Persuasive Marketing Business-Stealing vs Product Quality Equilibrium
Enterprise development evaluations often focus on firm-level outputs without evaluating general equilibrium effects, failing to distinguish whether marketing advice generates genuine welfare improvements or merely redistributes market share from non-treated competitors.
Picture this
Imagine ten bakeries in a small town with a fixed total daily demand for bread. If a consultant teaches one bakery how to run aggressive sales promotions, that bakery may temporarily win customers away from the other nine bakeries without increasing the town's total bread consumption. This represents "business stealing" (a zero-sum transfer). In contrast, if the bakery learns to improve bread quality or lower production costs, it expands overall consumer welfare and market value.
What the evidence says
In competitive market equilibrium with fixed aggregate consumer demand, persuasive marketing instruction primarily reallocates revenue across rival microenterprises (generating negative externalities for non-treated firms), whereas true industry-wide productivity growth requires cost reductions, product quality enhancements, or product differentiation.
- Who
- Theoretical framework applied to 160 urban microenterprise tailors operating in competitive local markets in Accra, Ghana.
- How
- Conceptual general equilibrium market structure analysis comparing persuasive marketing interventions against informative/quality-enhancing process innovations in microenterprise clusters.
What to do
Account for local market competitiveness and potential zero-sum business stealing when designing and evaluating microenterprise marketing support programs.
From the source
"For example, if the intervention primarily teaches better persuasive marketing, but not informative marketing, then business is likely simply being shifted from the less persuasive firm to the more persuasive one. If, on the other hand, product quality has increased, or costs have been lowered, then equilibrium benefits are likely accruing."
Consulting and Capital Experiments with Microenterprise Tailors in Ghana