Rates of Takeoff in Europe

The best way to introduce products in Europe may be to showcase them in Scandinavia first. According to a paper published in a 2003 issue of Marketing Science (Volume 22, Issue 2), Scandinavian consumers embrace new products an average of two years sooner than the European average.

The authors of “The International Takeoff of New Products: The Role of Economics, Culture and Country Innovativeness” studied the launches of 10 new consumer-durables categories — from washing machines to CD players — throughout 16 industrialized European countries after 1950. In each of these categories, the authors found a distinct takeoff in sales: a period of low sales followed by a rapid uptick. However, the timing of that takeoff varied from country to country.

Although consumer-product companies often launch first in the larger European economies of Germany, the United Kingdom and France, these countries are not among the quickest to embrace new introductions on the continent, where the average was six years to takeoff. Marketers under pressure to pull the plug on investment during an initial period of low sales, may risk prematurely canceling new products that simply need a longer gestation period, suggests co-author Gerard J. Tellis, professor of marketing at the University of Southern California’s Marshall School of Business. Indeed, the average of 7.4 years to takeoff in Mediterranean Europe (almost double the average of 3.8 years required in Denmark) makes product introduction there an even more daunting prospect.

Tellis and his co-authors — Stefan Stremersch, assistant professor of marketing at Erasmus University Rotterdam, and Eden Yin, university lecturer in marketing at the University of Cambridge’s Judge Institute of Management — examined a variety of economic and cultural variables to determine predictors of the adoption rate, and they attempt to explain country by country variances. Surprisingly, economic factors such as GDP per capita, income inequality and levels of international trade were not strong predictors of which nations fostered earlier takeoff. Information-access factors such as exposure to newspapers were also measured separately, but they tend to correlate with economic factors in samples from developed economies, making it difficult to separate out their effects. Economic factors, the authors point out, could play a much larger role in other samples, especially those comprising developing economies.

The authors posit that cultural factors may explain some of the differences in product takeoff, notably those factors that constitute innovativeness, such as a high need for achievement, industriousness and low uncertainty avoidance. Scandinavian countries exhibit each of these characteristics more strongly than, say, the tradition-bound cultures found along the Mediterranean. The measures of such factors were drawn from earlier, more narrowly focused research, h owever. The uncertainty avoidance of a nation’s populace, for example, was drawn from research that measured that aspect of IBM employees in various European nations. Whether that index is extensible to the entire population of those nations is debatable, Tellis admits, but he nonetheless believes that cultural variables are significant. He does suggest, however, that teasing out the precise mix of cultural factors that lead to innovativeness will require further research.

The study yielded another important finding: Prior takeoff in one country speeds subsequent takeoff in others. Thus, the authors conclude, it is best to use a “waterfall” strategy when introducing new products in Europe — that is, launching in one country at a time and allowing the effects to spill over to the next launch. The “sprinkler” approach of launching simultaneously in many countries is ideal from the perspective of economies of scale, but it risks early failure, or at least delayed success, that could scuttle the launch.

The research reveals that when product introductions were made in a single country, they most often occurred in the larger European economies of the United Kingdom or Germany. The authors contend, however, that test marketing in countries where takeoff is quickest, such as Denmark or Sweden, would minimize potential losses and maximize the chances of eventual success. “If the product is a dud,” says Tellis, “then the company has wasted enormous resources introducing it all over Europe. Or if the product takes too long to take off, managers are going to pull the plug.” Better, he says, to introduce in a single country known for quick take-off. If the product isn’t successful, losses are minimized; if it is, a spillover effect will aid subsequent and wider introductions throughout Europe.

Not included in the study were firm-level strategic factors such as advertising, pricing, product quality and distribution. For the most part, these data were not consistently available for the product categories and countries under study. Tellis contends that since the purpose of the study was to compare countries, it is not likely that these firm-level strategic variables would have changed the overall results.

For more information, contact tellis@usc.edu.