The concept of brand equity has received most attention in the context of fast-moving-consumer-go... more The concept of brand equity has received most attention in the context of fast-moving-consumer-goods marketing yet the concept is just as, if not more, important to professional services marketers. This paper explains the distinct nature of market-based assets, such as brand equity, in professional service industries. THE VALUE OF BRAND EQUITY To a large extent interest in brand equity has been confined to the fast-movingconsumer-goods context. Indeed, when one thinks brand it is names such as Coca-Cola, Marlboro, and Dove, which come to mind, rather than great service brand names such as Young & Rubicam or Dun & Bradstreet. But professional service companies can also own market-based intangible assets and they are likely to make up a greater proportion of the firm's asset base than that of manufacturing firms. This paper sets out to discuss the unique nature of such assets in this context. The concept of brand equity has been receiving considerable academic and practitioner attention of late. The rise in interest can be traced to a series of takeovers and valuations during the late 1980s which recognised the staggering values which brand names can reach. In 1987 Grand Metropolitan announced that half a billion Byron Sharp is the Director (Research) of the Marketing Science Centre at the University of South Australia. He has published in Australian, European and North American journals on topic of brand strategy.
Practitioners and academics have long discussed strategies for brand sales growth. A recent examp... more Practitioners and academics have long discussed strategies for brand sales growth. A recent example is an industry debate in which different brand growth strategies were argued: https://www.mmaglobal.com/thegreatdebate (MMA Global & Neustarr, 2021). A central question in this arena is whether a brand should focus on its heavy, light, or non-buyers in its efforts to grow its sales. This study contributes to our knowledge about how sales growth can occur by investigating the potential contribution these three buyer groups can make to any sales gain. Using both, a simulation study and an empirical study of purchases of approximately 12,400 households in the UK, across different brands and categories, we show that almost any brand’s headroom growth potential lies mostly in light or non-buyers of that brand. Even for large brands with high penetration the growth potential of light brand buyers eclipses heavy brand buyers.
When reliable models do not fit observed data it tells us that some condition in the market viola... more When reliable models do not fit observed data it tells us that some condition in the market violates the underlying assumptions of the model – and this can be very useful information indeed. The Dirichlet model of repeat-purchase has been validated over a very wide range of conditions, across countries and time. The model has been so successful that we know of no published incidences of the model's failure. Which raises the question of whether the model is too robust to be used to detect anything other than major deviations from its assumptions about buying behaviour? In this exploratory research we examine this issue by applying the model to a situation with some known violations of Dirichlet's underlying assumptions – specifically a market with some in-built variety seeking (a degree of purchase feedback), some functional differences between brands and a degree of brand level segmentation. The results show an uncharacteristically poor fit for the Dirichlet, and the brand...
Forthcoming in the European Journal of Marketing subject to changes
Wu, along with two anonymous reviewers, provided peer review that led to substantial improvements... more Wu, along with two anonymous reviewers, provided peer review that led to substantial improvements. Alexandra House helped to develop the software used in this study and was also involved in collecting data and rating ads. We received advice on the design of the copy testing procedures from Dave Walker, Sandeep Patnaik, and Don Esselmont. We thank the Alex Panos Fund and the Ehrenberg-Bass Institute for partial financial support for this project. Useful suggestions were received when earlier versions of this paper were presented at the
Brand Differentiation: the marketing tenet Differentiation is regarded as one of the core princip... more Brand Differentiation: the marketing tenet Differentiation is regarded as one of the core principles of marketing theory and practice. The near universal exaltation is "thou shalt differentiate" (e.g. Fulmer and Goodwin, 1988; Levitt, 1980; MacMillan and McGrath, 1997)-with the clear implication that marketers should be judged on how well they differentiate their brands. Such fundamental tenets deserve rigorous theoretical inspection as well as empirical testing. Science progresses not through consensus and the accumulation of conventional wisdom, but through competitive inquiry, questioning and testing. In this article we present theoretical and empirical evidence that throws doubt on the central position of differentiation in brand strategy. Theoretical Development The concept of differentiation can be traced back to Chamberlin and Robinson's independent 1930s work on deviations from the classical perfect competition model (Chamberlin, 1971; Chamberlin, 1933; Robinson, 1933). The economic literature asserts that marketers should try to differentiate their brands from others, so that they face less direct competition. The two current economic models that describe the conditions that create differentiation (Caves and Williamson, 1985) are