Product Hierarchy and Brand Strategy Influences on the Order of Entry Effect for Consumer Packaged Goods

Abstract

Manufacturers focus on becoming more agile, software firms deploy rapid application development tools—everyone is in a hurry. Although we all understand the benefits of being first to market, we understand just as clearly that not all first‐to‐market products enjoy the same, sustainable benefits from being market pioneers. Why do some pioneering products experience a more significant order‐of‐entry effect than others?Roger A. Kerin, Gurumurthy Kalyanaram, and Daniel J. Howard examine two factors–product hierarchy and brand strategy—which may influence the magnitude of this effect for new consumer packaged goods. First, they hypothesize that pioneering a new product class offers a greater advantage than introducing a new form to an existing product class. Second, they predict that the order‐of‐entry effect will be greater for brand extensions than for entirely new brands. Finally, considering both product hierarchy and brand strategy, they expect that the order‐of‐entry advantage for brand extensions over new brands will be significantly greater within new product classes than for new forms of existing products.These hypotheses are tested using data from the Information Resources, Inc. Behaviorscan° data set. Collected from 2,500 household panel members, 75 supermarkets, and 25 drugstores, this database contains weekly measures of brand trial penetration as well as brand distribution, price, and promotion information in eight geographic markets from the period 1983–1988. The models developed in this study explore the relationships among brand trial penetration, product hierarchy, brand strategy, order of entry, lag time between successive brand entrants, and marketing mix variables (i.e., price, promotion, distribution, and advertising).The study strongly supports all three hypotheses. In particular, the analysis clearly demonstrates that the order‐of‐entry effect is greatest for a new product class pioneered by a brand extension. Order of entry has the least effect on a new product form pioneered by an entirely new brand. For a company seeking a competitive advantage from being first to market, innovation in product function offers greater potential benefit than innovation in product form. Such a company can also benefit from building on the name and reputation of its established brands. Although the study finds these order‐of‐entry effects significant, the effects of marketing mix variables such as product price and promotion are consistently stronger.