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Innovation EquityAssessing and Managing the Monetary Value of New Products and Services$
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Elie Ofek, Eitan Muller, and Barak Libai

Print publication date: 2016

Print ISBN-13: 9780226618296

Published to Chicago Scholarship Online: May 2017

DOI: 10.7208/chicago/9780226394145.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 18 October 2021

Don’t Just Stand There: Do Something!

Don’t Just Stand There: Do Something!

Growing Innovation Equity through Marketing Actions

(p.70) Chapter Three Don’t Just Stand There: Do Something!
Innovation Equity

Elie ofek

Eitan Muller

Barak Libai

University of Chicago Press

This chapter explains how marketing efforts, such as price cuts and advertising, can affect innovation equity by impacting its various building blocks: the long-run market potential, the speed of diffusion, and the customer lifetime value. Moreover, marketing effects on customer lifetime value can occur at any phase: acquisition (adding new customers), development (increasing profits from existing customers), and retention (getting customers to stay longer). One way to gauge the impact of marketing actions is to examine where along the consumer decision making process they are likely to have the most influence (awareness, interest, evaluation, confidence, adoption). The chapter further explains how marketing activity often involves customer management trade-offs. For example, lowering price can expedite customer acquisition efforts yet have a negative effect on customer development. The innovation equity framework provides an expedient way to analyze these trade-offs and helps understand the implications of losing a customer on future profitability, particularly when such attrition occurs early in the product life cycle. To illustrate the key concepts, the chapter provides several examples, such as Sony’s PlayStation and Dropbox, and numerical analyses of how a price cut, subsidy or change to the customer referral scheme impact innovation equity.

Keywords:   acquisition, development, retention, decision making process, marketing, pricing, advertising, subsidize, referral program, innovation equity

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