The impact of low-price brands on the order of entry advantage

Abstract

The objectives of this research are to investigate (1) if a later entrant can reduce an order of entry effect by positioning itself as a low-price brand; and (2) if the type of low-price brand impacts the effectiveness of this strategy. The impact of a low-price strategy on the order of entry effect has been modelled using three categories of over-the-counter medicines. The results indicate that, in a majority of categories and dependent on the type of low-price brand, a low-price strategy can reduce the market share penalty for being a later entrant. In addition, the results provide evidence that leveraging an existing store brand name does not provide a strategic advantage over establishing a new brand name. The implications for managers is that a low-price brand provides a motivating point of difference for consumers, which shifts brand preferences and market share away from the pioneer brand.