New Product Preannouncement as a Signaling Strategy: An Audience-Specific Review and Analysis

Abstract

Firms in various industries with highly competitive environments use new product preannouncement (NPP) as one of the most effective and popular signaling tools. Preannouncements can bring both benefits and costs to firms. Extant research has studied NPP from different perspectives and tackled the questions, "Should a new product be preannounced and when?" and "What information should be preannounced and why?" However, the benefits and costs of preannouncements from an audience-specific perspective are less well understood. It is important to notice that benefits and costs of a preannouncement vary among different audiences and firms need to apply group-specific weights in assessing the overall benefits and costs prior to making new product preannouncements. The purpose of this article is to review the existing literature on new product preannouncements for commonly observed marketing problems and develop a general approach focusing on the target audiences and the incentives in sending signals to each audience, and the impacts of these signals. This article first reviews the literature on marketing-related NPP issues, as well as the determinants and effects of various factors on NPP decisions. Then, it discusses the phenomenon of new product preannouncements linked to other marketing and economics problems: (1) product development and positioning; (2) product diffusion and adoption; (3) firm value; (4) vaporware and antitrust litigations; and (5) consumer welfare. In addition, this article divides the target audience of the new product preannouncement into four groups: customers, competitors, investors, and distributors. Based on current signaling theory, it proposes an audience-specific framework to analyze the determinants, incentives, and impact of new product preannouncements. The proposed approach may provide more comprehensive insights on NPP strategies to managers and industrial decision-makers. Finally, the article suggests a number of future research directions from four different perspectives (customer, firm, government/industry, and methodology).

Keywords: New product preannouncement; signaling strategy; new product decisions