Asymmetric Competition in Choice and the Leveraging of Competitive Disadvantages

Abstract : Studies of grocery sales show that consumers of store brands switch to (price) discounted national brands more than consumers of national brands switch to discounted store brands. Such asymmetric price competition can be explained with numerous mechanisms proposed here and elsewhere. We report a choice experiment that replicates asymmetric price competition favoring higher‐quality competitors and demonstrates asymmetric quality competition favoring lower‐quality competitors. Also demonstrated are multiple mechanisms contributing to competitive asymmetries, where dominance involving the otherwise preferred brand is particularly potent (e.g., when a higher‐quality competitor matches the price of an otherwise preferred lower‐quality brand). The findings implicate modifications to (1) theories of decision making when extended to repeat choice, (2) empirical models of secondary purchase data, and (3) strategies for positioning and attacking brands. Whereas improving competitive disadvantages often attracts consumers from competitors more than does improving competitive advantages, this benefit must be weighed against the differentiation sacrificed by improving competitive disadvantages (improving competitive advantages, in contrast, increases differentiation).