How companies unveil new products or generate anticipation can significantly impact their success once launched, as evidenced by recent findings from Binghamton University, State University of New York. This research highlights the strategic advantages companies like Coca-Cola or Apple may gain through preannouncement marketing, whether for a highly anticipated movie or a new product release.
Have you ever found yourself eagerly awaiting a movie’s release after watching its trailer, thinking, “I can’t wait tosee that,”? It’s common, mainly when movies like “Barbie” or “Oppenheimer,” exceed box office expectations, often attributed to the early excitement built around them.
Associate Professor Debi Mishra from Binghamton University’s School of Management, along with a fellow researcher, conducted a study demonstrating how preannouncement marketing could play a crucial role in a product’s market success. This marketing strategy impacts shareholder value—with investors looking for appreciation in their investments—and plays a significant role in how companies communicate with consumers about upcoming products. Mishra points out the delicate balance companies must strike in deciding when and how much information to release about new products, with the timing of such disclosures potentially creating market surprises that could benefit the company.
The study, which analyzed 149 product launches and their preannouncements as reported by The Wall Street Journal between 2005 and 2018, examined the types of information released up to a year before a product’s launch and the financial implications of these announcements. It was found that non-costly preannouncements generally led to positive stock market reactions. This suggests that not all investments in hype before a product release are necessary for achieving post-launch compensation.
The study’s examples include Coca-Cola’s vague beverage announcement, which did not commit to a release date or investment amount, and IBM’s announcement regarding its $1 billion investment in artificial intelligence for data analysis and visualization. These cases illustrate different approaches to preannouncement marketing and their implications for shareholder expectations and market reactions.
Mishra’s research further reveals that the market is adept at discerning the credibility of a company’s commitments, such as significant investments in manufacturing a new product. This discernment influences stock market reactions to product announcements, with guaranteed investments being more credible and thus more likely to impact stock values positively.
Moreover, the study points to a “surprise effect” where market reactions can be significantly influenced by how much commitment a company visibly puts behind a new product announcement. A strategy of withholding information until closer to the product release can create a more significant impact on the market, akin to a surprise reveal.
In summary, Mishra’s findings underscore the nuanced role of preannouncement marketing in the success of new products. By carefully managing the timing and content of announcements, companies can strategically create market surprises that enhance the anticipation and eventual reception of new products, thereby contributing to their success and the company’s growth. This research offers valuable insights for businesses looking to leverage preannouncement marketing to its fullest potential, highlighting the importance of strategic communication in the competitive market landscape.
More information: Debi P. Mishra et al, Does the economic value of new product announcements depend upon preannouncement signals? An empirical test of information asymmetry theories, Journal of Product & Brand Management. DOI: 10.1108/JPBM-09-2022-4161
Journal information: Journal of Product & Brand Management Provided by Binghamton University