The viability of a second-mover's market win with higher brand equity

Abstract

This study supports the fact that in some aspects bounded rationality in consumer behaviors drive consumers to value more intangible than tangible aspects in a product, and enable the second-mover to overtake the market. The model of this paper focuses on the impact of a sequential market entrance of two firms in one market segment. By means of the Stackelberg competition and empirical metrics used in brand management, the model tries to show that when customers are facing an entrance of a product with a higher valued brand, they can ignore the first-mover's superiority and move to the product which delivers a stronger value – which is in this study's case greater brand equity (trust to a brand due to the brand's reputation and the value that this equity delivers). The findings show viable applications in the current smart phone market where customers’ belief based on bounded rational trust and belief in a brand's equity can make the late-mover overcome the disadvantages of being the inexperienced competitor. Also, in the same context, when consumers do not have a high discrepancy in choosing a product by its technological background or market experience, intangible assets can serve as the decision variable of a product.

Keywords:

• brand equity
• brand extension
• first-mover
• second-mover
• Stackelberg competition

Acknowledgements

The author thanks the anonymous reviewers and the journal's editors for their helpful comments on this article.