A Conceptual Framework For Analyzing the Impact of a Me-Too Entrant on the Pioneer's Market Share

ABSTRACT - Earlier research has found that a pioneering brand attains a sustainable competitive advantage in relation to later entrants, especially me-too brands, by being identified as the prototype of the product category, and thus gaining in perceptual distinctiveness. However, is a prototype model of schemas always appropriate? Research in psychology and marketing points to the existence of an alternate model, namely, the exemplar model of schemas. This article discusses how the competing models can be used to arrive at diametrically opposite predictions concerning the effectiveness of a me-too strategy to counter a pioneer, and sets forth conditions under which each of these models is appropriate.

Citation:

Jaideep Sengupta (1995) ,"A Conceptual Framework For Analyzing the Impact of a Me-Too Entrant on the Pioneer's Market Share", in NA - Advances in Consumer Research Volume 22, eds. Frank R. Kardes and Mita Sujan, Provo, UT : Association for Consumer Research, Pages: 128-132.

Advances in Consumer Research Volume 22, 1995      Pages 128-132

A CONCEPTUAL FRAMEWORK FOR ANALYZING THE IMPACT OF A ME-TOO ENTRANT ON THE PIONEER'S MARKET SHARE

Jaideep Sengupta, University of California, Los Angeles

ABSTRACT -

Earlier research has found that a pioneering brand attains a sustainable competitive advantage in relation to later entrants, especially me-too brands, by being identified as the prototype of the product category, and thus gaining in perceptual distinctiveness. However, is a prototype model of schemas always appropriate? Research in psychology and marketing points to the existence of an alternate model, namely, the exemplar model of schemas. This article discusses how the competing models can be used to arrive at diametrically opposite predictions concerning the effectiveness of a me-too strategy to counter a pioneer, and sets forth conditions under which each of these models is appropriate.

Marketing research on pioneering has traditionally examined the phenomenon from the firm's point of view (e.g., Robinson and Fornell 1985, Robinson 1988, Kalyanram and Urban 1992). Not much research has addressed the issue of pioneering from the consumer's perspective. A study by Carpenter and Nakamoto (1989; hereafter CN) represents an exception (see also Kardes and Kalyanram 1992). This study used an experimental approach and, based on a prototype model of schemas (Fiske and Taylor 1991), showed that pioneering advantages can result from the way consumers learn about brands and form preference structures. An important finding of this study was that me-too entrants actually ended up enhancing the pioneer's market share advantage by reinforcing the perception of the pioneer as the category prototype.

CN's paper raises an interesting questionBis there an alternate learning process under which me-too entrants can actually hurt the pioneer, and if so, what are the conditions under which these alternate mechanisms prevail? This is a pertinent question, since pioneers often do fail (Golder and Tellis 1993), and a major reason for their failure would seem to be that later entrants can easily imitate the pioneer, at a low cost (Liebermann and Montgomery 1988, Kerin, Varadarajan and Peterson 1992, Golder and Tellis 1993).

Thus, although Carpenter & Nakamoto's (1989) proposed mechanism represents an important step in studying the consumer processes related to pioneering, a more complete framework would also explain why pioneering may not always be a successful strategy, and show how a me-too entrant may hurt the pioneer.

The goal of this paper, as a first step in ongoing research, is to provide such a conceptual framework, by presenting an alternate learning mechanism which explains how a me-too entrant could hurt the pioneer. CN used the prototype model of schemas as the theoretical foundation for their proposed learning mechanism. We use a competing model of schemas-the exemplar model-as the foundation of the alternate learning mechanism we propose.

We also present a set of propositions delineating the conditions under which these two alternative learning mechanisms will prevail.

WHY PIONEERING WORKS: CARPENTER AND NAKAMOTO (1989)

CN argue that the process by which consumers learn about brands and form preferences for them has an important role in creating an advantage for pioneers, and that this process has two components. First, in the early stages of many markets, consumers may know little about the importance of the product attributes or their ideal combination. Thus, a successful early entrant can have a major influence on how attributes are valued and on the ideal attribute combination. Coca-Cola, for example, may have had a significant impact in its early years on the formation and evolution of individuals' preferences for colas. This influence can shift individuals' preferences to favor the pioneer over later entrants, leading to a market share advantage for the pioneer. In essence, following successful experiences with the pioneering brand, buyers come to perceive the combination of attributes possessed by that brand as the ideal combination, an idea which is reinforced by advertising.

