by Venkatesh Shankar, Gregory S. Carpenter, and Lakshman Krishnamurthi
This article was published in Journal of Marketing Research, 35 (February 1998), 54-70.
Although pioneers outsell late movers in many markets, in some cases, innovative late entry has produced some remarkably successful brands that outsell pioneers. The mechanisms through which innovative late movers outsell pioneers are unclear. To identify these mechanisms, we develop a brand-level model in which brand sales are decomposed into trials and repeat purchases. The model captures diffusion and marketing mix effects on brand trials and includes the differential impact of innovative and non-innovative competitors’ diffusion on these effects. We develop hypotheses on how the diffusion and marketing mix parameters of the brands will differ by market entry strategy (pioneering, innovative late entry, and non-innovative late entry). We test these hypotheses using data from 13 brands in two pharmaceutical product categories. The results show that an innovative late mover can create a sustainable advantage by enjoying a higher market potential and a higher repeat purchase rate than either the pioneer or non-innovative late movers, by growing faster than the pioneer, by slowing the pioneer’s diffusion, and by reducing the pioneer’s marketing spending effectiveness. Innovative late movers are asymmetrically advantaged in that their diffusion can hurt the sales of other brands, but their sales are not affected by competitors’ diffusion. In contrast, non-innovative late movers face smaller potential markets, lower repeat rates and less marketing effectiveness compared to the pioneer.