What You Should Know When Introducing a Product in EuropePublished: June 01, 2005 in Knowledge@Emory
If corporate executives could unravel the mysteries of new product acceptance, just imagine the possibilities. They could predict a winning product long before it ever hit the market, insuring their company’s success. But truth be told, the timing of when and if a product will become a hit is quite difficult to foretell. It took 15 years for the fax machine, one of the greatest inventions known to office managers, to capture our hearts. Add to that the logistical challenges that U.S. companies face when launching a product in European markets, and the uncertainties become even greater.
Stefan Stremersch, a visiting associate professor of marketing at Emory University’s Goizueta Business School, has been working to demystify the takeoff of new products around the world. In his latest paper The International Takeoff of New Products: The Role of Economics, Culture and Country Innovativeness (which won top honors in a contest held by the Marketing Science Institute and was covered in the media all around the world), he and co-authors Gerard J. Tellis and Eden Yin explore a number of questions about sales takeoff that could ultimately help businesses better understand the process and protocol for launching new products in Europe. In a comprehensive research paper that follows up on previous studies of product takeoff in the U.S., Stremersch and his associates address such questions as: does takeoff occur as distinctly in other countries as it does in the U.S.?; do different categories and countries have consistently different times to takeoff?; and what economic and cultural factors explain the inter-country differences?
The research begins with the understanding that new products do not grow into maturity at a steady rate. Rather, their sales pattern is marked by a long introduction period, when sales linger at low levels. At a certain point, the new product breaks into rapid growth, associated with a huge jump in sales — hence, takeoff. “In 1997 the advisor for my dissertation, Gerard Tellis, worked with Peter Golder on the concept of takeoff in the U.S.,” explains Stremersch, who has worked for the past eight years on issues related to technology innovation. “Their finding, in a nutshell, was that products take off when they get significantly cheaper.”
Stremersch’s paper extends this research into the international realm, motivated in part by issues surrounding the European unification movement. The introduction of a single European currency (the EURO) has led many to believe that the western half of the continent constitutes a single European market. Yet others argue that these countries have distinct market identities. Could a study about product takeoff uncover some truths about these dueling theories? “Europe has had a lot of issues around European convergence,” adds Stremersch. “What kinds of differences are there throughout The European Union between countries, and are these differences getting narrower or wider over time [as they are] affected by the unification movement? We looked to see differences across these European countries in how fast a product consistently takes off. Are some countries consistently fast in new product takeoff or are some countries consistently slow?”
Stremersch and his co-authors gathered data on 137 new products across 10 categories and 16 European countries. Products included such consumer durables as CD players, color TVs, computers, dishwashers, refrigerators, VCRs and washing machines. One of the most striking results, observe the researchers, is the dramatic time-to-takeoff difference between geographic regions of Europe. Scandinavian countries (Denmark, Sweden, Norway, Finland) have the shortest time-to-takeoff at 4 years. This number is almost half that for Mediterranean countries (France, Greece, Italy, Portugal and Spain), which have a mean time-to-takeoff of 7.4 years. The time for the rest of Europe (UK, Ireland, Germany, Austria, Belgium, Netherlands and Switzerland) is in the middle, at 6 years. What’s more, time-to-takeoff varies substantially across countries and categories. It is four times shorter for entertainment products than for kitchen and laundry appliances. It is almost half as long in Scandinavian countries as in Mediterranean countries.
Many of the differences related to product takeoff, says Stremersch, can best be explained by culture as opposed to economics. Takeoff is slower in Greece, for instance, because culturally the most innovative people of Greece are much less innovative than the most innovative people in the Netherlands. This finding has startling implications for the future market identity of The European Union. “If the explanation were economic, then you would expect that the differences in takeoff time between countries would get smaller because [for the most part] in The European Union the poorer countries are getting richer very fast and they’re closing in on the more wealthy countries,” notes Stremersch. “You would also expect in unification that different cultures would blend and come closer together. But that is not the case. In the unification movement, it seems that people are generally more strongly in touch with their original culture. That means that there is remaining cultural divergence that will only grow wider and that will also affect to what extent people are quick in accepting new technologies or not. Our research says that there is a strong difference in takeoff times and a strong difference in what speed people accept new products—and [it is not influence by], for instance, having an economic policy of convergence. Our message is that these differences are here and they are here to stay.”
The greatest lesson learned for managers by the findings in The International Takeoff of New Products, suggests Stremersch, is that the dramatic differences in takeoff times between countries defeat the notion of a globalization strategy. “What this paper shows is that within Europe, there are really wide differences in the status of the market,” observes Stremersch. “If you compare Denmark and France, you see that in Denmark the product has already taken off and you’re already reaching the mass market. At that point in France, you’re still trying to target the innovative segment of the market. You’re still trying to convince these very first consumers to buy your products. You’re basically before takeoff. This has large effects for marketing strategy. You can’t run the same pricing strategy or the same advertising campaign. You have to adapt locally.”
This research also gives companies some expectations about the time it will take for certain products to take off in the European market, notes Stremersch. “For instance, if you look at CD player, the average takeoff time is around three years,” he says. “If you are launching a DVD player, the time to takeoff of the CD player could give you a hint as to how long it could take you to get takeoff.” Companies also need to understand, he adds, that takeoff is not going to be immediate. It will take some time.
Stremersch has already taken his research on international takeoff to the next level in his paper Understanding and Managing International New Product Growth, which has been published in the International Journal of Research and Marketing. This second paper explores what happens after the takeoff of a new product. When does a product slow down and reach its full market potential? Look for a follow-up article in a future Knowledge@Emory.