respectively based on (a) brands offering different features that appeal to different segments in the market (Lancaster, 1984; Lancaster, 1979; Rosen, 1974), and/or (b) transaction costs and information imperfections (Nelson, 1974; Nelson, 1970; Stigler, 1961). Differentiation makes the brand an imperfect substitute with other brands so buyers of the brand are more loyal, and therefore its customer base is more secure. This makes the brand less susceptible to the activity of competitor brands; when a competitor lowers price, brands that are more differentiated are thought to lose fewer customers (Caves and Williamson, 1985). Reduced sales is the potential price paid for this increased loyalty, as a brand may appeal more to only one type of buyer, or all buyers but only in a specific buying situation. The economic theory is analytic rather than empirical. Logically, brands that are less substitutable will compete less directly. This does not mean that the normative strategy implications are proven. They depend on some important empirical questions concerning differentiation in the real world, such as:
There are many consumer behaviour generalisations for fast moving consumer goods markets, but har... more There are many consumer behaviour generalisations for fast moving consumer goods markets, but hardly any for markets such as banking, insurance, electricity, and telecommunications. Defection analysis and reduction programs are seen as important, but benchmarks are needed to assess these programs. This article reports a fundamental discovery that provides such benchmarks. It turns out that brand loyalty is polarised between repertoire markets, such as fmcg markets, and subscription markets, such as banking, insurance, electricity and telecommunications, and there seem to be no markets occupying the middle ground. Repertoire market consumers show polygamous loyalty and each brand satisfies a low share of its average buyer’s category requirements. Subscription market consumers show high brand loyalty with each brand satisfying a high share of its average buyers’ category requirements. Surprisingly, the famous Dirichlet model fits both types of markets, with radically different values ...
Extended conditional trend analysis: Predicting triple period buyer flows with a tri‐variate NBD model
Journal of Consumer Behaviour, 2021
Marketers are interested in the loyalty of their customer base. Increasingly this includes examin... more Marketers are interested in the loyalty of their customer base. Increasingly this includes examining behavioural loyalty inferred from the frequency or weight of purchase. A typical approach is to divide the customer base into arbitrary segments based on weight of purchase and then attempt to move customers from lighter to heavier segments, rather than have them reduce purchasing or cease buying altogether. Effects can be monitored by examining how purchasing by groups of individuals evolves over successive periods. However, much of the flow between segments represents random fluctuations in period‐to‐period purchasing rather than true change to underlying loyalty. Accurate analysis requires true change to be separated from these stochastic changes, for example through benchmarks derived from conditional trend analysis (CTA). While CTA considers the two‐period case, it provides no guidance for changes seen across three‐periods. The three‐period case is nonetheless regularly reported...
Purpose This study aims to independently test the predictive validity of the Persuasion Principle... more Purpose This study aims to independently test the predictive validity of the Persuasion Principles Index (PPI) for video advertisements for low-involvement products with a measure of in-market sales effectiveness. This study follows the inaugural test conducted by Armstrong et al. (2016) for print advertisements for high-involvement utilitarian products with a measure of advertising recall. Design/methodology/approach The method was in line with that developed by Armstrong et al. (2016) for rating advertisements and assessing the reliability of ratings. Consensus PPI scores were calculated for a data set of 242 matched pairs of television advertisements. For each pair, the authors determined whether the advertisement that better adhered to the persuasion principles performed better in-market. Findings Consensus PPI scores predicted the more sales effective television advertisement for 55% (confidence interval (CI) = 49%, 61%) of the 242 pairs. This result is no better than chance an...
Fifty years ago, Gerald Goodhardt's analysis of audience duplication across television progra... more Fifty years ago, Gerald Goodhardt's analysis of audience duplication across television programs led to the discovery of the Duplication of Viewing law. This law was then extended to describe and predict customer sharing within product categories: the Duplication of Purchase Law. Many replications and extensions documented the law‐like status of this generalisation, providing important insight into how brands compete and the composition of consumers' repertoires. In this article we build on that seminal research, using Duplication of Purchase as an analytical method to measure loyalty across categories, or, in other words, the purchasing of brand extensions. Brand extensions are commonly cited as a way to capitalise on brand equity, and when asked, respondents often report high intentions to purchase brand extensions. However, the actual cross category buying of brand extensions has not been systematically examined. In this research we analyse panel data to understand whether...
Brand Extensions: Does Buying a Brand in One Category Increase Propensity to Buy It in Another?