The above process represents the first component of CN's explanation of the pioneering advantage. However, this process in itself would not provide long term pioneering advantage, since later entrants would merely position themselves at the consumers' "ideal point" which has been created by the pioneer. The second component of CN 's explanation, which we discuss below, is based on the notion that consumers hold schemas for a product category (Sujan 1985) and that pioneers are perceived as being 'prototypical' of the schema, thus giving them a sustainable competitive advantage.

The Prototype Model of Schemas

A schema is defined as a memory representation of a particular stimulus domain (Fiske and Taylor 1991). A schema contains information about the category it represents, and is often used to categorize a new stimulus. Thus a schema about the category 'colas' may contain attributes such as "carbonated", "sweet" etc., as well as the interrelationships between these attributes, and a new drink possessing these typical attributes may be categorized as a cola, without much effort.

However, it is not always clear which instances belong to a category; thus, baseball may be a good example of the category "games", but betting on the Super Bowl may not (Fiske and Taylor 1991). The perception that some instances are more typical than others leads to the basic idea underlying the prototype model; namely, that instances range from being quite typical to atypical, with a most typical or prototypical instance best representing the category. The prototype is the "central tendency" or average of the category members (Fiske and Taylor 1991).

People may never actually encounter their prototypes in real life because they are abstracted from experiences with examples. Even though none of the instances may itself be a perfect prototype, people abstract out the most typical or average features. Further, according to this model, a new instance is classified as being a member of the category following comparison only with the abstract prototype, not with 'real' examples or instances of the category.

A prototype may, of course, be a real example of the category as well, in the cases where a category instance gets so strongly associated with the category as to become the prototype for that category. In such a situation, new instances are classified following comparison with this real 'example' which happens to be the prototype. Other examples of the category are not used in the classification attempt For example, for some people, Coca-Cola may be the prototype for the category 'colas' and new instances will be classified following comparison only with this prototype. The prototype thus becomes highly salient and distinct in peoples' perceptions, and the other instances of the category are neglected in comparison.

CN use this version of the prototype model to explain pioneering advantage by suggesting that the pioneer has a unique distinctiveness derived from its being representative of the category, thus acting as the prototype for that category. Being perceptually distinct, the pioneer overshadows brands positioned nearby, especially me-too brands that often rely on the pioneer to establish their identity.

Since the pioneer acts as the prototype, any new entrant in that product category is compared to the pioneer, and the closer the entrant is positioned to the pioneer, the more it serves to reinforce the idea of the pioneer as the category standard. That is, a me-too entrant helps the pioneer to become even more strongly associated with the category in the mind of the consumer. In so doing, the me-too entrant helps the pioneer by reinforcing its identity, and at the same time, suffers from its own lack of a unique identity. Therefore, as long as ambiguity remains concerning an objective ideal point for the category, comparisons drawn between the me-too entrant and the pioneer invariably favor the pioneer.

For a similar reason, price-cutting by me-too brands has little impact on the advantage of the pioneer. Being closer to the pioneer, the me-too brand is less distinct than the pioneer, so any price reduction has a smaller impact than a similar price reduction by a more differentiated rival.

Pioneering brands, therefore, have a perceptually based competitive advantage based on their prototypicality, that insulates them from competitors and may actually reverse competitive forces. Attempts by a me-too to cut price and reposition toward the pioneer to "compete away" its high share increase the pioneer's advantage by increasing the pioneer's perceptual mass.

Based on the foregoing, CN suggest a strategy for a later entrant to overcome the pioneer's advantage. The principal competitive disadvantage for a later entrant lies in its lack of distinctiveness, especially if it is positioned as a me-too of the pioneer. A later entrant should therefore try to diminish the impact of the pioneer's distinctiveness and increase its own by moving away from the pioneer. By doing so, it can establish an identity for itself, and thus become perceptually more distinctive.

