Marketing Letters, Online First™ - SpringerLink

Business and Economics

Marketing Letters

2012, DOI: 10.1007/s11002-012-9208-z

More effective assessment of market performance in later stages of the product development process: The case of the motion picture industry

Gerda Gemser, Mark A. A. M. Leenders and Charles B. Weinberg

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• Abstract

  A key challenge for companies engaging in new product development (NPD) is to reduce uncertainty by accurately forecasting demand. In this study, we focus on whether later-stage NPD market performance assessments are more accurate than early-stage assessments. Although the literature supports this, we suggest four factors (escalating commitment, information-processing limitations, emergence of new uncertainties, and interdependencies) why this may not be so. Using data from the movie industry, we find that the price film distributors pay to producers for a nearly or fully completed but not yet launched film (the so-called minimum guarantee) mediates the effect of production budget, the main predictor of revenues at the early stage of NPD, consistent with the hypothesis that later-stage assessments are more accurate than earlier ones. However, despite the external validity of this market-based measure, the amount of uncertainty reduction is limited. The implications for NPD uncertainty management are discussed.

  
  

  Keywords  New product development – Uncertainty reduction – Motion picture industry