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

T. Tony Ke (), Jiwoong Shin () and Jungju Yu ()
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T. Tony Ke: Marketing, Business School, The Chinese University of Hong Kong, Hong Kong
Jiwoong Shin: Marketing, School of Management, Yale University, New Haven, Connecticut 06520
Jungju Yu: Marketing, College of Business, Korea Advanced Institute of Science and Technology, Seoul 02455, Korea

Marketing Science, 2023, vol. 42, issue 6, 1101-1124

Abstract: 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.

Keywords: product portfolio; brand positioning; mainstream brand; niche brand; consumer search; holdup problem (search for similar items in EconPapers)
Date: 2023
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