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Executive Summary
Consider the launch of iPhone, one of the major product introductions in the United States in 2007. Close observation of the introduction closely yields two key inferences: First, the promotion of iPhone was heavily tilted toward word-of-mouth communications and buzz rather than to paid advertising. Second, following the launch of Apple’s iPhone, several leading handset manufacturers, such as Samsung and Nokia, began launching smart phones with similar features. To what extent was the communication between consumers in the market specifically related to iPhone? To what extent do iPhone’s competitors enjoy the buzz generated by iPhone? Although Apple is working under the assumption that interpersonal communication will help push its own product, allowing it a relatively low investment in advertising, it appears that others in the industry are enjoying the benefits of this cross-brand effect: To quote Verizon spokesperson Michael Murphy: “I would have to think that a rising tide lifts all ships.” Although consumer-based communications are occupying increasing interest on the part of academics and practitioners, an important but often overlooked issue is that these communications are not always brand specific. Potential adopters can communicate with the customers of a specific brand but eventually purchase a competing brand because of factors such as brand equity, price, availability, special offers, and a better match to their needs. Thus, firms enjoy new customers who joined as a result of the influence of their competitors’ customers.

This study shows that the interplay between within- and cross-brand influences can have a substantial effect on the growth of markets under competition. The authors develop a framework that explicitly represents these two influences; they focus on the case of two otherwise-identical competing brands with different entry times. As a result of within-brand influence, current customers create an interaction-based advantage for the first entrant, which grows with time. Thus, the authors illustrate how customers should be viewed as market assets who yield increasing returns during the diffusion process. Conversely, cross-brand influence enables a market follower to enjoy a shorter time to take-off. Given the combination of both, the authors predict the “dual pattern,” characterized by a fast take-off for a follower, followed by a widening gap in favor of the first entrant. To investigate the dual pattern empirically, the authors examined the cellular phone markets in Western Europe, in which regulatory effects created a brand environment in which competing brands are similar in almost all marketing-mix aspects, except for their entry time. The dual pattern is identified in 14 of 16 Western European countries. The authors use these brand-level data to show that the ratio of within- to cross-brand influence explains the dual pattern better than other, more straightforward alternatives, such as differences in price, churn, and technology.

Biography
Barak Libai is Associate Professor of Marketing in the Recanati Graduate School of Business at Tel Aviv University. He has a BSc in Industrial Engineering and Management from the Technion, an MBA from Tel Aviv University, and PhD in Marketing from the University of North Carolina at Chapel Hill. At the time this work was completed, he was a visiting professor at the Massachusetts Institute of Technology. His research interests combine the growth of markets for new products and the valuation of customers, and his work has won awards from the Marketing Science Institute, the American Marketing Association, Journal of Service Research, and International Journal of Research in Marketing. He is a member of the editorial board of the International Journal of Research in Marketing and serves on the academic advisory board of the Word of Mouth Marketing Association.

Eitan Muller is Professor of Marketing in the Stern School of Business at New York University and Chaired Professor of Marketing in the Recanati Graduate School of Business at Tel Aviv University. He earned a BSc (cum laude) from the Technion and his MBA (cum laude) and PhD in Managerial Economics from the Kellogg Graduate School of Management at Northwestern University. He has been a visiting professor at Northwestern University, the University of Pennsylvania, and the University of Texas at Austin. He has won several awards, including the Harold Maynard Award for significant contribution to marketing theory and thought. He has published more than 60 articles in marketing and economics journals and edited a book on diffusion of innovations. He is a member of the editorial boards of Journal of Marketing, Journal of Marketing Research, Marketing Science, and International Journal of Research in Marketing. He has extensive consulting experience in the telecommunications industry.

Renana Peres is Assistant Professor of Marketing in the Graduate School of Business at the Hebrew University of Jerusalem. She earned a BSc and MSc in Physics (cum laude) from the Hebrew University of Jerusalem and an MBA (cum laude) and a PhD in Marketing from the Recanati Graduate School of Business at Tel Aviv University. She is currently a visiting professor in the Wharton School at the University of Pennsylvania, where she teaches marketing modeling and marketing strategy. She has published in Journal of Marketing Research and International Journal of Research in Marketing, mainly on innovation diffusion and the evolution of markets for new products. She is a member of the editorial board of International Journal of Research in Marketing. Her industry experience includes being a founder and the first chief executive officer of Persay, a high-tech firm that develops systems and technologies that perform voice-based authentication of subscribers in applications of direct banking, telecommunication, and e-commerce.

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