Why Do Some International Markets Quickly Embrace New Products While Others Don’t?Published: December 15, 2005 in Knowledge@Emory
Stefan Stremersch is passionate about new products—equally as passionate as managers are about the growth of their companies’ fledgling products in the marketplace. A visiting associate professor of marketing at Emory University’s Goizueta Business School, the Belgian-born Stremersch has spent the past 8 years studying technology innovation and new product growth. And yet, he believes he has only scratched the surface of potential papers on the topic. “In marketing study, there have only been around 10 good papers on international growth of new products, which is still rather limited,” suggests Stremersch. “All the diverse issues that can come up internationally can mean huge problems for managers. We need to face up to the magnitude of the challenge for practitioners.”
Stremersch and his colleagues are doing their part academically. In his paper “The International Takeoff of New Products: The Role of Economics, Culture and Country Innovativeness,” he and co-authors Gerard J. Tellis and Eden Yin explored a number of questions about sales takeoff that could ultimately help businesses better understand the process and protocol for launching new products in Europe. That, of course, led to numerous new questions that Stremersch was not about to let go unanswered.
He and Tellis, a professor of marketing at the Marshall School of Business, University of Southern California, have since followed up on their product takeoff research in their paper, “Understanding and Managing International Growth of New Products,” which explores what happens next in the lifecycle of certain products in Europe, in particular consumer durables, electronics and kitchen and laundry appliances. This paper won top honors in a research competition held by the Marketing Science Institute. “The previous paper looked at the very early stage of new product growth, the takeoff point,” notes Stremersch. “Takeoff is the point where growth kicks in. The first paper was about when that point occurs: is it long after the product is introduced or rather shortly after the product is introduced? We now know that takeoff varies across countries and that it is driven by culture. But what happens to growth after this takeoff point? Is that again similar across countries or very different? And if it’s different, by what is it different? In this paper, we advanced from the very early stage to the middle stage of the product lifecycle.”
“Understanding and Managing International Growth of New Products,” which was published in the International Journal of Research in Marketing, addresses whether or not the pattern of product growth after the takeoff point differs across countries, whether such differences can be explained by culture or economics and the implications of these results on new product strategy.
The study uses the database of historical data on sales of new consumer durables developed by Stremersch, Tellis and Yin, which contains sales data on 10 consumer durables across 16 European countries, including Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK, from the period 1950 to 2000. The authors studied the duration of the growth stage of the product lifecycle, which is the time that elapses between takeoff and the end of the growth stage. The end of the growth stage is one period before sales slow down, or start to decline. The study also looks at growth rate to explain the pattern of sales growth across Europe.
The findings, new to this field of research, suggest strong differences across countries in both growth rate and growth duration. The mean duration of the growth stage, for example, ranges from 6.5 years in Denmark to 13 years in Switzerland. “The results show that the pattern of growth differs substantially across European countries,” explains Stremersch. “The pattern is somewhat different than for the takeoff point. In the takeoff paper, we found that the fastest takeoff is in the north, then on to the Mediterranean, and then on to the southern countries, explained by the fact that technophiles are more frequent in culturally innovative countries.
In this paper, when advancing in the lifecycle past takeoff point, the pattern is much more mixed. The first countries that show the shortest growth stage with the highest growth rate are countries like Finland, Denmark, the Netherlands and Germany. There is a different kind of pattern here; it is not a very clear-cut, north to south phenomenon.”
The key reason for this changing pattern, Stremersch suggests, is that the drivers of product growth differ from the drivers of product takeoff. Product takeoff is much more about how quickly the most innovative segment in the country adopts the product, while product growth is more about how fast the mass market is adopting the product in each of the countries studied. In other words, while culture explained the variations in takeoff points, economy explains the variations in product growth. “The Gross Domestic Product per capita is the best way to explain variations in product growth,” says Stremersch. “Products in the wealthy countries seem to grow very fast to maturity, but in the somewhat poorer regions, they grow somewhat more slowly to maturity. There’s still variation, as in the takeoff paper, but it seems to be more split up into economic blocks.”
The combined research and results from both Stremersch/Tellis studies help demystify new product growth in Europe for managers in a number of ways, says Stremersch. He details three significant implications:
- When companies are introducing a new product into the international realm, they need to decide whether to tackle all countries at the same time—in what Stremersch refers to as a sprinkler strategy—or to enter into countries with a waterfall strategy, introducing in different countries at different times. As the research and simulation exercises suggest, different strategies generate different growth cycles. “The sprinkler generates sales faster, but it also has the most risk,” explains Stremersch. The north to south waterfall strategy generates the same amount of sales, but it gets there slower. It also gets there at a lower risk. The introduction of a new product is a tradeoff between sales maximization and risk minimization. A firm or manager has to ask, ‘How much risk am I willing to incur?’
- The results address global versus local marketing of a new product. If a company is marketing internationally, does it use the same strategy for all countries, or does it differentiate across countries? “Our results across the two papers show that countries are in very different stages of lifecycle at certain times,” says Stremersch. “Some countries like France may not have reached product takeoff, while Finland has reached product maturity. That means that you have a totally different customer to target for adoptions of the product. Since countries are in different stages, you are likely to have different advertising copy run across these countries. That applies for other strategies like price, as well.”
- And finally, the research has implications for managing expectations about a new product’s growth. “We give empirical, historical evidence about how new product growth evolves across countries, both in takeoff and slow down,” notes Stremersch. “On average, a product might take five or six years to take off, especially when you have a new kitchen appliance. So you shouldn’t be upset if after one year your product has not yet taken off. The same thing with product growth. Our research shows managers that products do reach maturity, it is a fact of life, and it also gives them an expectation of how long that might take. On average, we found that products, after takeoff, grow from 8 to 10 years before they reach maturity and stop growing.” The research also helps managers set expectations about how and when different products will take off and grow in certain countries.
Stremersch isn’t done yet. He has already begun to expand his cache of new product growth data by looking into European growth patterns for pharmaceutical products and by studying which countries influence each other’s product takeoffs. For instance, does a takeoff in the Netherlands influence the takeoff in Belgium, Germany or Denmark? And if so, why? Stay tuned. Says Stremersch: “We’re keeping busy.”