Small market-share brands are known to suffer from two specific disadvantages compared with high-share brands: they tend to have fewer buyers than high-share brands, and they also tend to be bought less often (Ehrenberg, Goodhardt, and Barwise 1990). The authors consider a third important advantage for high-share brands: unusually high behavioral loyalty (e.g., degree of repeat purchasing). We show, across many product-markets in both Japan and the U.S., that high-share brands have significantly greater loyalty than the levels that would be expected on the basis of a popular consumer purchase model (the Dirichlet model). Several possible causes for this effect are examined, including four key assumptions that underlie the Dirichlet model. The most likely source appears to be the existence of distinct consumer segments, which may emerge through the distribution strategies pursued by both large brands and small retailers. The authors discuss other possible causes of this market-share premium as well as several of its managerial implications.
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