Large competitors are often viewed as a
major threat for startups and small companies; big companies have more financial
resources and greater scale, market power
and brand awareness than smaller ones.
However, our research finds that a smaller
brand can actually benefit if consumers
can see the competitive threat it faces from
a larger organization.
When Cold Stone Creamery, a U.S.-based ice cream chain with about 1,400
stores, moved within 50 steps of a J.P. Licks
ice cream store in Newton, Massachusetts,
some people expected that J.P. Licks, a small,
locally owned company, would be beaten
out of the Newton market. But consumers
rallied around J.P. Licks, and Cold Stone
later closed its nearby location. When the
owner of the Los Angeles-based coffee store chain The Coffee Bean &
Tea Leaf could not stop a Starbucks coffee shop from moving in next
door, he was surprised to see his sales shoot up — so much so that he
started proactively colocating new stores next to Starbucks ones.
These examples are not anomalies. In six lab and field studies,
we explored the effects of having a large, dominant competitor
and found that highlighting a large competitor’s size and close
proximity can help smaller brands, instead of harming them.
(Detailed results of our findings can be found in “Positioning
Brands Against Large Competitors to Increase Sales,” forthcoming
in the Journal of Marketing Research. See “Related Research.”)
Compared to when they are in competition with brands that are
similar to them in size or when consumers view them outside of a
competitive context, small brands see consumer support go up
when they are faced with a competitive threat from large brands.
This support translates into higher purchase intention, more purchases and more favorable online reviews.
As part of our research, we conducted a field study at an indepen-
dent bookstore in Cambridge, Massachusetts. Upon entering the
bookstore, 163 prospective shoppers were exposed to one of three
versions of an in-store ad, emphasizing either the store’s large
competitors, small competitors or no com-
petition. Shoppers who read the “large
competitors” version were told that the
store’s main competitors are large corpora-
tions that have the ability to put small
businesses such as this bookstore out of
business. The “small competitors” version
indicated the store’s main competitors are
other locally owned small bookstores in
Cambridge. In the “no competition” ver-
sion, participants were given no information
about the competitive environment. Shop-
pers were then given a $5 coupon, coded
with the in-store ad version they read. Ana-
lyzing shoppers’ sales receipts and the
number of redeemed coupons, we found
that shoppers were significantly more likely
to make a purchase after reading the “large
competitors” version of the in-store ad, compared to the “small com-
petitors” version or the no competition version. They also purchased
more items and spent more money at the store, compared to shop-
pers reading the “small competitors” or “no competition” versions.
These results suggest that framing the competitive game and empha-
sizing a competitive narrative against a larger company can help a
small establishment — and spur consumers to make a purchase that
supports the smaller competitor.
In subsequent studies, we tested this “framing-the-game” effect
in various contexts and product categories and further found that
support for a large brand decreases when consumers view it as being
in competition with a smaller brand. In one study, we asked participants to assess two hypothetical rival tire shops, “Tire World” and
“Tire Planet,” under three conditions — small vs. large, small vs.
small or large vs. large competitors. While participants indicated no
preference for the small or large shop when it was competing against
a competitor of similar size, the small vs. large competitive context
elicited a strong preference for the small rather than large shop. Participants indicated they were significantly more favorable to the
small “Tire World” shop in the small vs. large setting than in the
small vs. small, and significantly more adverse to the large “Tire
The Upside to Large Competitors
New research suggests that a smaller company can benefit by making consumers
aware that it competes against bigger corporations.
BY NEERU PAHARIA, ANAT KEINAN AND JILL AVERY
Jim Koch, founder of the Boston Beer Company,
has often contrasted his brewery’s size with that
of larger competitors.