Evidence shows that marketers can direct consumers’ limited attention to specific product attributes by making them “prominent.” This research asks: How should firms decide which attribute to make prominent in competitive environments? A key feature of this setting is that consumers’ preferences are context-dependent and that a firm’s choice of an attribute affects the evaluation of all products in the category. We develop a model in which firms selectively promote one of two attributes (e.g., image or performance) before competing in price. We find when consumers evaluate both attributes, perceived differentiation within an attribute can become diluted; we call this the dilution effect. This implies that making the same attribute prominent can arise in equilibrium. Only if there is a sufficient quality advantage in an attribute do we find equilibria with firms making different attributes prominent. We also show how the dilution effect can be a disincentive for investments in quality improvements.
- Competitive strategies
- Context-dependent preferences
- Dilution effect
- Limited consumer attention
- Prominent attributes