Competitive strategies for late entry into a market with a dominant brand

This paper considers optimal positioning, advertising, and pricing strategies for a firm contemplating entry in a market dominated by an entrenched competitor. Drawing on behavioral research on consumer preference formation, the authors develop an individual-level model that reflects differing consumer responses to similar products offered by the dominant brand and later entrants-an effect they term asymmetric preferences. From the resulting aggregate market response model, the authors derive several competitive implications, notably (1) that preference asymmetry can make a differentiated late entry strategy optimal even if preferences would appear to dictate otherwise, and (2) that me-too strategies are not equilibrium late entry strategies. More generally, the present analysis suggests that preference asymmetry can contribute to the persistent competitive advantage of dominant brands.