New Product Launch Strategy for Network Effects Products

Abstract

In recent years, there has been a growing interest in the link between launch strategy decisions and new product performance. Much of that research focuses on investigating successful launch strategies for innovative, high-technology products. With the rapid growth of information technology as one high-technology sector, in certain industries, network effects occur, which change the competitive game. The existing literature offers little decision-making guidance to managers on how to successfully introduce a product that exhibits network effects. The authors discuss the influence of network effects on the dynamics of market competition and on consumers' consumption behaviors. They argue that, because of these changes, the priority of particular performance objectives and the impact of specific launch strategies differ for products that exhibit network effects from what current wisdom and empirical results prescribe. These ideas are formalized in a conceptual framework and a series of research propositions.

The chilling effects of network externalities

“…This lack of knowledge is noteworthy given the growing interest in optimal product strategies for network goods. Various market entry strategies or reactions to market entry of network goods have been suggested in recent years (Sun, Xie & Cao, 2004;Lee & O'Connor, 2003;Montaguti, Kuester & Robertson, 2002). Such strategies typically have an impact on or are affected by the rate of growth of the network good in question.…”

Qualitative Analysis of Online Communities to Support International Business Decisions

“…In a business to consumer context, this network innovation arises when indirect network externalities exist. Indirect network effects occur when the introduction of complementary goods by a firm increases as the sales of the primary good increases (Lee and O'Connor 2003). Therefore, firms will be motivated to launch more products related to this network of products in order to increase the value perceived by customers (Basu et al 2003).…”

Integrating Value and Utility Concepts into a Value Decomposition Model for Value-Based Software Engineering

“…The significance of these psychological effects can be so strong as to enable firms with inferior products to capture the markets if they gain control of the bandwagon [13]. Product launch timing is an influential factor in creating these effects and hence at least release planning is affected by this market effect [22].…”