Supply constraints and waitlists in new product diffusion

Constraints on production capacity adjustment present a strategic and operational problem for managers launching products when demand is uncertain. Stock‐outs can be costly if demand exceeds available product supply, as sales are deferred or lost when prospective customers are waitlisted. Recent research on diffusion under supply constraints has analyzed launch strategies to minimize the chance of stock‐outs. Others suggest that waitlisted buyers generate social exposure that can boost customer demand and shape the diffusion process. We develop a generalized model of new product diffusion under supply constraints that explicitly accounts for endogenous customer waitlisting and waitlist‐generated word‐of‐mouth. We estimate the model for a prominent example of waitlisting, the launch of the Toyota Prius hybrid‐electric vehicle in the U.S.A., finding evidence of positive word‐of‐mouth from waitlisted buyers. Inclusion of endogenous supply constraints and waitlisting also alters the estimated contribution of marketing and adopter word‐of‐mouth.

Reference:

David R. Keith, John D. Sterman, and Jeroen Struben. Forthcoming. Supply constraints and waitlists in new product diffusion, System Dynamics Review, first published 14 April 2018: https://onlinelibrary.wiley.com/doi/abs/10.1002/sdr.1588

2018-06-24T12:48:35+00:00 By |

About the Author:

Jeroen Struben
Jeroen Struben is Associate Professor of System Dynamics in the Strategy & Organisation Department at EM Lyon Business School and research affiliate at MIT Sloan School of Management. Jeroen received his PhD at MIT’s Sloan School of Management and holds an MsC in Physics from Delft University of Technology. Jeroen Struben is a social and systems scientist who studies dynamics of market formation and transformation towards more sustainable pathways. His research addresses questions such as “How do alternative products and practices penetrate in the marketplace - or society at large, rather than falter?”. Jeroen analyses market formation processes, focusing on the over-time interactions across stakeholders working through both social and material adoption challenges. He conceptualizes and studies these efforts as market formation processes because significant uptake of such products involves the joint development of consumer familiarization, complementary infrastructure, and technology improvement for example. Jeroen tackles these problems using methods ranging from simulation to empirical analysis of large spatiotemporal datasets. His current research program consists of three projects: (I) Market formation for alternative fuel vehicles, (II) Market formation for nutritious food, and (III) Market formation theory. Jeroen’s research produces insights for both scholars and practitioners about coordination and collective action across organizations, industries and governments. Jeroen teaches topics related systems thinking, sustainability, and innovation. Through his research Jeroen has worked with organizations across a variety of sectors ranging from automotive (Ford, GM, SAIC Shanghai), to energy (Shell, National Renewable Energy Laboratory, United States Department of Energy (DOE), Johnson Controls China), public health (PHAC), and to fisheries (NOAA, GCDC).

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