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A Model of Product Portfolio Design: Guiding Consumer Search through Brand Positioning

MARKETING SCIENCE2023-11

Ke, T. Tony | Shin, Jiwoong | YU, Jungju

We investigate a firm's optimal product portfolio design on a Hotelling line that can affect consumers' search decisions. Consumers form their perceptions of a brand from interactions with all products in the portfolio. We conceptualize the average location of the products as the brand position that represents the aggregate information about characteristics common to the product portfolio. Then, we propose a mechanism for why and how brand positioning induced by a firm's product portfolio design can deliver credible information that guides consumer search. We show that niche positioning naturally conveys more information than mainstream positioning. A mainstream brand has incentives to opportunistically dilute its brand by offering a wide range of products. Even in a monopolistic market, a niche brand positioning may arise as an equilibrium because it serves as a commitment device that prevents brand dilution.

Publisher
INFORMS
Issue Date
2023-11
Article Type
Article
Citation
MARKETING SCIENCE, Vol.42, No.6, pp.1101 - 1124
ISSN
0732-2399
DOI
10.1287/mksc.2022.1424
Contact : Joo, Sunhee ( shjoo2006@kaist.ac.kr )

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