SSRN Electronic Journal, 2019
It is a common belief that users of a brand in one category are more likely to purchase brand ext... more It is a common belief that users of a brand in one category are more likely to purchase brand extensions than non-users of the brand. This study examines whether extensions actually do facilitate purchase of the brand in a second category. <br><br>We analyze one year of household purchasing data for approximately 60,000 US households to understand the level of cross-category purchasing brand extensions achieve. We investigate 98 extensions across 30 CPG category pairings. <br><br>This study finds:<br><br>• Purchasing a brand in one category makes a consumer, on average, 2.4 times as likely to purchase the same brand in a second category compared to a consumer who purchased a different brand in the original category.<br><br>• Extensions in complementary categories achieve the highest levels of cross-category sharing.<br><br>• Extensions in categories which are substitutable, or have high, moderate or low levels of similarity to the original product category all achieve cross-category purchasing higher than what is expected for two unrelated brands.<br><br>The overall finding provides empirical support for the theory of brand equity, specifically that usage &amp; familiarity with a brand name in one category facilitates purchase of that brand in other categories.
Forecasting advertising and media effects on sales: Econometrics and alternatives
International Journal of Market Research, 2018
The contribution of regression analysis (econometrics) to advertising and media decision-making i... more The contribution of regression analysis (econometrics) to advertising and media decision-making is questioned and found wanting. Econometrics cannot be expected to estimate valid and reliable forecasting models unless it is based on extensive experimental data on important variables, across varied conditions. This article canvasses alternative, evidence-based methods that have been shown to be useful for forecasting problems. These methods are described with the hope that they are more widely used for marketing forecasting. The approaches include media and copy experiments, analyses of individual level single source data, and structured expert judgment.
Double Jeopardy describes how smaller brands lose twice; they have fewer buyers who are slightly ... more Double Jeopardy describes how smaller brands lose twice; they have fewer buyers who are slightly less loyal. A common loyalty measure is how often people buy the brand in a given time period. An alternative loyalty measure is how much people spend, which reflects purchase frequency and price paid. The brand equity literature suggests that high equity brands should reap high purchase rates and high prices. It is therefore possible that Double Jeopardy might become obscured when using a revenue-based measure such as spend per buyer. The reason is that price variation could create more, and more pronounced deviations from the Double Jeopardy pattern. We demonstrate that Double Jeopardy holds for spend in thirteen consumer goods categories: smaller brands have fewer buyers who spend somewhat less on the brand. We further find no relationship between brand share and average price and no relationship between excess/deficit loyalty and average price.
Putting Correspondence Analysis to use with Categorical Data in Market Research
Developments in Marketing Science: Proceedings of the Academy of Marketing Science, 2015
Correspondence analysis is an under-utilised technique that is suited to many of the marketing re... more Correspondence analysis is an under-utilised technique that is suited to many of the marketing researcher's requirements for data reduction, analysis and display. This paper discusses two of the major applications of the technique which can be utilised with categorical data; the graphical representation of the data from two-way tables and the rescaling of ordinal data. The technique is seen as being particularly appropriate for perceptual mapping. A very practical focus has been taken with the examples outlined in the paper to provide both academics and practitioners with sufficient information to incorporate correspondence analysis into future research.
The concept of brand equity has received most attention in the context of fast-moving-consumer-go... more The concept of brand equity has received most attention in the context of fast-moving-consumer-goods marketing yet the concept is just as, if not more, important to professional services marketers. This paper explains the distinct nature of market-based assets, such as brand equity, in professional service industries. THE VALUE OF BRAND EQUITY To a large extent interest in brand equity has been confined to the fast-movingconsumer-goods context. Indeed, when one thinks brand it is names such as Coca-Cola, Marlboro, and Dove, which come to mind, rather than great service brand names such as Young & Rubicam or Dun & Bradstreet. But professional service companies can also own market-based intangible assets and they are likely to make up a greater proportion of the firm's asset base than that of manufacturing firms. This paper sets out to discuss the unique nature of such assets in this context. The concept of brand equity has been receiving considerable academic and practitioner attention of late. The rise in interest can be traced to a series of takeovers and valuations during the late 1980s which recognised the staggering values which brand names can reach. In 1987 Grand Metropolitan announced that half a billion Byron Sharp is the Director (Research) of the Marketing Science Centre at the University of South Australia. He has published in Australian, European and North American journals on topic of brand strategy.
Practitioners and academics have long discussed strategies for brand sales growth. A recent examp... more Practitioners and academics have long discussed strategies for brand sales growth. A recent example is an industry debate in which different brand growth strategies were argued: https://www.mmaglobal.com/thegreatdebate (MMA Global & Neustarr, 2021). A central question in this arena is whether a brand should focus on its heavy, light, or non-buyers in its efforts to grow its sales. This study contributes to our knowledge about how sales growth can occur by investigating the potential contribution these three buyer groups can make to any sales gain. Using both, a simulation study and an empirical study of purchases of approximately 12,400 households in the UK, across different brands and categories, we show that almost any brand’s headroom growth potential lies mostly in light or non-buyers of that brand. Even for large brands with high penetration the growth potential of light brand buyers eclipses heavy brand buyers.
