Brand Competition Psychology: How Consumer Choices Effect Demand and Why You Should Appreciate Your Competitors

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The goal of every brand marketer should be to build brand equity. What exactly is brand equity? It’s the ability of your brand to shift consumer demand. Consumers have a vast array of choices these days. Today, we walk into a supermarket and are actually confused by all the different choices we are bombarded with! Whereas not too long ago, we would be hoping for more products and as consumers, find ourselves disappointed with things that don’t really serve our needs. Today, brand strategy is not so much about creating demand than it is about shifting your consumer’s demand to YOUR brand.

Fact: Higher demand of your brand leads to higher market share.

Now logically, there are two ways to increase market share and become a market leader:

1)      Eliminate competition

“Well if I don’t have competition and I’m the only choice for my consumer, then I can have all or most of the market share.”

2)      Enhance brand equity

“I will make it so that my brand will shift consumer demand from my competitors to me.”

It’s surprising how the majority of companies today, choose Option 1.

Greed is not good, when your aim is to shift consumer demand.

The leading brand in a category habitually tries to stretch its appeal in order to seize every last bit of market share. What they fail to recognize is that when you stretch your brand, it deteriorates and weakens. The leading brand should endure competitors and also appreciate them. 

The entrance of Pepsi-Cola, was probably one the best things to have happened for Coca-Cola. Why? The competition between Coca-Cola and Pepsi-Cola makes customers more aware of Cola. The Cola category has been growing ever since this rivalry erupted.

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If you want to build market share, understand the consumer’s mind, where your brand lives, and leverage that beautiful asset to create a strong brand building strategy. How consumers respond to competition and choices is crucial for any brand marketer to understand.

Customers always have choices, even when no competition exists. They can make the decisions to choose beer, apple juice, or water to drink instead of cola. The reason is because increased competition grabs more attention of customers and has the habit of increasing sales in the category.

Choice fuels demand.

Choice is seen as a huge benefit. Without choice, customers begin questioning the category itself. For instance, customers begin questioning the price point, in wonder if they’re paying too much – “How can I judge the price if I don’t have anything to compare it with?”

The psychology of most brand marketers and companies is that they want to have an unfair advantage over their competitors. They can’t handle the idea of having an even playing field. So they come to the conclusion, that the only way to keep as much of the market share as possible, is to drive out the competition. That’s when they end up making horrible branding decisions and decide to expand, extend their line, etc., which only further weakens the brand.

Appreciate your competitors. Competition leads to increased choices.

There is however, a limit to how much choice there should be for a consumer in a particular category. Having too much choice can definitely be detrimental. Having too many brands can lead to having too much variety, which leads to greater confusion for the consumer.

What’s the right amount of competition? Two seems to be the best number – Coca Cola/Pepsi, Nintendo/PlayStation, Duracell/Energizer, etc. Too much choice leads to reduced consumption.

In the consumer’s mind, if there isn’t any competition they often think that companies could take advantage of them and rip them off. This is why we usually see competing businesses clustered in one area. We’ve all seen it – how similar businesses are usually grouped together in one neighborhood. This is especially evident in large cities. These business clusters attract more customers because now customers have more than one store to shop at, in one trip. Time is limited these days for the average individual. Moreover, customers can now easily make comparisons.

Healthy competition is good. No brand can ever be capable of dominating the entire market. Anything greater than 50% is extremely rare. If your aim is to gain market share greater than 50%, it’s more efficient to consider creating several independent brands (not line extensions).


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Sam Pardhan

Hi, I'm Sam. I enjoy growing brands and businesses through sophisticated marketing methods. Over the years, I have contributed to the profitable growth of my own and many of my client's companies through the exact principles I write about on Brand Marketing Psychology. It is my hope that these marketing insights will also serve you in catapulting your business and marketing success to new heights.

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