Launching timing for digital products with consumers' variable needs (Q1720406)

Summary: The value of a digital product diminishes because of the changing needs of consumers over time. To maintain the value of products, digital product firms sequentially launch upgraded versions of existing products. Therefore, a critical challenge faced by these firms is to determine the timing of launching upgrades. In this study, we develop an analytical model that incorporates needs variation and a product diffusion process in a sequential launching context. The comprehensive model considers two types of transition strategies (i.e., older generations are gradually phased out or totally replaced). We investigate the optimal launching timing of new product generation by conducting several computational experiments. Under total replacement, an astute manager will launch the upgrade when the existing version has reached the maturity stage. However, phase-out transition, the new upgrade, will be launched now or never according to the rate of needs variation. This study bridges the gap between the knowledge on the launching timing of digital products and the volatility of consumer valuation.