A Simultaneous Model for Innovative Product Category Sales Diffusion and Competitive Dynamics

Diffusion of innovation has been the focus of an entire stream of research in marketing, and firm entry and exit decisions have been investigated by marketers, strategists, and economists. However, little attention has been paid to the relationship between changing demand and the entry and exit behaviors of competitors in the marketplace. Understanding this relationship is essential in making resource commitments, as profitability of options depends not only on the size and growth of the market, but also on the number of competitors likely to be encountered. This is particularly important in innovative markets, where changes occur rapidly and one cannot assume that either customer needs or competitors faced tomorrow will be the same as today. We simultaneously model demand and number of competitors, including the interactive relationship between these dynamics in the marketplace, and empirically investigate three technology-intensive markets-video cassette recorders, personal computers, and workstations. Our results suggest that competition and demand impact entry and exit, but that the nature of this impact may depend on whether or not a `shakeout' has occurred in the marketplace. Further, an increasing number of competitors may lead to improved marketplace offerings, resulting in demand expansion. (C) 1999 Elsevier Science B.V. All rights reserved

Market Orientation and Organizational Performance: Is Innovation a Missing Link?

In recent years, a market-oriented corporate culture increasingly has been considered a key element of superior corporate performance. Although organizational innovativeness is believed to be a potential mediator of this market orientation-corporate performance relationship, much of the evidence to date remains anecdotal or speculative. In this context, the authors present a systematic framework to test the postulated "market orientation-innovation-performance" chain. To this end, the direct causality assumption of market orientation on organizational performance is examined with Narver and Slater's (1990) market orientation framework. Moreover, the authors take a componentwise approach and examine how the three core components of market orientation (customer orientation, competitor orientation, and interfunctional coordination) affect the two core components of organizational innovativeness (technical versus administrative) en route to affecting corporate performance. Using banking industry data, the authors empirically test and substantiate innovation's mediating role in the market orientation-corporate performance relationship

Customer acquisition and retention spending: An analytical model and empirical investigation in wireless telecommunications markets

Strategic resource allocation in growth markets is always a challenging task. This is especially true when it comes to determining the level of investments and expenditures for customer acquisition and retention in competitive and dynamic market environments. This study develops an analytical model to examine firms’ investments in customer acquisition and retention for a new service; it develops hypotheses drawing on analytical findings and tests them with firm-level operating data of wireless telecommunications markets from 41 countries during 1999–2007. The empirical investigation shows that a firm’s acquisition cost per customer is more sensitive to market position and competition than retention cost per customer. Furthermore, whereas firms leading in market share, on average, do not have a cost advantage over other firms in retaining customers, they have a substantial cost advantage in acquiring customers, and this advantage tends to increase with market penetration. The study results provide guidelines for firms’ strategic resource allocation for customer acquisition and retention in competitive service markets.Department of Management and Marketin

Entry Mode and Performance in a Transitional Economy: A Framework for Foreign-Invested Enterprises in China

A conceptual framework is developed, bringing together entry mode, the influence of state officials, and the adoption of a customer-driven orientation in order to explain the performance of foreign-invested firms in a transitional economy. The model is tested on a sample of firms in China across eight provinces and cities, spread across the relatively developed South Coast, the Central Belt formed by Shanghai and the Yangzi basin and the less-developed North and West. We find that the decision to enter through a joint venture reduces the customer focus of the enterprise. Contrary to expectation, however, we find no positive relationship between entry by joint venture and the degree of state influence exerted over the enterprise. It appears that whollyowned foreign enterprises experience just as much involvement by government officials in their activities as do the joint ventures. However, greater customer focus fosters innovativeness, which in turn, leads to higher performance. Managerial implications are discussed for executives responsible deciding on the mode-of-entry: wholly-owned foreign enterprise (WOFE) or foreign equity joint venture (FEJV).Department of Management and Marketin

Chaos : implications for new product forecasting and the research-practice interface

The mathematics of chaotic dynamics are now familiar to marketing researchers. Do possible sightings of chaos in marketing data sets have implications for the way new product studies and launches should be performed? Should these practices be affected by the knowledge that chaos is possible in principle? Although the mathematics of new product diffusion models clearly allow for chaotic bifurcations and fluctuations, these phenomena have not been reliably observed for actual products. In this paper we offer reasons why this has been so. The reasons include measurement and specification error, and aggregation and data collection interval effects. We conclude that marketers have not been looking in the right places to find chaos (or at least, traditional market research reports do not lend themselves to an effective search for chaos), and that brand managers behave in a way that minimizes chances of observing chaos. The exploration of chaos in the context of new product forecasting leads to an analysis of the implications of chaos for the practice of marketing

National brands versus private labels: An empirical study of competition, advertising and collusion

This article considers competition between nationally advertised brands and quality-equivalent privatelabel brands (a form of store, house or own-label branding). Philip Parker and Namwoon Kim investigate the impact of advertising on market power across brands. Supporting recent theoretical arguments (though contradicting others), the industry study reveals that heavy advertising among national brands can increase prices, revenues, and profits for both national brands and private-label brands. Using a representative category, the authors report nine tests to support the conclusion that the 'battle of private labels' may result in 'an alliance with private labels'. From a theoretical perspective, the study rejects the advertising as information hypothesis and the authors find that advertising sustains (significantly increases) market power and/or facilitates collusive strategies.

