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Strategies of incumbent firms have received considerable attention in marketing and across business disciplines, but findings regarding performance (dis)advantages and innovativeness are mixed. Prior studies on supply-side sources (factors internal to the firm) of incumbent inertia disadvantages are more prevalent than those on demand-side factors, which relate to a firm’s customers and may explain potential incumbent advantages. We introduce an integrated demand-side framework to incumbent inertia, recognizing how the supply- and demand-side factors interrelate through learning mechanisms. On the one hand, incumbent firms learn and develop various routines and assets that influence their product strategies, typically reflecting inertia and incremental innovation. At the same time, customers learn about products in the market, forming preferences that reflect switching costs and network externalities (demand-side factors). Although an incumbent can gain advantages from demand-side effects, this could accelerate the onset of supply-side disadvantages. We present a set of research propositions that specify critical effects, and examine implications for incumbent strategies.

Although marketers often introduce product innovations using line extensions, extant research provides little empirical evidence on whether and how this product strategy pays off. The objective of this study is to examine the effects of innovation and the relative roles of brand and marketing mix variables in the success of new line extensions. Using data from 196 new line extensions across 23 consumer packaged goods categories, the authors employ a two-stage approach to assess how innovation and parent brand strength impact line extension trial purchase. The authors find that innovative line extensions tend to have a higher level of average trial probability. The strongest marketing driver for successful innovative line extension introductions is parent brand strength. Non-innovative line extensions gain higher trial from greater distribution. The results offer guidance on how managers can better utilize brand strength and the marketing mix when employing a line extension strategy.

Empirical studies reveal a surprisingly wide variety of pricing strategies among retailers, even among Internet sellers of undifferentiated homogeneous goods, such as books and music CDs. Several empirical findings remain puzzling; for example, within the same market, some small retailers decide to discount deeply, whereas others forgo the price-sensitive switchers and price high. The authors present theoretical and empirical analyses that address these varied pricing strategies. A model of three asymmetric firms shows that under multiple switcher segments, in which different switchers compare prices at different retailers, firm-specific loyalty is not sufficient to explain the variety of pricing strategies. The authors demonstrate that a retailer's strategy to discount deeply or frequently is driven by the ratio of the size of switcher segments for which the retailer competes to its loyal segment size. The relative switcher-to-loyal ratios among retailers explain situations in which a small retailer finds it optimal to price high, despite having few loyals, or to discount and go for the switchers. The results of two empirical studies confirm the model's predictions for varied pricing strategies in the context of Internet booksellers. The analyses also present several implications. A small retailer can sometimes benefit from strategically limiting its access to switchers to soften price competition. A midsized retailer can benefit from targeting its switcher acquisition activities toward its larger rival, given the shallower discounts involved. When most switchers widely compare prices, a large retailer should offer few shallow discounts because other firms will more aggressively discount. The importance of switcher segmentation suggests that managers should carefully measure switching behavior in devising pricing strategies.

Inertia reflects a firm’s inability to change or innovate and may be fostered by many sources. Though researchers have focused on internal inertia factors, we examine inertia factors within a firm’s customer base: switching costs, customer preference stability, and network externalities. New products at 279 firms are examined to assess the role of these demand-side inertia factors in determining innovativeness and, ultimately, financial performance. The inertia factors are hypothesized to have differential innovativeness effects for early and late entrants. Overall, demand-side factors affect innovativeness positively, contrasting with firm-based factors (e.g., routines or assets), which typically inhibit innovativeness. Consumer preference stability is the only factor negatively related to innovativeness, though only for early entrants. Network externalities and switching costs increase innovativeness (particularly for early entrants). Demand-side inertia factors are critical determinants of innovativeness and may now be placed within the previously internally focused set of factors engendering early mover advantage.