Further, if a brand does wish to use the me-too strategy, it would seem to make sense for it to copy a differentiated later entrant, rather than the pioneer. Positioning closer to a differentiated entrant helps develop recognition for the market segment and increases the relative prominence of both the distinctive entrant and its me-too. Furthermore, by decreasing the relative distinctiveness of the pioneer, this segmentation strategy increases the market shares of both the brands at the pioneer's expense. In other words, by copying a differentiated entrant, a competing perceptual mass is set up which can effectively challenge the pioneer's perceptual mass.

The ideas discussed above were verified experimentally by CN. To summarize, their key findings were, that given a product-market with ambiguous attribute weights and an ambiguous ideal point:

1. The more similar a me-too entrant to the pioneer, the more it helps the pioneer in terms of increasing share.

2. A price cut by a me-too does not hurt the pioneer as much as an equivalent price cut by a later entrant.

3. The market share advantage of the pioneer decreases as the similarity between the differentiated later entrant and its me-too increases.

The above results are based on a learning process which rests on the prototype model of schemas. It is important to remember that according to the prototype model, the different elements of a schema do not come easily to mind when thinking of the category; what does come to mind is a "typical" element of the category. Thereby, the ability to distinguish between different elements of the category is severely diminished, and only the prototype gains perceptual distinctiveness.

CN's results certainly seem counterintuitive to some extent. Given a rational consumer, one would expect a close imitator of the pioneer to reduce the pioneer's market share, not increase it. Similarly, a price-cut by the me-too should adversely affect the pioneer. Finally, if a later entrant has a me-too substitute, the pioneer should gain because the later entrant and its me-too will compete away each other's share. We propose to show that these results are predicted by an alternate learning process which is based on the exemplar model of schemas.

THE EXEMPLAR MODEL OF SCHEMAS

As a counterpoint to the prototype perspective, the exemplar approach (e.g. Brooks 1978; Hintzman 1986), suggests that one remembers separate instances (or exemplars) one has actually encountered, rather than some average prototype one has abstracted from experience. In this view, people categorize a new instance by seeing whether it resembles a lot of remembered exemplars from a category, rather than by comparing it with a single prototype. Thus, according to the exemplar view of schemas, a number of instances of a category (not just a single prototypical instance) can be highly salient perceptually and distinct in memory.

Fiske and Taylor (1991), in a concise review, note that the exemplar view has several advantages over the prototype view of schemas in being able to explain a number of schema-related issues with more ease. The exemplar view most directly accounts for people's knowledge of specific examples that guide their understanding of a category. For example, to refute an assertion that all luxury cars come with power windows, one may retrieve a specific counter-example from the category 'luxury cars'. This reliance on concrete instances suggests the idea of exemplars and supports the thesis that an exemplar viewpoint allows for the salience of different category members.

Further, people often know a lot about the possible variation of members within the category. A prototype theory cannot represent information about variability. However, it is easy to describe people's knowledge of such variation by positing exemplars. Again, such knowledge of variability implies that the consumer is in a position to retrieve specific examples of a category.

Within social cognition, the exemplar model is emerging as a powerful alternative to the prototype model (Smith and Zarate 1990). It has been used to explain how people make judgments about an individual from another culture (Read 1987), the effect of irrelevant similarities on judgments (Gilovich 1981), and facets of the ingroup - outgroup effect (Linville, Fischer and Salovey 1989).

In consumer research, a study of advertising schemas revealed that consumers contain specific examples of ads within a product category, rather than general rules for 'typical ads' (Goodstein, Moore and Cours 1992). In another recent consumer study, Basu (1993) found some evidence for the presence of prototype versus exemplar based processing under different informational conditions.

The accumulated evidence indicates that there is good reason to theorize about the exemplar model, although the prototype model has traditionally received more attention in schema research.

A key difference between the prototype model and the exemplar model (especially relevant in the context of the pioneering problem) is that the prototype model posits that the schema contains an abstract, global, generalized representation of the category, whereas the exemplar model suggests that the schema contains differentiated, individual instances of the category. If the exemplar model is the "true" one, then the different members of a category will all be salient, and similarities and differences between these members can easily be perceived.

