Product Hierarchy and Brand Strategy Influences on the Order of Entry Effect for Consumer Packaged Goods

Manufacturers focus on becoming more agile, software firms deploy rapid application development tools—everyone is in a hurry. Although we all understand the benefits of being first to market, we understand just as clearly that not all first-to-market products enjoy the same, sustainable benefits from being market pioneers. Why do some pioneering products experience a more significant order-of-entry effect than others? Roger A. Kerin, Gurumurthy Kalyanaram, and Daniel J. Howard examine two factors–product hierarchy and brand strategy—which may influence the magnitude of this effect for new consumer packaged goods. First, they hypothesize that pioneering a new product class offers a greater advantage than introducing a new form to an existing product class. Second, they predict that the order-of-entry effect will be greater for brand extensions than for entirely new brands. Finally, considering both product hierarchy and brand strategy, they expect that the order-of-entry advantage for brand extensions over new brands will be significantly greater within new product classes than for new forms of existing products. These hypotheses are tested using data from the Information Resources, Inc. Behaviorscan° data set. Collected from 2,500 household panel members, 75 supermarkets, and 25 drugstores, this database contains weekly measures of brand trial penetration as well as brand distribution, price, and promotion information in eight geographic markets from the period 1983–1988. The models developed in this study explore the relationships among brand trial penetration, product hierarchy, brand strategy, order of entry, lag time between successive brand entrants, and marketing mix variables (i.e., price, promotion, distribution, and advertising). The study strongly supports all three hypotheses. In particular, the analysis clearly demonstrates that the order-of-entry effect is greatest for a new product class pioneered by a brand extension. Order of entry has the least effect on a new product form pioneered by an entirely new brand. For a company seeking a competitive advantage from being first to market, innovation in product function offers greater potential benefit than innovation in product form. Such a company can also benefit from building on the name and reputation of its established brands. Although the study finds these order-of-entry effects significant, the effects of marketing mix variables such as product price and promotion are consistently stronger.     

First-mover advantages from pioneering new markets: A survey of empirical evidence

Market pioneers can develop first-mover advantages that span decades. The most general first-mover advantage that helps explain higher pioneer market share levels is a broad product line or brand proliferation. In markets for experience goods, pioneers tend to shape consumer tastes and preferences in favor of the pioneering brand. While the preliminary results vary by industry, they indicate that market pioneers donot tend to perish more often than later entrants. Accounting profits for market pioneers generally are lower in the first four years of operation, but higher thereafter. Overall, market pioneers follow innovative strategies that have high initial costs and risks, but yield high potential returns.     

An Empirical Analysis of Follower Entry Timing Decisions

Followers frequently incur market share penalties due to delayed entry. How might they then respond to a pioneer? This paper attempts to answer this question. Followers are assumed to be able to respond by choosing a time interval of entry relative to the pioneer, and by focusing on consumer relative preferences for their brand. These choices potentially involve different trade-offs. For example, achieving higher relative preferences may result in an entry delay that would increase the leadtime. We argue that the follower's response will depend on the magnitude of the pioneering effect. Our analysis of the ASSESSOR database indicates that followers respond primarily by reducing leadtimes. We further find that later followers achieve higher consumer relative preferences than earlier followers do. While these findings merit generalizability as they concern multiple brands and categories, many of which still exist, their implications should be qualified with caution since the data do not go beyond 1984.