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Download PDFRakoff, Hannah with Jeroen Struben, "Under the Golden Arches: Disruptive and Conventional Product and Firm Dynamics under Consumer Heterogeneity and Network Effects", 2011 July 24-2011 July 28
- 2011 July 24-2011 July 28
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This paper examines dynamics following introduction of nutritious food by a company well known for high-motivational and low-nutritious products. Employing a system dynamics model, we investigate how consumer dynamics affect uptake of the disruptive product. Our example is the burger chain McDonalds, which introduced salads, fruit and other healthier options in the early 2000s. Focusing on consumer choice, we analyze the process of newcomers trying McDonalds and either becoming core customers, or not. It is important to distinguish overall post-introduction commercial success, from sales of the new product per se. We examine conditions that separate commercial success (by drawing in new types of customers, whether these are the profitable ones or whether they simply accompany more burger-eaters), neutrality (in which existing customers simply change over), or failure (by alienating existing customers so that they abandon the company). We focus on the role of heterogeneity in products and consumers, and on interactions with network effects. We consider in detail the large and inertial installed base of pre-existing burger eaters, and the degree to which its dominance is hard to unseat, drawing parallels with reactions to other disruptive and 'progressive' products in industries ranging from consumer products to electric vehicles to utilities.
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