Stereotyping and market entry strategy

I have a paper just published in Customer Needs and Solutions — “Stereotyping and Marketing: Out-Group Homogeneity Bias and Entry to Competitive Markets”. This paper has quite a history, with early versions arising from my dissertation (13 years ago). It was quite a journey and the final paper looks nothing like where it started. (For example, it contains a minor nod to supporting experiments — these were really hard work to do but only made the footnote.)

The basic idea is that we shouldn’t necessarily expect bad marketing approaches, in this case stereotyping of customers, to be removed from competitive markets. There is nothing in market theory that guarantees that marketers using bad (here stereotypical) models of consumers will be driven from the market. The idea that markets will take care of bias relies on some strong underlying assumptions. Market pressure might rid marketers of bias — either through them learning their mistakes or the worst being forced from the market — but there are circumstances where it won’t.

To examine the persistence of bias in competitive markets we looked at market entry where marketers experienced out-group homogeneity bias — “the tendency to perceive out-groups as less varied simply because we are unable to identify with them” (Bendle and Perkins, 2019, page 1). Note although the marketers in our model are using stereotypes these are not ‘negative’ stereotypes. The example I use is non-UK marketers thinking all English people love tea. No one thinks it is wrong to love tea — this isn’t a hate-filled stereotype. What’s more it has some basis in fact; a lot of English people do like tea. Still it is a bias because it doesn’t capture the diversity of English consumer tastes. A marketer using this model of English people will behave differently to one who has an accurate view of taste diversity.

Using a simple market entry game we note that stereotyping, in addition to its effects on consumers, “can have negative consequences for the competitor of those experiencing the bias” (Bendle and Perkins, 2019, page 1). (We do examine where this holds and doesn’t hold). The lesson is that my bias can hurt you. This means despite me using the stereotypes and causing the problem I won’t be the one motivated to learn or drop out of the market.

The message from a public policy viewpoint is clear. Markets can be effective but they aren’t magical. Sometimes markets need help to reduce stereotyping. This can come from a variety of sources e.g., government, trade association programs, even competitors educating their rivals about diversity.

I would like to see more academic work on stereotyping in marketing. Perhaps I’ll publish something else in 13 years (2032).

Read: Neil Bendle and Andrew Perkins (2019) Customer Needs and Solutions, First Online: 22 July 2019, https://rdcu.be/bLn4g