Excerpt from Product Interdependency in New Product Decisions
The role of new products in the growth and continuing profitability of modern businesses has been universally recognized by marketing practitioners and educators. This recognition has prompted the development of a considerable literature concerning new product decision making procedures. Throughout the literature one significant factor has been largely neglected or considered only on a subjective verbal basis. This factor is product interdependency. In today's multiproduct firm, interdependencies between new and old products are almost always present and should not be neglected when the new product decision is made.
"Differential" Considerations
The new product will become part of the firm's product line. It may be complementary to the line and aid the other product offerings or it may have substitution effects and reduce the marketing effectiveness of existing products. The performance of the new product itself is not a satisfactory criterion for the decision to add the product when interdependencies are present. The decision should be based on the change in the total line's performance. Rather than basing the acceptance of the product on the profit of the new product alone, the change in the total line profit should be considered. The change in the total line profit is called the "differential profit."
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