This 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 managers in formulating demonstration strategies and in responding to competitors' demonstration efforts.
Bibliographical noteFunding Information:
The authors thank Oliver Heil, Donald R. Lehmann and two anonymous reviewers for their comments on earlier versions of this manuscript and for their guidance throughout the review process. The authors acknowledge BARD, the Davidson Center for Agribusiness, Kmart Research Center, and the Center for Research in Agricultural Economics for their financial support of this research.
- Imbalanced doupolistic competition
- Non-price competition