Using Exploratory and Exploitative Market Learning for New Product Development

While the need for research on the market‐learning efforts of a firm in relation to its new product development is continuously emphasized, the empirical results on this issue reported so far have been mixed. The current study contends that the inconclusive nature of the empirical evidence is mostly due to the existence of different dimensions of organizational market learning—exploratory and exploitative—and to possible different routes by which these learning dimensions are linked to new product performance. More specifically, this study argues that exploratory market learning contributes to the differentiation of the new product because it involves the firm's learning about uncertain and new opportunities through the acquisition of knowledge distant from existing organizational skills and experiences. By contrast, this study posits that exploitative market learning enhances cost efficiency in developing new products as it aims to best use the currently available market information that is closely related to existing organizational experience. This study provides empirical support for this two‐dimensional scheme of organizational market learning and its consequent effects on two components of new product advantage: new product differentiation and cost efficiency. Further, given that the effectiveness of firms' strategic efforts is contingent upon the nature of the market environment, the current study examines the moderating effects of environmental dynamism and market competitiveness for this market learning—new product advantage relationship. This study is based on survey data from 157 manufacturing firms in China that encompass various industries. The empirical findings support the two‐dimensional market learning efforts that increase new product differentiation and cost efficiency, respectively. The study confirms that exploratory market learning becomes more effective under a turbulent market environment and that exploitative market learning is more contributive when competitive intensity is high. It also suggests that because of their differential direct and moderating effects on new product advantage either exploratory or exploitative market learning may not be used exclusively, but the two should be implemented in parallel. Such learning implementations will help to secure both the feature and cost‐based new product advantage components and will consequently lead to the new product success. The current study attempts to contribute to greater clarity and better understanding of how market learning influences new product success as it theoretically identifies and empirically validates the two forms of new product advantage as the conceptual mediator between market learning and new product performance

An initial and repeat purchase demand model for multi-generation technological product markets

While most studies on the new product adoption models have focused on single-generation products, the importance of analyzing the consumers' purchase demand in multi-generation products has been emphasized only recently. Modeling efforts in multi-generation product markets can be categorized into two streams -- repeat purchase and technological substitution (replacement of generation). This paper integrates the two areas by proposing a model which incorporates both initial and repeat purchases, and allows for leap-frogging behavior in multi-generation technological product markets. Whereas most new product adoption models are based on aggregate market sales, the proposed model is estimated and validated on individual consumer data. The model form is deceptively simple. Within a logistical framework, it combines purchase incidence (buy/not buy) component and brand (or "generation") choice components for each time period. These model components allow for individual heterogeneity and purchase probabilities for buyers are captured as a function of buyer expectations of future generations and preferences of the currently available options. The proposed model is quite parsimonious. It requires relatively simple data for estimation. It is empirically tested using individual-level purchase data from the multi-generation personal computer market data. The model fits and predicts the individual consumers' actual purchase behavior reasonably well

Modeling cross-price effects on inter-category dynamics: The case of three computing platforms

Existing research on the market evolution model focused on new product sales growth for a single product category. Accordingly, this approach did not imply any interactions among separate but related product categories that could affect each other's market growth. However, the importance of analyzing these inter-category relationships is emphasized because such an analysis helps managers to better understand the underlying market dynamics and develop more profitable product-line strategies for a multi-product market. The current study suggests a sales growth model that can be used to analyze the inter-category product relationships and forecast sales of these related products. The authors develop a simultaneous equation model that incorporates the cross-price effects on inter-category dynamics for technological product markets. It deals with the price effect of one product category on the market size of other categories that serve similar customer utilities. The model is empirically tested based on the sales and price data of three computing platforms--mainframe, mini, and micro computers, which dynamically interact within the broader "computing" market. The results show that the sales of a given category of computing platform is significantly affected by the price of the category itself and by that of the related categories as well. The model is validated by comparing it with its alternative model specifications of similar purpose based on several established model comparison criteria. Managerial implications, contributions, and limitations of the model are also discussed.Innovation diffusion Inter-category relationships Cross-price effects Marketing Computing industry