Competing with brands: the impact of product reliability and compensation mechanisms on non-brand suppliers in smart technology

Purpose Amidst rapid advancements in smart device technology, this paper aims to analyze how product reliability and non-branded suppliers’ compensation mechanisms impact competition with branded suppliers. It explores their effects on consumer behavior and market performance, focusing on the distinct effects on branded and non-branded products. Design/methodology/approach We employ a duopoly competition game model to dissect the strategic interactions between brand and non-brand technology product suppliers. Our analytical framework is designed to capture the nuanced effects of product reliability and compensation mechanisms on market dynamics. Findings Several key conclusions are drawn. First, increased reliability of non-brand products enhances consumer trust, leading to higher prices and greater market recognition, often challenging traditional brand premiums. Consequently, branded products may see price declines to remain competitive. Although compensation mechanisms initially boost non-brand product appeal, their influence wanes as reliability improves. Furthermore, brand suppliers can maintain higher profits when non-brand reliability is low, but profits for non-brand suppliers rise significantly with high reliability and compensation mechanisms. In scenarios where non-brand products are highly reliable and consumer effort is low, these mechanisms can create a win-win situation for both brand and non-brand suppliers, enhancing profits for both parties. Finally, brand positioning sensitivity critically impacts pricing and demand; high sensitivity can lead to price reductions and decreased demand, while low sensitivity often results in price increases and higher demand, as consumers prioritize risk mitigation and price performance over brand loyalty. Originality/value This pioneering research delves into the interplay between product reliability and compensation strategies employed by non-brand suppliers, shedding light on their capacity to bolster consumer trust and disrupt traditional brand premiums within the smart technology market. By proposing a viable win-win framework, the study not only challenges existing market paradigms but also provides actionable insights for suppliers and governments to optimize their competitive positioning and profitability in this dynamic industry landscape.