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Optimal timing of introduction for sequential generations of new products with consumer learning and expectations

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A multitude of new and improved product generations appear in consumer markets. The marketing literature provides normative guidelines to managers regarding the timing of introduction of a next generation product only under restrictive conditions. In particular, it does not consider consumers' expectations about future products and learning about the quality of the existing product through word of mouth information. Moreover the findings have been rather contradictory. Wilson and Norton 1989 suggest that the introduction should be "now or never'', while Kalish and Lilien 1986 suggest that introduction should be "delayed''. This paper provides a closed form analytical solution to the optimum timing problem. It shows that even in the absence of immediate threat of competition several factors can speed up introduction. This may explain why some industries e.g. hi-tech witness such a rapid pace of product introductions. Results suggest that the firm should introduce incremental innovations earlier in markets than significant or radical innovations. It also indicates that when consumers need the product very urgently (i.e. they are "hungry''), the firm should introduce the next generation sooner than when the consumers are "full'' (i.e. do not need the product urgently). However, when the consumers are "too full'' (have little urgency to buy the product) the firm should introduce as soon as possible.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2002/2002-100.pdf

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Copyright INSEAD. All rights reserved