Do me‐too brands price lower than the feature pioneer?

Abstract

Purpose The purpose of this paper is to investigate the pricing strategies of me‐too brands. Design/methodology/approach This research estimates an empirical model using a panel data of 20 consumer packaged goods sub‐categories. Findings Me‐too brands face pricing constraints that restrict them from pricing aggressively versus the feature pioneer. The results show that private label brands have the most flexibility to price aggressively. Line extensions me‐toos and new brand name me‐toos do not cut price. Line extensions of national brands are constrained by their parent brand's prices. New brand names are constrained by the higher costs of launching a new brand name. Thus, it appears that consistent product line pricing and covering the costs of launching a new brand name limit price competition versus the feature pioneer. Research limitations/implications This research is limited by the lack of distribution data, the lack of customer mind‐set measures of brand equity, and the limited number of private label me‐toos in the sample. Practical implications Feature pioneers need not worry about price cutting from line extension and new brand name me‐toos. They can set prices to cover their development costs and meet their strategic goals. Without the ability to undercut the feature pioneer, me‐too brands need to utilize other marketing tools to compensate for delayed entry. Originality/value Conventional wisdom suggests a me‐too brand succeeds if it charges a low price as low prices are essential to obtain trial. This paper provides empirical evidence that certain types of me‐too brands are restricted from aggressive price cutting.

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