The Effects of Imbalanced Competition on Demonstration Strategies
AbstractThis paper analyzes the effect of competition on product demonstration decisions. Pre-purchase product demonstration enables marketers to differentiate products that are ex-post differentiated but are judged according to perceived fit, rather than actual fit, due to pre-purchase consumer uncertainty. Imbalanced competition accompanied by fit uncertainty motivates the follower to offer demonstrations to avoid a price war. This paper explores the conditions that lead the leader to retaliate. In addition to effects on quantity, competition may increase the quality of demonstrations offered by the leader. We analyze a business case, showing that competition may increase the demonstration intensity and that the leading manufacturer’s response to changes in competition is stronger than the responses of the followers. Our research has the potential to aid mangers in formulating demonstration strategies and in responding to competitors’ demonstration efforts.
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Bibliographic InfoPaper provided by Hebrew University of Jerusalem, Department of Agricultural Economics and Management in its series Discussion Papers with number 93131.
Date of creation: 2010
Date of revision:
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Postal: Faculty of Agriculture, Food and Environmental Quality Sciences Hebrew University of Jerusalem, P.O. Box 12, Rehovot 76100
Web page: http://departments.agri.huji.ac.il/economics/indexe.html
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Imbalanced competition; product demonstration; differentiation; test-drive; price war; Political Economy; Production Economics;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
- NEP-BEC-2010-09-11 (Business Economics)
- NEP-COM-2010-09-11 (Industrial Competition)
- NEP-CSE-2010-09-11 (Economics of Strategic Management)
- NEP-MIC-2010-09-11 (Microeconomics)
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