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Marketing Professor Explores the Benefits of Being the Little Guy

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When shopping in urban malls or populated areas, consumers often have a variety of options to satisfy their needs and demands. As small businesses such as coffee shops and book stores strive to lure customers away from larger competition, a recent study suggests that competitive advertising and strategic locating can help smaller brands increase sales.

In the study forthcoming in The Journal of Marketing Research, “Positioning Brands Against Large Competitors,” Georgetown University’s McDonough School of Business Assistant Professor Neeru Paharia and her co-authors explore the effects of a small brand having a large, dominant competitor – highlighting the conditions under which focusing on a competitive threat, rather than hiding it, can actually help a small business.

Throughout field studies, the researchers distributed a hypothetical advertisement to customers at a small independent bookstore located in Cambridge, Mass., that mentioned the store was competing with a nearby large competitors. The researchers also distributed a different advertisement in the same bookstore that did not mention competition and found that customers were more likely to buy something if the bookstore mentioned large competitors.

Paharia finds that consumers will increase their support for small brands when they perceive the smaller brand is faced with a competitive threat from a large brand versus when the smaller brand is in competition with brands that are similar in size or when the smaller brand is outside of a competitive context.

“Consumers want to protect the small guy,” said Paharia. “They tend to relate and want to defend companies with personal narratives or underdog beginnings.”

The researchers also examined more than 10,000 Yelp reviews of Pete’s Coffee & Tea. According to those reviews, the more people mentioned Starbucks in the text of a Pete’s review, the better the reviews were for Pete’s. Therefore, the researchers determined that highlighting a large competitor can help smaller brands. While owners of small coffee shops may believe being located next to other shops of similar size and resources provides fairer and more equal competition, Paharia argues that being located near a larger business can also be advantageous.   

This consumer support directly translates into purchase intention, real purchases, and more favorable online reviews. Paharia argues that this ‘framing the game effect’ is mediated by consumers’ motivation to express their views and have an impact in the marketplace through their purchasing behavior.

Before large companies reconsider plans of grand openings or new locations, executives may want to consider the price, quality, and assortment of their companies’ offerings. If there is a significant difference in quality or price, this phenomenon may not occur. However, if all else is equal, consumers will support the smaller business.

“Smaller brands should compare themselves with larger companies to leverage the underdog mentality and frame the sales process as a game between competitors,” said Paharia. “Consumers will likely adopt this mindset as it gives them a sense that they are participating and directly impacting the marketplace through this consumer activism.”