Order of entry,trial diffusion,and elasticity dynamics: An empirical case

This paper considers the diffusion process of new brands in order to estimate marketing mix elasticities and order-of-entry effects. Using an empirical case, we test hypotheses regarding the role of order of entry on brand trial processes within a new category. Consistent with research hypotheses, the results demonstrate that the diffusion rate of a brand's trials and its pricing and advertising elasticities vary systematically as a function of competitive entry. Competitive influences (which are negative) increase as order of entry is delayed. Short-term price elasticities are found to be an inverted U relationship with the order of entry, whereby early followers have the highest elasticities, as compared to the pioneer and to later followers. Advertising elasticities decline as the number of competitors increases.