Marketing Strategies: Introduction Stage and the Pioneer Advantage
Because it takes time to roll out a new product, work out technical problems, fill dealer pipelines, and gain consumer acceptance, sales growth tends to be slow in the introduction stage. Profits are negative or low, and promotional expenditures are at their highest ratio to sales because of the need to (1) inform potential consumers, (2) induce product trial, and (3) secure distribution.31
To be the first to introduce a product can be rewarding, but risky and expensive. Steven Schnaars studied 28 industries in which imitators surpassed the innovators and found several weaknesses among the failing pioneers.32 These included new products that were too crude, improperly positioned, or launched before strong demand existed; exhaustive product-development costs; a lack of resources to compete against larger entrants; and managerial incompetence or unhealthy complacency. Successful imitators thrived by offering lower prices, continuously improving the product, or using brute market power to overtake the pioneer.
Gerald Tellis and Peter Golder have identified five factors underpinning long-term market leadership: vision of a mass market, persistence, relentless innovation, financial commitment, and asset leverage.33 One study found Internet companies that realized benefits from moving fast (1) were first movers in large markets, (2) erected barriers of entry against competitors, and (3) directly controlled critical elements necessary for starting a company.34
FIGURE 9.5 Sales and Profit Life Cycles