Product Introduction Strategies under Sequential Innovation for Durable Goods with Network Effects

Chau, Ngan N.; Desiraju, Ramarao

doi:10.1111/poms.12649

Cited by 21 publications

(13 citation statements)

References 56 publications

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“…Sale et al [3] presented a model that simultaneously determines the optimal timing for the introduction of new product generations, pricing, production timing, and produced quantities. Chau and Desiraju [4] explored the relative optimality of five product-introduction strategies of a durable goods manufacturer: replacement, skipping, a delayed line, shelving, and line-extension. Kirshner et al [5] advised that brand commitment and the risk of product failure play an important role in the timing of upgrades for a durable product.…”

Section: Literature Reviewmentioning

confidence: 99%

The Pricing Decision and Channel Choice of Upgraded Products in the Presence of Strategic Consumers

Shao

2021

Mathematical Problems in Engineering

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Many dual-channel suppliers need to make appropriate strategies for their upgraded products in the presence of strategic consumers. This paper develops a two-period dynamic game framework to explore the optimal pricing and upgrade the channel choice when the supplier introduces new upgraded products to a market populated by strategic consumers. The results show that, under any upgrade channel choice, the strategic consumers’ behavior has impacts on supplier and retailer’s pricing decisions and reduces their profit. The supplier could choose appropriate upgrade channel to improve his performance according to the consumers’ patience and innovation level of upgrade products. The supplier should choose pure offline channel to upgrade products when the innovation level of upgraded product B is relatively small. With the sufficiently high innovation level, the supplier should adopt pure offline channel to upgrade products when consumers’ patience is low and uses dual-channel upgrade strategy when the patience is high enough.

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Section: Literature Reviewmentioning

confidence: 99%

The Pricing Decision and Channel Choice of Upgraded Products in the Presence of Strategic Consumers

Shao

2021

Mathematical Problems in Engineering

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“…Sun et al [18] use the expected network size and the strength of the network effect to characterize consumers' utility. Chau and Desiraju [19] describe network benefits through the total number of consumers who purchase early and the influence of the installed base on consumers' willingness to pay. Especially due to the development of computing technology, "personal interaction" has been incorporated into the purchasing process.…”

Section: Literature Reviewmentioning

confidence: 99%

“…As the network effects exist, we can avoid considering the situation where all consumers enter the market when M is sufficiently large. at is, β is assumed to have no finite lower limit so as to avoid considering corner solutions [18,19,30]. e larger β is, the more sensitive consumers are to the innovation level.…”

Section: Individual's Decision-makingmentioning

confidence: 99%

The Impact of Advance Selling Strategies on a Three-Echelon Supply Chain in the Presence of Social Influence

Niu

Yang

2020

Mathematical Problems in Engineering

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As the quality of new products is ex-ante uncertain, social influence plays an important role in the diffusion of a new product. An important question is how to expand public knowledge about consumer experience with a new product by using promotion strategies. This paper discusses the impact of advance selling strategies on a three-echelon supply chain when upstream enterprises launch a new product facing strategic consumers under social influence. This problem is modeled as a Stackelberg game, and a two-advance-selling-discount model is presented. Furthermore, we consider the impact of advance purchase behavior on the financing strategy when the retailer places an advance order. Several results are obtained: (i) the consumers’ utility in the second period is increasing in the number of predecessors. (ii) Upstream enterprises will provide deeper advance selling discounts when consumers become more patient or predecessors have a greater influence on imitators. Moreover, the total demand will increase when the consumer’s discount factor decreases or the impact intensity of predecessors increases. However, high innovation levels will drive enterprises to set high advance selling discounts. We also obtain the condition under which the total demand increases quickly as the innovation level changes. (iii) The two-advance-selling-discount model yields Pareto-improved results compared with the case where there is no advance purchase, though it cannot coordinate the supply chain. Finally, we extend the model to analyze the two-advance-selling-discount model with a minimum order quantity constraining the precommitted order quantity, and we show this can allow the enterprises to increase their profits. We also determine a condition under which the upstream enterprises should put a constraint on the minimum order quantity.

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“…3 In addition, some software vendors adopt the Line-extension Strategy i.e., release a low-quality version first and extend the product line by releasing a high-quality version later and sell both versions simultaneously. For instances, Adobe Acrobat 3D was added to the product line of Adobe Acrobat in 2005, 4 Adobe Premiere Pro was added to the product line of Adobe Premiere Elements in 2003, 5 and Dishonored 2 was added to the line of the old version Dishonored in 2016. In this case, after the release of the high-quality version, the low-quality version is still available on the market, and consumers could purchase either version.…”

Section: Introductionmentioning

confidence: 99%

“…Word-of-mouth (WOM), involving information communication among consumers on products or services, is generally considered to affect consumers' adoptions through influencing their perceptions about product value, namely, positive WOM enhances expected quality while negative WOM reduces it [3,4]. When choosing from such sequential releasing strategies, the WOM effect bridging sequential periods is a vital factor for firms to consider, because the valuation of consumers for a newer high-quality product can be significantly affected by the older low-quality product [5]. Namely, consumers buying the older low-quality version may generate (positive or negative) WOM effect, which will have an impact on the valuation of the future consumers for the newer high-quality product.…”

Section: Introductionmentioning

confidence: 99%

Optimal sequential releasing strategy for software products in the presence of word-of-mouth and requirements uncertainty

Wang

Feng

et al. 2018

Inf Technol Manag

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This study proposes a two-period analytical model to explore the relative optimality of three sequential releasing strategies for a software vendor: (1) Skipping Strategy-skip the limited-functionality version and introduce a full-functionality version in the next period, (2) Replacement Strategy-release a limited-functionality version first and replace it with a full-functionality version later, and (3) Line-extension Strategy-release a limited-functionality version first and extend the product line by releasing a full-functionality version later. Word-of-mouth (WOM) effect and uncertainty in consumers' requirements are taken into consideration. Our analysis shows that Skipping Strategy is optimal when the net WOM is negative and sufficiently small, while the Replacement Strategy becomes the optimal choice when the net WOM is negative but not sufficiently small. However, the Line-extension Strategy dominates other two strategies when the net WOM is positive. Different pricing patterns may be chosen when adopting Line-extension Strategy, i.e. when the net WOM is positive and not very large, Low-High pricing pattern (a relatively low price for the limited-functionality version and a relatively high price for the full-functionality version) is optimal, while High-Low pricing pattern (a relatively high price for the limitedfunctionality version and a relatively low price for the full-functionality version) becomes optimal when the net WOM is positive and sufficiently large. Numerical experiments show that the software vendor could improve its profit by choosing optimal quality design but the overall dominance pattern of the three release strategies is similar no matter whether the quality design is exogenously given or optimally chosen.

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Product Introduction Strategies under Sequential Innovation for Durable Goods with Network Effects

Cited by 21 publications

References 56 publications

The Pricing Decision and Channel Choice of Upgraded Products in the Presence of Strategic Consumers

The Pricing Decision and Channel Choice of Upgraded Products in the Presence of Strategic Consumers

The Impact of Advance Selling Strategies on a Three-Echelon Supply Chain in the Presence of Social Influence

Optimal sequential releasing strategy for software products in the presence of word-of-mouth and requirements uncertainty

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