Optimal product introduction and life cycle pricing policies for multiple product generations under competition

Arslan, Hasan; Kachani, Soulaymane; Shmatov, Kyrylo

doi:10.1057/rpm.2008.47

Cited by 34 publications

(9 citation statements)

References 10 publications

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“…Billington et al (1998) and Erhun et al (2007) provide managerial insights derived from hands-on experience. To our knowledge, only five papers consider analytical comparisons of rollover strategies (despite employing different terminologies): Levinthal and Purohit (1989), Lim and Tang (2006), Ferguson and Koenigsberg (2007), Arslan et al (2009), and Koca et al (2010). The last four focus on the cannibalization effect and/or product introduction and phaseout times.…”

Section: Introductionmentioning

confidence: 99%

Analysis of Product Rollover Strategies in the Presence of Strategic Customers

Liang

Çakanyıldırım²,

Sethi³

2014

Management Science

100

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F requent product introductions emphasize the importance of product rollover strategies. With single rollover, when a new product is introduced, the old product is phased out from the market. With dual rollover, the old product remains in the market along with the new product. Anticipating the introduction of the new product and the potential markdown of the old product, strategic customers may delay their purchases. We study the interaction between product rollover strategies and strategic customer purchasing behavior and find that single rollover is more valuable when the new product's innovation is low and the number of strategic customers is high. Interestingly and counter to intuition, the firm may have to charge a lower price for the old product as well as receive a lower profit with a higher value disposal (outside) option for the old product under single rollover. Facing a market composed of both strategic and myopic customers, the firm does not necessarily reduce the stocking level as more myopic customers become strategic.

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Section: Introductionmentioning

confidence: 99%

Analysis of Product Rollover Strategies in the Presence of Strategic Customers

Liang

Çakanyıldırım²,

Sethi³

2014

Management Science

100

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“…Lim and Tang (2006) and Arslan et al. (2009) are among the few papers in the product rollover literature that endogenize the release times. In both papers, however, the release time informs the volume of aggregate demand for the second product, and it does not impact the perceived quality of either product.…”

Section: Introductionmentioning

confidence: 99%

Designing Digital Rollovers: Managing Perceived Obsolescence through Release Times

Koca

Valletti

Wiesemann

2021

Production and Operations Management

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When releasing a new version of a durable product, a firm aims to attract new customers as well as persuade its existing customer base to upgrade. This is commonly achieved through a rollover strategy, which comprises the price of the new product as well as the decision to discontinue the sale of the existing product (solo rollover) or to sell the existing product at a discounted price (dual rollover). In this study, we argue that the timing of the new product release is an important—but commonly overlooked—third lever in the design of a successful rollover strategy. The release timing influences the consumers' perception of obsolescence, by which an existing product is considered obsolete merely by reference to a new product. This reinforces the upgrading behavior of existing customers, but it also necessitates deep discounts of the existing product to keep its sale viable in a dual rollover. We analyze the impact of the release timing on solo and dual rollovers in markets for digital goods (i.e., where production costs are negligible) that are composed of naive and sophisticated consumers. Under the assumption that both the old and the new product would offer a similar utility if there was no perceived obsolescence, we show that in both markets a firm selecting the release times from a continuous timeline can induce sufficiently large parts of its existing customer base to upgrade so that a solo rollover is optimal. We also characterize the resulting market segmentation, and we offer managerial as well as policy advice.

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“…150 In the same vein as our research, another stream of the literature 151 on multiple generation products introduction assumes a single gen-152 eration in the market at any time (solo-product roll). Some papers 153 examine product introduction decisions under competitive environ-154 ment in a duopoly (e.g., Arslan et al, 2009;Cohen et al, 1996Cohen et al, , 2000155 Morgan et al, 2001;Souza, 2004;Souza et al, 2004), while others con-156 sider a monopoly as we do in our paper (e.g., Carrillo, 2005 Liu and Ozer (2009) is closely related to our work. We both show that 159 the pace of technology evolution negatively impacts the firm's to-160 tal profit, and a smaller product replacement cost encourages more 161 product replacements.…”

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confidence: 96%

“…This 58 assumption is supported: For example, Hewlett-Packard totally re- 59 placed DeskJet 500 printers with DeskJet 510 printers (Lim & Tang,60 2006); Microsoft stops selling older software versions as soon as a new 61 version is released; Google stopped selling Nexus 4 when launching 62 Nexus 5 in September 2013, and so on. Consequently, the assump- 63 tion of a complete replacement strategy is widely used in the liter-64 ature (e.g., Arslan, Kachani, & Shmatov, 2009;Carrillo, 2005;Cohen, 65 Eliashberg, & Ho, 1996& Ho, , 2000. 66 We consider a firm that adopts a complete replacement strategy to 67 introduce multiple generations of a product at regular time intervals 68 within a given planning horizon.…”

mentioning

confidence: 99%