Competitive Strategies for Late Entry into a Market with a Dominant Brand

This paper considers optimal positioning, advertising, and pricing strategies for a firm contemplating entry in a market dominated by an entrenched competitor. Drawing on behavioral research on consumer preference formation, we develop an individual-level model that reflects differing consumer responses to similar products offered by the dominant brand and later entrants—an effect we term asymmetric preferences. From the resulting aggregate market response model, we derive several competitive implications, notably (1) that preference asymmetry can make a differentiated late entry strategy optimal even if preferences would appear to dictate otherwise, and (2) that me-too strategies are not equilibrium late entry strategies. More generally, our analysis suggests that preference asymmetry can contribute to the persistent competitive advantage of dominant brands.