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Pulling the Plug to Stop the New Product Drain
William Boulding, Ruskin Morgan and Richard Staelin
Journal of Marketing Research
Vol. 34, No. 1, Special Issue on Innovation and New Products (Feb., 1997), pp. 164-176
Published by: American Marketing Association
Stable URL: http://www.jstor.org/stable/3152073
Page Count: 13
You can always find the topics here!Topics: Net present value, Decision support systems, Financial management, Market share, Opportunity costs, Investment strategies, Risk analysis, Product introduction, Decision making, Business structures
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Although an important aspect of managing new product introductions is to recognize and quickly take action when a product launch has failed (i.e., "pull the plug"), senior managers in a new product launch setting tend to remain committed to a losing course of action. The authors investigate this issue with controlled experiments, using senior level executives as subjects. Their results suggest a strong bias toward continued commitment to failing new products. Consequently, the authors devise and test the effectiveness of five decision aids aimed at reducing this bias. Improving the quality of the information environment does not greatly reduce bias, nor does precommitment (at time of launch) to self-specified decisions rules. The most effective methods of reducing commitment to a losing course of action appear to be either precommitment to a predetermined decision rule or introduction of a new decision maker at the time of the stop/no stop decision. Of these two methods, the latter produces marginally less commitment to a losing course of action. However, none of the tested decision procedures completely reduces commitment to a losing course of action relative to the control condition.
Journal of Marketing Research © 1997 American Marketing Association