Clustering product launches by price and launch strategy

Abstract

PurposeThe purpose of this paper is to examine the interaction of pricing strategies with other aspects of launch, in particular, timing, logistics/inventory strategy, and coordination with support organizations, and the effect on profit and competitive performance.Design/methodology/approachThe paper presents an empirical study of 215 recent new product launches, focusing on pricing and other strategic and tactical launch decisions and the resulting profitability and competitive performance. Clusters of new product launches are identified and the profitability and competitiveness of each cluster are discussed.FindingsThe paper finds that some clusters are related to greater success than others. The most profitable and competitively successful cluster contained launches supported by solid market research and marked by good timing decisions. By contrast, the least profitable/successful cluster were higher price launches unsupported by adequate research.Research limitations/implicationsThe study is limited by the fact that the sampling frame is made up of members of a professional association of product development and management, and may therefore be more representative of “best practice” in new product development (NPD) than of NPD in general. The authors believe the use of the key informant method is justified in this study, however this method has been criticized in the past.Originality/valueThe pricing decision for a new product is sometimes oversimplified as a “high‐low” or “skimming versus penetration” choice. The study finds that the actual effect of pricing on ultimate success is much more complex, and that one must consider not only price level, but also the timing of the launch, the logistics and inventory strategy, the extent of market research, testing, and planning, and so forth.