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More effective assessment of market performance in later stages of the product development process: The case of the motion picture industry

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Abstract

A key challenge for companies engaging in new product development (NPD) is to reduce uncertainty by accurately forecasting demand. In this study, we focus on whether later-stage NPD market performance assessments are more accurate than early-stage assessments. Although the literature supports this, we suggest four factors (escalating commitment, information-processing limitations, emergence of new uncertainties, and interdependencies) why this may not be so. Using data from the movie industry, we find that the price film distributors pay to producers for a nearly or fully completed but not yet launched film (the so-called minimum guarantee) mediates the effect of production budget, the main predictor of revenues at the early stage of NPD, consistent with the hypothesis that later-stage assessments are more accurate than earlier ones. However, despite the external validity of this market-based measure, the amount of uncertainty reduction is limited. The implications for NPD uncertainty management are discussed.

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Notes

  1. Being a sequel can be an important indicator of box office performance (Dhar et al. 2012; Hennig-Thurau et al. 2009). In our sample, 3 % of the 87 movies are sequels, so inclusion of sequels as a control variable is not viable.

  2. To make our data comparable to Dhar et al. (2012), we omitted movies that were not shown in the US market, resulting in a subset of 67 movies. Furthermore, we only consider US box office revenues, and we matched genre classifications and scales.

  3. These additional analyses are available upon request from the authors.

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Acknowledgement

The financial support of the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged. Helpful comments from Tirtha Dhar and assistance in obtaining data from Guanghui Sun and Alexander de Haas are much appreciated. We also appreciate the helpful comments of the anonymous reviewers and the editor.

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Authors and Affiliations

  1. Department of Product Innovation Management, Delft University of Technology, Landbergstraat 15, 2628 CE, Delft, The Netherlands

    Gerda Gemser

  2. University of Plymouth Business School, Drake Circus, Plymouth, Devon, UK, PL4 8AA

    Mark A. A. M. Leenders

  3. Sauder School of Business, The University of British Columbia, 2053 Main Mall, Vancouver, BC, Canada, V6T 1Z2

    Charles B. Weinberg

Authors
  1. Gerda Gemser
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  2. Mark A. A. M. Leenders
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  3. Charles B. Weinberg
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Correspondence to Charles B. Weinberg.

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Gemser, G., Leenders, M.A.A.M. & Weinberg, C.B. More effective assessment of market performance in later stages of the product development process: The case of the motion picture industry. Mark Lett 23, 1019–1031 (2012). https://doi.org/10.1007/s11002-012-9208-z

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