Perception Spillovers Across Competing Brands: A Disaggregate Model of How and When

Journal of Marketing Research (JMR)
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Key Takeaways

Spillover effects in consumer decision making have been the foundation of various branding strategies, including line extensions and umbrella branding. The underlying argument is that consumers transfer their quality perceptions across products carrying the same brand name. This perception transfer reduces the uncertainty that consumers face when evaluating the quality of a new product whenever the product carries a familiar brand, which in turn can accelerate their adoption.

In this article, the authors examine whether and how such spillover effects also occur across directly competing products that carry different brand names in a given product category. Drawing on the accessibility-diagnosticity framework and extant literature in branding and order-of-entry effects, the authors argue that spillover can indeed occur across competing brands when brands and products are perceived as being similar. Because competing brands often enter the market in a sequential manner, the authors posit that spillovers across competing brands can be of two different types: (1) prior perception spillover, which is a one-time perception transfer that occurs at the moment a new brand enters the market, and (2) dynamic perception spillover, which is an ongoing perception transfer associated with consumer learning that occurs through consumption experience and exposure to marketing communication. The authors test their proposed learning model based on a Bayesian learning framework that accounts for prior and dynamic spillovers using a novel data set of disaggregate-level physicians’ brand (drug) choices.

The results of the study suggest that when a late entrant product is similar to a directly competing brand already present in the market, physicians use their quality perception of the existing brand to form their initial quality perceptions of the new entrant (prior spillover effect). Furthermore, physicians have more precise initial beliefs about the quality of the new brand if this brand is similar to existing ones. In addition, physicians’ consumption experience with a product influences their perception of quality of other products, even when these are in direct competition and do not carry the same brand name, provided that these products are similar (dynamic spillover effect). In contrast, the authors did not find any perception spillover effects (either prior or dynamic) from previously existing brands to new entrants that are radically new and, thus, highly dissimilar.

The authors conduct counterfactual experiments to demonstrate that the share gains for late entrants due to spillover effects can be significant. The spillover effects that the authors examine are of great interest to brand mangers either launching new products or facing introduction of new but similar new products, especially in markets characterized by high quality uncertainty. Overall, the study offers significant implications for the understanding of second-mover advantages and the entry of “me-too” products.

Ramkumar Janakiraman is currently Assistant Professor of Marketing in the Mays Business School at Texas A&M University. Ram has a PhD in Business Administration from the Marshall School of Business at the University of Southern California, Los Angeles. His research interests are primarily in the domain of econometric modeling of firm and consumer decision making. They include structural learning models, market response models, new product development, and new product adoption. Ram has worked extensively on modeling physicians’ prescription behavior and physicians’ response to the various promotional tools. His research is forthcoming or has appeared in journals such as Management Science, Journal of Marketing, Journal of Marketing Research, and Annals of Family Medicine. Ram’s teaching interests include marketing analytics, pricing, and marketing research. Ram has a BTech (Honors) in Materials Engineering from Institute of Technology, Varanasi (India) and an MS in Materials Science and Engineering from University of Pittsburgh.

Catarina Sismeiro is a senior lecturer in the Tanaka Business School at Imperial College London. She received her PhD in Marketing from the University of California, Los Angeles, and her Licenciatura in Management from the University of Porto, Portugal. Her primary research interests include studying pharmaceutical markets, modeling consumer behavior in interactive environments, and modeling spatial dependencies. Other areas of interest are decision theory and econometric methods. Her research has been published in Journal of Marketing Research, Management Science, and Marketing Letters. She received the 2003 Paul Green Award, was the finalist for the 2007 and 2008 O’Dell Awards, and was a 2007 MSI Young Scholar.

Shantanu Dutta is Dave and Jeanne Tappan Chair in Marketing and Vice Dean for Research Advancement in the Marshall School of Business at the University of Southern California. His research focuses on strategic marketing issues. In particular, he has studied how firms can use distribution, marketing communication, strategic partnerships, and value pricing to build competitive advantage. He has published extensively on these topics in leading marketing, economics, law, and strategy journals, such as Journal of Marketing, Journal of Marketing Research, Marketing Science, Management Science, Journal of Law and Economics, Journal of Law, Economics and Organization, Quarterly Journal of Economics, Review of Economics and Statistics, Strategic Management Journal, and Sloan Management Review, among others. He serves as a member of the editorial review board for Journal of Marketing Research, Marketing Science, and Marketing Letters. He also served as the secretary of the Informs Society for Marketing Science.

Journal Marketing Research, Volume 46, Number 4, August 2009 View Table of Contents.

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