The preannouncement of a new product is a transversal practice which can be adopted in different business sectors . This strategy can be defined as formal communication by a company indicating the release of a product that cannot be bought by the clients yet (Boss, Manceau, 1997).
What exactly is the preannouncement of a product?
Normally, two types of information are spread: the design and the name of the product. The price is rarely communicated in advance. An announcement can be made keeping in mind different contacts such as current consumers, potential consumers, competitors and shareholders. Moreover, a choice of a specific referent-target refers to the evaluation of its importance for the success of the new product. In every case, two important decisions must subsequently be taken: the first one concerns the relevance and the second one the time schedule of the eventual anticipation.
The advantages and disadvantages of a preannouncement
The decision of preannouncing a new product depends on the evaluation of advantages and disadvantages deriving from the hypothetical announcement. It is fundamental the benefits to outweigh the risks. An accurate analysis of risks and potential benefits can help the development team to decide what is the best. The research shows that there are three main coexisting risks: indirectly helping the competitors allowing them to react promptly to product launches; cannibalize the company’s existing products; and negatively affect the evaluation of the product while damaging the company reputation. While the two main advantages of an anticipation are respectively: the construction of a favorable perception anchored to the product and the urge to purchase planning, which includes the process of inducting customers to refuse the purchase of offers by competitors while still waiting for the new product to arrive (Le Nagard- Assayag, Manceou, 2001).
Volkswagen showed the New Beatle four years before its US launch, in the US at the Detroit Motor Show in 1994. The then-showed prototypes presented served to show the brand’s inventiveness and creativity and were not designed for mass production. The goal was clear: to stimulate the rumors about the product before its release. (Robertson, Eliashberg, Rymon, 1995). Preannouncements like this, aimed to motivate the customers to waiting for the new model’s release, are therefore widespread in the car industry.
The risk formula
However, reporting an innovative product in advance can be risky because it could be reproduced by competitors, even by using superior means and materials. It is exactly for this reason that some prefer to preserve the secret of innovation as long as possible. The generic presentation of advantages and disadvantages of an announcement strategy allows us to define a utility index, known as U.
U= benefits = P x A______
costs C x Ca x I
where P indicates the probability of inducting favorable perceptions of the product, the A the probability of favoring the anticipation of the purchase; C the risk of favoring the response of competitors; Ca the risk of cannibalization of already existing company’s products; I the risk of deterioration of the reputation of the product or company.