by Venkatesh Shankar, Gregory S. Carpenter, and Lakshman Krishnamurthi
This article was published in Journal of Marketing Research, 36 (May 2009), 269-276.
Empirical research on sequential brand entry shows market share advantages for pioneers arising from a direct impact of order or timing of entry on market share and indirect effects of order of entry on a brand’s market response. Analyses demonstrating these effects implicitly assume that a brand’s diffusion and market response parameters are independent of the stage of the life cycle in which a brand enters. In this paper, we examine how the stage of market life in which a brand enters affects its sales through brand growth and market response, after controlling for the order of entry effect and time-in-market. We develop a dynamic brand sales model in which brand growth and market response parameters vary by stage of life cycle entry, i.e., by pioneers, growth-stage and mature-stage entrants. We estimate the model using data on 29 brands from six pharmaceutical markets. Our results reveal advantages associated with entering during the growth stage. Brands that enter in the growth stage of the product life cycle reach their asymptotic sales level faster than pioneers or mature-stage entrants, are not hurt by competitor diffusion, and enjoy a higher response to perceived product quality than pioneers and mature-stage entrants. We find that pioneers reach their asymptotic sales levels more slowly than later entrants, and pioneer’s sales, unlike later entrants’ sales, are hurt by competitor diffusion over time. On the positive side for pioneers, buyers are most responsive to marketing spending by pioneers. Mature-stage entrants are most disadvantaged; they grow more slowly than growth-stage entrants, have lower response to product quality than growth-stage entrants, and have the lowest response to marketing spending. We outline the implications of these results.