Perception Spillovers Across Competing Brands: A Disaggregate Model of How and When

Abstract

Drawing on the accessibility-diagnosticity framework, and previous literature in branding and order-of-entry, the authors hypothesize that consumer spillovers can also occur across directly competing products that do not share brand names. The authors suggest two mechanisms (prior perception spillover and dynamic perception spillover) and one moderating variable (product/brand similarity). To test for spillovers across competing brands, the authors develop a structural Bayesian learning model and estimate it using prescription choice and marketing communication data from a panel of physicians. From their model results, the authors find evidence of prior and dynamic perception spillovers across competing brands only when brands are sufficiently similar. In contrast, the authors find no evidence of spillover effects across products that are highly dissimilar. Finally, several policy experiments illustrate the strength and significance of competitive spillovers for product diffusion and, based on their results, the authors derive strategic implications for order-of-entry effects and the entry of "me-too" products.

Keywords: Spillovers, Perception Spillovers, Branding, New Products, Consumers, Choice, Bayesian Learning Framework, Physician Prescription Behavior, Pharmaceuticals