Abstract

Abstract

Research in 1974 opened the subject of signaling. The idea was that schools could signal potential employers about the expected job performance of students. This was followed by work in economics and marketing where the potential consumer was the target. More recently, the subject has been studied in the area of stockholder relations.The current authors applied the ideas to the introduction of a new product, where the term is preannouncement. The purpose of this study was to learn more about how firms decide to use, or not use, preannouncement. Note that this is not a study of success of the strategy, nor is it a study of the reactions or behavior of consumers. Firms were asked, “In your most recent new product introduction, did you preannounce or not? If yes, why?” Various pretests were conducted, instruments refined, and survery forms handed out. The sample consisted of 75 individuals who had participated in executive education courses at a major university.The authors theorized that there were two factors involved in this decision. One was consumer behavior (would there be advantages to preannouncing?) and competitive behavior (would competitors move to hurt the preannouncer in any way?) They also hypothesized the following specific propositions about the respondents' answers in the survey. For each, the study results are given. 1. Preannouncing firms will defend their behavior in terms of the increased buying they expected to stimulate; non‐preannouncing firms will defend their behavior by stressing the competitive risks of such a practice. Result of the research: The expected reasons were given, but other reasons were given as well. For example, preannouncers often mentioned image enhancement and distribution advantages. Non‐preannouncers mentioned inability to deliver and fears of antitrust action. Apparently there are many, highly situational reasons for the action or the non‐action. There is no available body of theory that fits such diversity. 2. Because the potential gains come at some risk, it was hypothesized that firms with smaller market shares would be most attracted to the approach. Result of the research: This was verified. 3. Because the larger the firm the more likely preannouncement may be considered anticompetitive, larger firms will use it less than will smaller firms. Result of the research: This was verified. 4. Because the more competitive the industry is, the more likely adverse competitive response is, preannouncement is expected to be more common in less competitive industries. Result of the research: This was verified. 5. Because preannouncement is most advantageous when consumers need more time to learn about the new item, it was hypothesized that substantial consumer learning would be positively associated with preannouncement. Result of the research: This was not borne out. 6. Because switching costs are a significant impediment to market acceptance of a new item (and favor current suppliers), preannouncement should be more prevalent when switching costs are high. Result of the research: This was verified.The authors prescribe various forms of additional theory building and research. But the findings clearly indicate that the preannouncement decision is a valid issue, and that there is some specific situation analysis that firms do when deciding it.