Getting a Grip on the Saddle: Chasms or Cycles

56 Pages Posted: 22 Jun 2012

See all articles by Gerard J. Tellis

Gerard J. Tellis

University of Southern California - Marshall School of Business, Department of Marketing

Deepa Chandrasekaran

University of Texas at Austin

Date Written: June 22, 2012

Abstract

The saddle is a sudden, sustained, and deep drop in sales of a new product, after a period of rapid growth following takeoff, followed by a gradual recovery to the former peak. This paper tests for the generalizability of the saddle across products and countries and for three rival explanations: chasms in adopter segments, business cycles, and technological cycles. The authors model both boundary points of the saddle: start of the sales drop and recovery to the initial peak, using split-population models. Empirical analysis of historical sales data from 10 products across 19 countries shows that the saddle is fairly pervasive. The onset of the saddle occurs in 148 product-country combinations. On average, the saddle occurs 9 years post-takeoff, at a mean penetration of 30%, lasting for 8 years with a 29% drop in sales at its depth. Results support explanations of chasms and technological cycles for information/entertainment products and business cycles and technological cycles for kitchen/laundry products. The authors discuss findings, contributions, and implications.

Keywords: New product diffusion, International marketing, Chasm, Business cycles, Hazard models

Suggested Citation

Tellis, Gerard J. and Chandrasekaran, Deepa, Getting a Grip on the Saddle: Chasms or Cycles (June 22, 2012). Available at SSRN: https://ssrn.com/abstract=2089453 or http://dx.doi.org/10.2139/ssrn.2089453

Gerard J. Tellis (Contact Author)

University of Southern California - Marshall School of Business, Department of Marketing ( email )

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HOME PAGE: http://gtellis.net

Deepa Chandrasekaran

University of Texas at Austin ( email )

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Austin, TX 78712
United States
3236330823 (Phone)

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