Several studies have demonstrated an order-of-entry effect on market share, suggesting that pioneers outperform later entrants. However, other research has pointed out the limitations of these studies and found evidence that many pioneers fail or have low market share. Given this background, the purpose of this research is to understand the conditions under which pioneers are more likely and also less likely to have an advantage. We propose a game-theoretic model that includes important sources of pioneer advantages as well as disadvantages. Specifically, we incorporate a pioneer advantage due to preemption in markets with heterogeneous tastes. In addition, we incorporate a potential pioneer disadvantage due to technology vintage effects, where later entrants utilizing improved technology can have lower costs and higher quality. The model allows us to evaluate the extent of vintage effects necessary to overcome a pioneer's advantage. Key relationships are found between the magnitude of the pioneer advantage or disadvantage and consumer valuations of product attributes (e.g., variety and quality). We empirically validate the model with vintage effect data in 36 product categories, and measures of consumer valuations of product variety and quality for 12 of these 36 categories. The results show that pioneers do better in product categories where variety is more important and worse in categories where product quality is more important. Pioneers in categories with high vintage effects are shown to have lower market shares and higher failure rates. Similar results appear when analyzing persistence of market leadership over time, further validating our model's major implications. We also present two case studies that illustrate key elements of the model.

This study investigates how people’s satisfaction judgments are modified after they interact with other group members. It integrates research on customer satisfaction and social influence to develop hypotheses about how an individual’s satisfaction is influenced by discrepancies between her expectations about the satisfaction of other group members and their actual opinions as revealed in group discussion. It also considers how this effect is moderated by the individual’s susceptibility to social influence and perceptions of group cohesiveness. Two empirical studies demonstrate significant social influence effects on satisfaction judgments in groups. Study One analyzes group satisfaction data collected over time using a mixed-effects regression. It shows that an individual’s perceived discrepancy between others’ satisfaction judgments and expected group satisfaction has an important influence on her postdiscussion satisfaction judgments. Moreover, individuals discount the prediscussion satisfaction judgments of other group members in favor of perceived satisfaction and its discrepancy with expectations. Group cohesiveness accentuates the perceived discrepancy with expected group satisfaction. Study Two analyzes survey data from dyads drawn from a cross-sectional sample of organizational buyers who purchase from the same supplier. It models the decision maker’s satisfaction with a service supplier as a function of end-user satisfaction. It shows that social influence effects exist in purchasing groups within organizations. Both studies demonstrate that individual-level postdiscussion satisfaction judgments tend to become more extreme, a phenomenon we call satisfaction escalation .

Several studies have demonstrated an order-of-entry effect on market share, suggesting that pioneers outperform later entrants. However, other research has pointed out the limitations of these studies and found evidence that many pioneers fail or have low market share. Given this background, the purpose of this research is to understand the conditions under which pioneers are more likely and also less likely to have an advantage. We propose a game-theoretic model that includes important sources of pioneer advantages as well as disadvantages. Specifically, we incorporate a pioneer advantage due to preemption in markets with heterogeneous tastes. In addition, we incorporate a potential pioneer disadvantage due to technology vintage effects, where later entrants utilizing improved technology can have lower costs and higher quality. The model allows us to evaluate the extent of vintage effects necessary to overcome a pioneer's advantage. Key relationships are found between the magnitude of the pioneer advantage o r disadvantage and consumer valuations of product attributes (e.g., variety and quality). We empirically validate the model with vintage effect data in 36 product categories, and measures of consumer valuations of product variety and quality for 12 of these 36 categories. The results show that pioneers do better in product categories where variety is more important and worse in categories where product quality is more important. Pioneers in categories with high vintage effects are shown to have lower market shares and higher failure rates. Similar results appear when analyzing persistence of market leadership over time, further validating our model's major implications. We also present two case studies that illustrate key elements of the model.

There is strong management interest in the use of multimedia stimuli to gather data with which to forecast consumer response to really new products. These vivid methods have high face validity and are attractive to top management, but they have only begun to be tested for validity. The authors evaluate one virtual representation called information acceleration (IA) that has been applied eight times to consumer and business-to-business products. They report on three tests of validity-two internal and one external. The first internal test compares the ability of IA to represent a physical automobile showroom and salesperson. The second internal test compares the ability of IA to represent the interpersonal interaction of a medical technician with a physician when evaluating a new medical instrument. The external test compares forecasts, made in 1992 for a camera launched in 1993, with actual sales for 1993 and 1994. The authors also compare actual sales to forecasts modified for the actual marketing plan and for an unforeseen negative Consumer Reports article. Using real-world applications of IA as a basis, the authors conclude with a summary of the lessons that have been learned during the past five years.

In these cases, companies with a long track record of contracting tend to hand off the job to outsiders -- three times as often, in fact, as businesses with average levels of experience in the practice. [...] businesses that outsourced too much or too little -- by just 1% -- saw an 11% decrease in the expected number and influence of their patents.