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Consumer learning, expectation and timing of introduction of sequential generations of new products (RV of 2002/100/MKT)

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A multitude of new and improved product generations appear in consumer markets. Research suggests that a firm should always introduce an improved next generation product either immediately or after the demand for the existing product stops growing. The author presents a model to analyze the effect of consumer learning of quality and expectation of quality of future products on timing of introduction. Contrary to the extant research, he finds that a firm should not always introduce the next generation immediately even if it is fully developed by RandD. This holds even when firms compete on the time to introduce the next generation. Consumer expectation generally allows a firm more time to introduce the next generation. A firm can pre-announce and use prior advertising to shape consumer expectation and communicate credibly the superiority of the next generation to gain more time for introduction. However, if the quality of the existing product is high, the firm can avoid introducing sooner by an advertising policy that fosters diverse perceptions of superiority of the next generation among the consumers.

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en

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application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/inseadwp2003/2003-79.pdf

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Copyright INSEAD. All rights reserved