Is Early Product Release Preannouncement a Signal for High Product Quality?

Abstract

New product release preannouncement is a pre-release communication process for sending a message to target groups such as consumers, competitors, and/or stockholders. Despite its importance, little has been empirically investigated about the strategic role of its timing. In this paper, we focus on consumers as the target group and study the impact of preannouncement timing on consumer demand for new products. In particular, we investigate a signaling role of preannouncement timing as a potential mechanism for the effect of preannouncement timing on sales. We construct a unique data set from the Japanese video game market, which includes details about product release strategy, game characteristics, pre-release survey on consumer excitement, media coverage, advertising, and post-release sales for 936 games between 1999 and 2008. Our findings suggest that (1) early preannouncement increases sales for high-quality games, but decreases sales for low-quality games; and consistently (2) high-quality games tend to preannounce earlier than low-quality games. We then investigate the signaling role as an underlying mechanism, where pre-release consumer excitement plays a key role: early preannouncement increases consumer excitement, but too much excitement hurts sales for low-quality games and this serves as a signaling cost. The additional findings are consistent with the signaling role.