ORDER OF ENTRY AS A MODERATOR OF THE EFFECT OF THE MARKETING MIX ON MARKET SHARE

Order of entry has been demonstrated to have a significant effect on m arket share. A number of explanations for this effect have been sugges ted in the marketing and strategy literatures. To date, the market sha re advantage gained by pioneers has typically been treated as a main e ffect-an automatic regularity. Treating order-of-entry as a main effec t implies that there is no penalty on the effectiveness of a brand's m arketing instruments for late entry and that a late entrant can compen sate for being late by dedicating sufficient marketing resources to th eir product. In this study, we investigate the influence of order-of-e ntry into a market on the effectiveness of a firm's marketing mix deci sions by asking the question, ''Can followers compensate for not being first by their marketing mix decisions?'' Also, even if they can comp ensate for being late, does this effort become increasingly more diffi cult with later entry? That is, are there asymmetries in the effective ness of a brand's marketing mix variables that relate to its order of entry into the market, or as has been typically assumed to date, is or der of entry strictly a main effect? An asymmetry exists, for example, if the market response to advertising is different for the first entr ant versus the second or third entrant. An asymmetry also exists if th e effects of, say, a price change by the first entrant on the second e ntrant are different than the effects on the third entrant. We develop a market share attraction model where the parameters vary as a functi on of order-of-entry. Our main contribution is in modeling the sources order-of-entry advantage as asymmetries in effectiveness of a brand's marketing instruments. Hence, distinct from previous research we expl ain why there are inherent order-of-entry effects. This paper is poten tially of interest to researchers developing market share models and s tudying the effectiveness of marketing-mix variables. The substantive implication of our results concern directly academics interested in ma rketing strategy as well as the practicing marketing strategists. We m odel asymmetries in the market response of early entrants versus late entrants using data from two durables and three nondurables categories . With one exception, all data sets are established from the inception of the category and hence do not suffer from the possible bias of exc luding pioneers who have failed. Results show that asymmetries in the effectiveness of a brand's marketing mix variables are an essential so urce of order-of-entry effects; we find that the main effects of order of entry are minimal. Order-of-entry effects do not necessarily lead to lower shares, but overcoming these effects is not without substanti al cost to the late entrant. Our results support previous research tha t has demonstrated advantages to early entry. In addition, we provide guidelines for how late entrants should compete. Later entry tends to reduce a competitor's price sensitivity, suggesting that they not inst igate in a price war with earlier entrants in order to gain share. Ord er-of-entry tends to decrease response to quality and to promotion. To achieve the same impact on market share, later entrants need a bigger change in quality and need to spend more on promotion. Our data did n ot support an asymmetric effect on advertising.