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The introduction of really new products creates many dilemmas for managers. Initially, they must develop a launch strategy in the face of great uncertainty about the product's potential. After launch, they need guidance about whether to pull the plug on a new product with lackluster sales (prior to takeoff) or persist with a product that could ultimately be a failure. Our results and model of the takeoff in sales of new products provide some guidance on these complex managerial decisions.
Prior to our study on sales takeoff, a manager's only recourse to analyzing new product growth would have been diffusion models. However, these models have typically used new product sales beginning at or around the takeoff, have assumed takeoff, and have not explicitly modeled it. In contrast, our model addresses the time from commercialization until takeoff, thus providing insights during the period of greatest uncertainty.
Whirlpool Corporation used our model to guide their decision making in the testing and launch of a completely new consumer durable, the Personal Valet.
Key words: sales takeoff; new product growth; product management; sales forecasting; market response models; innovation
History: Processed by Gary L. Lilien, ISMS Practice Prize Editor.
Company and Problem Background
Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances. Every year, it sells $11 billion of appliances under 11 brand names in more than 170 countries. In the 1990s, Whirlpool developed the first new appliance category in 30 years. The product is a laundry appliance called the Personal Valet Clothes Vitalizing System (www.personalvalet.com). It is the first in a new category of appliances: a substitute for dry-cleaning service. It can be placed in bedrooms, walk-in closets, or laundry rooms because it runs on standard 110-volt electricity and does not require any water lines or other special hookups. Through a patented process, the Personal Valet smoothes wrinkles and cleans odors from virtually every fabric, such as wool, silk, cotton, leather, suede, and synthetic clothes, thus eliminating two primary reasons for trips to the dry cleaner. It cannot remove visible stains, but only about one-quarter of the clothes taken to dry cleaners need to have visible stains cleaned. Treating up to three items of clothing at a time in the Personal Valet takes 30...