European economies show dramatic differences in innovativeness

A study of 137 new product launches in 16 European countries shows the persistence of major regional disparity in the era of the European Union, according to an article in a journal of the Institute for Operations Research and the Management Sciences (INFORMS®).

“While we expected some differences, we were surprised by the size of the differences,” the authors write. “We were also surprised by the fact that Scandinavian countries tend to have the shortest `time-to-takeoff´ of all European countries. In contrast, the large economies of Europe – France, Germany, Italy, Spain, and the United Kingdom — turned out to be less “innovative” than the Scandinavian countries.”

Based on their research, the authors recommend that European marketers introduce new products first in a few countries, employing what is called a waterfall strategy, rather than in many countries at once, what marketing literature calls a sprinkler strategy.

“The International Takeoff of New Products: The Role of Economics, Culture and Country Innovativeness” appears in the current issue of the INFORMS journal Marketing Science. The authors are Gerard J. Tellis of the University of Southern California, Stefan Stremersch of Erasmus University, Rotterdam, and Eden Yin of Cambridge University.

The authors employ a hazard model to analyze marketing data.

Normally, a new product is marked by a long introductory period when sales linger at low levels. At a certain point in time, the takeoff, a successful new product breaks into rapid growth and a large jump in sales. Time-to-takeoff is the duration of the introductory stage from product introduction to takeoff.

The authors´ most important conclusions are that –

• “Time-to-takeoff” for new products differs dramatically between countries (for example, 3.3 years for Denmark and 9.3 years for Portugal). On average, time-to-takeoff takes about half the time in Scandinavian countries (4 years) as it does in Mediterranean countries (7.4 years).
• Cultural factors partly explains these differences. In particular, the probability of takeoff increases in countries that place high in an index of achievement and industriousness and low in uncertainty avoidance.
• Sales of most new products display a distinct takeoff in various European countries, at an average of 6 years after introduction.
• Time-to-takeoff differs dramatically across product classes. The mean time-to-takeoff is 8 years for what are described as “white” goods (kitchen and laundry appliances) and 2 years for “brown” goods (entertainment and information products).
• The probability of a new product´s takeoff in one country increases with prior takeoffs in other countries.

Because managers are under great pressure to pull the plug on a product that has not taken off, the authors suggest that introducing a product in a few countries that are expected to show early takeoff can win internal corporate support. The strategy allows lets marketers use sales data in one country to forecast sales in other countries where they plan to launch the product. Unfortunately, the authors observe, most European marketers do not introduce new products gradually and pay a penalty in failure.

The authors analyzed the takeoff of 10 consumer durable categories across 16 Western European countries. The study is one of the largest on international new product growth.

The countries included in the study are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. The products are refrigerators, washing machines, freezers, dishwashers, color televisions, dryers, VCR´s computers, CD players, and microwave ovens.

The authors used data on product sales made available by Euromonitor, GFK, The Economist Intelligence Unit (EIU), TableBase of Responsive Database Services, the archives of appliance manufacturers in various European countries, and a private observer.

The authors of this study were recently recognized with an award by INFORMS for research that helped Whirlpool plan the launch of its Personal Valet Clothes Vitalizing System.