LATE MOVER ADVANTAGE - HOW INNOVATIVE LATE ENTRANTS OUTSELL PIONEERS

Although pioneers outsell late movers in many markets, in some cases i nnovative late entry has produced some remarkably successful brands th at outsell pioneers, The mechanisms through which innovative late move rs outsell pioneers are unclear, To identify these mechanisms, the aut hors develop a brand-level model in which brand sales are decomposed i nto trials and repeat purchases. The model captures diffusion and mark eting mix effects on brand trials and includes the differential impact s of innovative and noninnovative competitors' diffusion on these effe cts. The authors develop hypotheses on how the diffusion and marketing mix parameters of the brands differ by market entry strategy (pioneer ing, innovative late entry, and noninnovative late entry), The authors test these hypotheses using data from 13 brands in two pharmaceutical product categories. The results show that an innovative late mover ca n create a sustainable advantage by enjoying a higher market potential and a higher repeat purchase rate than either the pioneer or noninnov ative late movers, growing faster than the pioneer, slowing the pionee r's diffusion, and reducing the pioneer's marketing spending effective ness. Innovative late movers are advantaged asymmetrically in that the ir diffusion can hurt the sales of other brands, but their sales are n ot affected by competitors' diffusion. In contrast, noninnovative late movers face smaller potential markets, lower repeat rates, and less m arketing effectiveness compared with the pioneer.