Thus, if an exemplar model is a better representation than a prototype model of the way a majority of consumers view a product category, CN's hypotheses concerning the pioneering advantage may not hold true. If consumers recognize the different brands as distinct entities, as is the case under an exemplar viewpoint, the different examples of the category (i.e. the different brands) will all be perceptually salient and distinctive. Positioning a new entrant near the pioneer should not enhance the abstracted 'perceptual mass' of the pioneer, because such an abstraction only holds good under the prototype viewpoint. On the contrary, such an entrant will steal market share from the pioneer since consumers will perceive it as a substitutable brand. This adverse effect on the pioneer's share will be strengthened if the me-too is priced lower. Finally, if a later entrant competes with its me-too, the pioneer should gain by the competition between these two brands since the consumer is able to treat the brands distinctly and observe their similarities and differences, unlike in the prototype case where the later entrant and its me-too together form an abstract perceptual mass against the pioneer.

Based on the foregoing, we arrive at the following proposition which is the basis for our conceptual framework:

P1 If an exemplar model, as opposed to a prototype model, is the true representation of the consumers' learning process, then:

A. The more similar a me-too entrant to the pioneer, the more it hurts the pioneer in terms of market share.

B. A price cut by a me-too hurts the pioneer more than an equivalent price cut by a later entrant.

C. The market share advantage of the pioneer increases as the similarity between the differentiated later entrant and its me-too increases.

Simply put, our framework suggests that a prototype based learning process implies that a me-too entrant will help the pioneer, while an exemplar based learning process implies that a me-too entrant will hurt the pioneer.

The remainder of this paper discusses the moderating factors which determine when each learning model is appropriate.

PROTOTYPES VERSUS EXEMPLARS: A RESOLUTION

The set of moderating factors that follows has been culled from various streams of research in social cognition and marketing.

Order of Learning

Researchers have obtained exemplar versus prototype based processing by manipulating the way people learn initial information about the category. For example, in one study, subjects who learned about group prototypes before encountering individual group members engaged in more prototype based processing, relative to subjects who were given information about group members at the outset (Smith and Zarate 1990, see also Medin, Altom and Murphy 1984). In another study, Basu (1993) induced prototype versus exemplar based processing by giving subjects a categorization rule or exposing them to a number of category exemplars, respectively.

In the consumer domain, it may happen that the consumer learns about the product category through a set of abstract attributes, or through experiences with various brands. In the latter case, the exemplar based model of schema representation and categorization should be more appropriate than the prototype model.

P2 If consumers' initial information about the product category comes through exposure to various brands, rather than to an attribute based category rule, the learning process will be based on the exemplar model, and a me-too entrant will hurt the pioneer. However, if the initial information about the category comes through an attribute based category rule, the learning process will be based on the prototype model and a me-too entrant will help the pioneer.

Amount of Elaboration Accompanying Learning

Another approach to resolving the prototype-exemplar debate suggests that the use of exemplars represents relatively elaborated processing. Along these lines, Fiske and Taylor (1991, pg. 116) observe, "the capacity and the motivation to be accurate or to focus on individuals would probably encourage exemplar-based processes over prototype-based processes." Supporting research has been done by Brewer (1988), who suggests that people start out by representing others in pictoliteral prototypes, and then move on to exemplars when they can individuate other people. Relatedly, Linville, Fischer and Salovey (1989) suggest that people use more exemplars to represent their own groups, and that therefore they can engage in more elaborate processing of own group members than of other group members.

The basic idea emerging from this approach is that exemplar-based models are more appropriate under conditions which encourage more elaborate processing (see, however, Kossan 1981 for another view). The exemplar representation of schemas and the consequent categorization process certainly seems to require people to put in more cognitive effort than does the prototype model, since, according to the exemplar model, people can distinguish between different instances of a category and keep them separate in memory, unlike in the prototype model wherein different instances get bound up into a single, fuzzy "prototype". Further, categorization in the exemplar model requires comparison with a number of exemplars, which seems to be cognitively more taxing than a comparison with a single prototype.

Thus, when category learning is accompanied by greater elaboration, a me-too entrant should hurt the pioneer, whereas under lower elaboration, a me-too entrant should help the pioneer.

