How Do Firms Build Market Share?
Anthony Priolo  1, *@  , David Argente  2@  , Doireann Fitzgerald  3@  , Sara Moreira  4@  
1 : Lancaster University Management School  (LUMS)  -  Website
Bailrigg, Lancaster, LA1 4YW -  United Kingdom
2 : Pennsylvania State University  (Penn State)  -  Website
201 Old Main, University Park, Pennsylvania 16802 -  United States
3 : Federal Reserve Bank of Minneapolis  -  Website
90 Hennepin Ave, Minneapolis, MN 55401 -  United States
4 : Northwestern University Kellogg School of Management  -  Website
2211 Campus Drive, Evanston, IL 60208 -  United States
* : Corresponding author

We build a new data set to show that successful entrants in the consumer food sector build market share by adding new customers. They reach new customers by entering new geographical markets, placing their product in more stores in these markets, and by advertising direct to customers in markets where their product is available. We find no evidence that entrants manipulate markups to build market share. We estimate a structural model of endogenous customer base acquisition through marketing and advertising to match these facts. Our estimates suggest that the accumulation of customer base is subject to frictions which mean that entrant growth is a drawn-out process. This process generates market shares which are much more dispersed than underlying firm heterogeneity in cost or product appeal. 


Online user: 2 Privacy
Loading...