Incumbents’ marketing deterrence strategies and potential entrants’ time-to-entry: evidence from the US airline industry

Abstract

Purpose

The purpose of this study is to investigate how incumbent firms’ marketing deterrence strategies, price-cuts and quality improvement, influence potential entrants’ (PEs) entry timing into incumbents’ markets and examine the moderating role of incumbents’ market-level resources and capabilities (R&Cs).

Design/methodology/approach

To test the hypotheses, an accelerated failure time model is applied to a rich data set of entry threats between 1997 and 2019 in the US airline industry.

Findings

The findings show that while quality improvements delay PEs’ entry, price-cuts expedite it. Furthermore, PEs are more likely to be deterred by price-cuts when incumbents possess high market-level R&Cs. However, such R&Cs do not moderate the link between incumbents’ quality improvement and PEs’ entry timing.

Research limitations/implications

Market entry in this research is conceptualized and defined as a large resource deployment into a market and operationalized as a binary variable. However, PEs might rather choose a minor resource deployment instead to establish a foothold in new markets. It would be fruitful for future research to examine various levels of participation in a new market and examine how the incumbents’ marketing deterrence strategies affect PEs’ entry timing. Doing so would provide us with a deeper understanding of the difference between actual/full market entry and micro/minor market entry.

Practical implications

This research examines the impact of incumbents’ marketing deterrence strategies in a contingency framework and highlights the crucial role of R&Cs in implementing such deterrence strategies. Doing so provides actionable insights to managers who craft strategies to protect their markets against PEs.

Originality/value

Previous research illustrates that incumbent firms commonly respond to competitors’ entry threats by cutting prices and improving quality. While antecedents of these deterrence strategies have been extensively investigated, the consequences have yet to be empirically examined.

Citation

Aghaie, S., Kamran-Disfani, O., Darani, M. and Saljoughian, M.M. (2024), "Incumbents’ marketing deterrence strategies and potential entrants’ time-to-entry: evidence from the US airline industry", European Journal of Marketing, Vol. 58 No. 10, pp. 2265-2287. https://doi.org/10.1108/EJM-01-2023-0014