In support of this idea, we should note that CN explicitly state that the mechanism they propose holds only when attribute weights and the ideal point are ambiguous, i.e., when product category knowledge is low. In terms of our framework, since lower category knowledge leads to lower elaboration (Sujan 1985), the learning process will be based on the prototype model, and the me-too will end up helping the pioneer, as found by CN.

Further theoretical support for elaboration as a moderating factor stems from the idea that under low elaboration conditions, consumers often rely on simple heuristics to guide their evaluations (Petty and Cacioppo 1986). Thus, the fact of a brand being a pioneer may itself be used as a positive heuristic. A me-too entrant will lend support to such a heuristic, leading to increased market share for the pioneer under low elaboration conditions. Under high elaboration, however, a more detailed evaluation will lead to the me-too threatening the pioneer's share, particularly if the me-too is lower priced, as is often the case.

Another stream of research lends weight to this perspective. CN's findings regarding the counterproductive impact of a me-too is very similar to the attraction effect, whereby a brand gains in market share when another brand that it asymmetrically dominates enters the choice set (Huber and Puto 1986). Ratneshwar et al (1987) found that increased knowledge regarding the product category diluted the attraction effect, a finding that is also predicted by our model. Increased knowledge produces greater elaboration (Petty and Cacioppo 1986), facilitating an exemplar based process which results in the me-too hurting the pioneer. In other words, the dominated brand might hurt the dominating brand instead of helping it.

Finally, Kardes and Kalyanram (1992), in discussing various order-of-entry effects, suggest that prior category knowledge and high category involvement should serve to decrease the pioneering advantage. Again, this is in line with our framework since both greater knowledge and involvement produce greater elaboration (Petty and Cacioppo 1986). Greater elaboration will lead to an exemplar based learning process, which implies that a me-too entrant will decrease the pioneering advantage.

The accumulated evidence leads us to the following proposition:

P3 When category learning is accompanied by greater elaboration, an exemplar based process ensues, and a me-too entrant hurts the pioneer. Lower elaboration facilitates a prototype based process under which a me-too entrant helps the pioneer.

Some of the pioneering literature provides additional empirical support for this proposition. For example, consumer goods have been shown to benefit more from pioneering, as compared to industrial goods (Robinson, 1988). In terms of our discussion, industrial goods are probably a more highly involving purchase than are consumer goods, because they usually represent a higher investment. As greater involvement leads to greater elaboration, we would expect the above result. Similarly, Robinson and Fornell (1985) in a study using the PIMS data, found that low cost consumer goods gain more from pioneering than high cost consumer goods; again, an expected result according to our proposition, since higher cost leads to higher purchase involvement, leading in turn to greater elaboration.

Lag Time for Me-too Entrant

Another important factor affecting the type of learning mechanism, and hence the degree of pioneering advantage, would seem to be the amount of time that elapses till a me-too enters the market. The longer the time the pioneer occupies a perceptual space on its own, the more the likelihood that it acquires the status of a category standard or prototype. Consumers get repeatedly exposed to the pioneer, through advertising, word of mouth, consumption experiences etc. causing the pioneer to significantly impact category learning (Kardes and Kalyanram 1992). However, if a me-too enters the market soon after the pioneer, there is still room in the consumers' perceptual space for another category instance, and an exemplar based learning process is more likely to occur, cutting the pioneer's advantage. Empirical support for this idea comes from studies by Kalyanram and Kardes (1992) who found that when subjects were given information about a set of brands sequentially, the pioneer benefited; however, when the same information was given simultaneously across brands, this effect was wiped out.

P4 A low time lag between the pioneer and its me-too will lead to an exemplar based learning process, which implies that the me-too will hurt the pioneer. A high time lag between the pioneer and its me-too will lead to a prototype based learning process, which implies that the me-too will help the pioneer.

In conclusion, this paper has tried to present a conceptual framework for analyzing the impact of a me-too entrant on the pioneer, using the exemplar/prototype distinction as a theoretical basis. The framework has been used to delineate a set of factors which affect the learning process leading to pioneering (dis)advantage.

Future research should seek to carry out empirical tests of the framework presented here, and use the framework to uncover other factors that affect the impact of a me-too entrant on the pioneer.

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