Abstract
The authors study brand-share dynamics among competing brands in new repeat-purchase categories. In such new categories, market shares are strongly affected by retailer distribution decisions. Because a retailer that considers a brand for distribution can take into account the prior performance of that brand with other retailers, the success of a manufacturer in obtaining distribution can depend positively on its brand's market share to date. This creates positive feedback between a brand's market share and its distribution over the growth stage of the category. Temporary positive feedback, along with the way manufacturers influence their brand's market share and distribution, is hypothesized to drive the emergence of the market structure. The authors model this feedback to quantify the evolution of a brand's coupled market share and distribution. Empirical results using data from the U.S. ready-to-drink tea category suggest that positive feedback between market share and distribution exists in the early growth stage of the category. Therefore, early in the life of the new category small short-term changes in market share or distribution may generate larger long-term changes in market share and distribution. Later, such momentum appears absent. In this context, the authors discuss how a late entrant fails to capture a sizeable share of the market.
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