Companies, when to fanfare in product announcements?

Most of us know about, probaly even closely follow, Apple’s new iPhone reveal every year in September – just like billions of other people globally. This type of new product announcements are designed for several reasons such as creating consumer demand and informing investors so that Apple’s stock price is positively affected on the basis of this positive information. Despite the latter’s importance, however, in general, the reactions from investors are not unequivocally positive but at best mixed to Apple’s or any other brand’s new product announcements. But why?

In our research we tried to find an answer to this question by considering how these brands first announced to the public their intent to produce a new product in the near future.

Product preannouncements

For different reasons such as creating future demand, discouraging competition, or simply, yet, very importantly telling the investors and consumers how innovative they are, firms may decide to “preannounce” their products, i.e., their intent to produce something down the road. For example, recently, Hollywood studios announced their plan to make a new “hunger games” movie in 2026.

Brands, on the other hand, choose different types of content when they preannounce their products especially when it comes to revealing the details. For example, on one hand, in 2005, Coca Cola simply announced that they will be adding new flavors with no further details. On the other hand, in 2011, Netflix announced that they agreed to pay 1 billion USD for the rights to stream series like Gossip Girl and the Vampire Diaries. Coca Cola’s announcement could be considered as “cheap talk” since the brand could easily and without any cost occurring, walk back on this decision. However, Netflix’s announcement is more concrete, i.e., it creates clear expectations that the product will be eventually introduced to the market as indicated. Hence, we call the preannouncements similar to Coca Cola’s as costless preannouncements and the ones similar to Netflix’s as costly announcements. We argued that how, i.e., whether brands use costly vs. costless preannouncements for their upcoming products will impact the market’s reaction to the product announcement itself when it arrives.

Linking two announcements together

Our idea is simple. Costless preannouncements do not include much information or create a lot of confidence in investors about brands’ intention to eventually introduce the product. However, if brands do introduce the product, then, this is “pleasantly surprising”, and markets react positively. The costly preannouncements, on the other hand, create confidence and expectations in investors that brands will eventually introduce the product. Therefore, the product’s actual announcement does not include a lot of information and investors are likely to “brush it off” as something expected.

Testing the idea

In order to test this idea, we matched companies’ 149 product announcements published in Wall Street Journal that also had preannounced their intent to produce in the previous year leading to the product’s announcement. The final list includes a broad spectrum of product categories ranging from technology to consumer products to utilities. Doctoral students and authors independently classified the preannouncements into costly (78 announcements) and costless (71 announcements) categories by looking for some keywords within the announcements such as “minor changes” or “updates” for costless and “development cost” or “advertising cost” for costly categories. The raters agreed more than 95% of the times for each category and the remaining discrepancies were solved after mutual discussion.

To analyze the data, we used “event study” methodology that looks at the stock prices around an event, e.g., product preannouncement in our context. This methodology assumes markets are efficient. This means that companies’ stock prices reflect all the information about the company and thus truly reflects its value. Therefore, any new information released to the market will be instantly reflected in the stock’s prices of the concerned company, such as product announcements.

We looked at the mean abnormal returns, i.e. signs of a reaction to new information, 6 days before the announcement, the announcement day, and 6 days after announcement both for the whole sample (149 firms) and firms in the costly and costless categories separately. The results supported our idea. When companies choose costly preannouncements, the market reaction to the product’s actual announcement itself is nonexistent. However, and as we expected, when companies opt in for costless preannouncements, the market reacts positively when the product is actually announced.

We further checked for two notions; first, whether the effects we observe are due to general financial conditions in the economy (i.e., temporal effects), and second; whether what we observe holds across different product categories/industries or only an artefact of certain (but not all) categories. Results indicated that our observations are not likely to be temporal or industry specific increasing our confidence in the observed results. Finally, we found that the positive reaction to announcements preceding costless preannouncements further spills into the sales of the product making the effect likely to be longer term than a mere initial reaction.

Managerial implications

Prior research did not consider how the decisions for one announcement could affect the ones for the second in the future. For example, conventional wisdom suggests that companies should stay off cheap talk in preannouncements and inform markets about the specific details of their intent such as investment costs to convince the investors. Our results, on the other hand, indicates that even when companies opt in for this type of announcements, the potential initial losses could be compensated during actual launch. This indicates a choice for managers; they can first decide how much details they would like to include in the preannouncements. For example, Apple’s iMac preannouncement did not include many details, while its iPhone ones are typically with more details.

Similarly, when companies are about to announce their new products to the market, they tend to raise their expectations of the market and often, “go big” in announcement events. For example, recently, Tesla launched its first Cybertruck with much fanfare and the event was live streamed on X as well. However, managers have the choice of either going big or keeping it more low key. For example, Apple chose to launch the Apple Watch very quietly, without having one of the Apple’s usual big events. Our results inform managers when to spend more money on the launch events and when this money could better be used for other marketing activities.

Another implication of our results is to strategically reveal certain details in preannouncements but keep some surprise elements when the time arrives for the actual product launch. In other words, if managers would like to fanfare their new products, they should keep some details up their sleeves.