.
While the U.K. and Switzerland show fast takeoff times, but moderate influence on other countries, France and Germany have slower takeoffs, but greater influence on other countries. And, with their large populations (with the exception of Switzerland), these countries make good candidates for first product launches.
On the other hand, the authors found that countries characterized by a relatively long time-to-takeoff and limited foreign clout, but high foreign susceptibility, are good candidate countries for a late product launch.
Examples of these types of countries include Singapore, Vietnam, India, Indonesia, Pakistan and China. Once these countries are penetrated, however, the market potential is huge, given their large population sizes, especially in the cases of India, Pakistan and China.
These findings provide valuable input to managers to inform market entry decisions, manage expectations of global takeoff and identify possible spillover patterns.
The authors warn, however, that the results should be interpreted with caution, as their model is descriptive rather than normative, and the results are conditional to the countries in the study sample.
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