New Product Entries and Product Class Demand

Because new products are critical to success and survival, the evaluation of new product ideas receives much attention. In the early stages of product development, concept evaluation models are used to predict market share and/or sales of hypothetical product concepts. These models have focused on consumer preferences, brand choice, and market share. Individual demand or usage rates have been considered exogenous. This paper presents a concept evaluation model which considers the effects of a new product on both market share and demand for the product class. A conceptual framework for the relationship between new product entries and product class demand is presented and then formulated into a mathematical model. An empirical application of the model illustrates some of the possible methods for model estimation and testing.