For most firms, successful new products are engines of growth. Several frameworks, including the product life cycle and the growth-share matrix, postulate the need for new products that generate future profitability and prevent the obsolescence of the firm's product line. Year after year, managers strive to improve financial performance and firm value through marketing actions such as new product introductions and promotional incentives. It is investigated the short- and long-term impact of such marketing actions on financial metrics, including top-line, bottom-line, and stock-market performance. It is applied multivariate time-series models to the automobile industry, in which both new product introductions and promotional incentives are considered important performance drivers. Notably, whereas both marketing actions increase top-line firm performance, their long-term effects strongly differ for the bottom line. First, new product introductions increase long-term financial performance and firm value, but promotions do not. Second, investor reaction to new product introduction grows over time, indicating that useful information unfolds in the first two months after product launch. Third, product entry in a new market yields the highest top-line, bottom-ine, and stock market benefits. Managers may use these results to justify new product efforts and to weigh short- and long-term consequences of promotional incentives. The findings have several important implications for new product and promotion strategies. Innovative firms need to pay special attention to appropriating new product introduction rewards in the marketplace to enhance stock returns. In conclusion, the research adds an important dimension. The investor community rewards innovative firms by their willingness to pay a premium in valuation, and this premium gradually increases for several weeks after the new product launch. Furthermore, innovation policy is an antidote against firms' dependence on sales promotions, which depress firm value.
New products, sales promotions, and firm value: The case of the automobile industry
Journal of Marketing ; 68 , 4 ; 142-156
2004
15 Seiten, 2 Bilder, 10 Tabellen, 81 Quellen
Aufsatz (Zeitschrift)
Englisch
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