Marketing Innovation and New Product Portfolios: A Compositional Approach

Abstract

Product innovation performance is often measured by means of the percentages in the product portfolio from: (a) innovative products launched for the first time in the market; (b) new products to the firm already extant in the market; and (c) unchanged products. These percentages have often been used to assess the impact of open innovation. More recently, innovation in marketing mix has attracted interest per se, beyond the traditional role of marketing in providing external information about consumer needs. Thus far, portfolio data have been analyzed without considering their constant 100 sum. Apart from violating the usual statistical assumptions, the analysis has interpretational flaws. In this article, we use compositional data analysis methods and show how these shortcomings can be overcome by simple transformations. With Community Innovation Survey data in Spain (2012), we show that marketing innovation is a driver of both sales of new-to-the-firm and new-to-the-market products