When reliable models do not fit observed data it tells us that some condition in the market viola... more When reliable models do not fit observed data it tells us that some condition in the market violates the underlying assumptions of the model – and this can be very useful information indeed. The Dirichlet model of repeat-purchase has been validated over a very wide range of conditions, across countries and time. The model has been so successful that we know of no published incidences of the model's failure. Which raises the question of whether the model is too robust to be used to detect anything other than major deviations from its assumptions about buying behaviour? In this exploratory research we examine this issue by applying the model to a situation with some known violations of Dirichlet's underlying assumptions – specifically a market with some in-built variety seeking (a degree of purchase feedback), some functional differences between brands and a degree of brand level segmentation. The results show an uncharacteristically poor fit for the Dirichlet, and the brand...
Forthcoming in the European Journal of Marketing subject to changes
Wu, along with two anonymous reviewers, provided peer review that led to substantial improvements... more Wu, along with two anonymous reviewers, provided peer review that led to substantial improvements. Alexandra House helped to develop the software used in this study and was also involved in collecting data and rating ads. We received advice on the design of the copy testing procedures from Dave Walker, Sandeep Patnaik, and Don Esselmont. We thank the Alex Panos Fund and the Ehrenberg-Bass Institute for partial financial support for this project. Useful suggestions were received when earlier versions of this paper were presented at the
Brand Differentiation: the marketing tenet Differentiation is regarded as one of the core princip... more Brand Differentiation: the marketing tenet Differentiation is regarded as one of the core principles of marketing theory and practice. The near universal exaltation is "thou shalt differentiate" (e.g. Fulmer and Goodwin, 1988; Levitt, 1980; MacMillan and McGrath, 1997)-with the clear implication that marketers should be judged on how well they differentiate their brands. Such fundamental tenets deserve rigorous theoretical inspection as well as empirical testing. Science progresses not through consensus and the accumulation of conventional wisdom, but through competitive inquiry, questioning and testing. In this article we present theoretical and empirical evidence that throws doubt on the central position of differentiation in brand strategy. Theoretical Development The concept of differentiation can be traced back to Chamberlin and Robinson's independent 1930s work on deviations from the classical perfect competition model (Chamberlin, 1971; Chamberlin, 1933; Robinson, 1933). The economic literature asserts that marketers should try to differentiate their brands from others, so that they face less direct competition. The two current economic models that describe the conditions that create differentiation (Caves and Williamson, 1985) are respectively based on (a) brands offering different features that appeal to different segments in the market (Lancaster, 1984; Lancaster, 1979; Rosen, 1974), and/or (b) transaction costs and information imperfections (Nelson, 1974; Nelson, 1970; Stigler, 1961). Differentiation makes the brand an imperfect substitute with other brands so buyers of the brand are more loyal, and therefore its customer base is more secure. This makes the brand less susceptible to the activity of competitor brands; when a competitor lowers price, brands that are more differentiated are thought to lose fewer customers (Caves and Williamson, 1985). Reduced sales is the potential price paid for this increased loyalty, as a brand may appeal more to only one type of buyer, or all buyers but only in a specific buying situation. The economic theory is analytic rather than empirical. Logically, brands that are less substitutable will compete less directly. This does not mean that the normative strategy implications are proven. They depend on some important empirical questions concerning differentiation in the real world, such as:
There are many consumer behaviour generalisations for fast moving consumer goods markets, but har... more There are many consumer behaviour generalisations for fast moving consumer goods markets, but hardly any for markets such as banking, insurance, electricity, and telecommunications. Defection analysis and reduction programs are seen as important, but benchmarks are needed to assess these programs. This article reports a fundamental discovery that provides such benchmarks. It turns out that brand loyalty is polarised between repertoire markets, such as fmcg markets, and subscription markets, such as banking, insurance, electricity and telecommunications, and there seem to be no markets occupying the middle ground. Repertoire market consumers show polygamous loyalty and each brand satisfies a low share of its average buyer’s category requirements. Subscription market consumers show high brand loyalty with each brand satisfying a high share of its average buyers’ category requirements. Surprisingly, the famous Dirichlet model fits both types of markets, with radically different values ...
Extended conditional trend analysis: Predicting triple period buyer flows with a tri‐variate NBD model
Journal of Consumer Behaviour, 2021
Marketers are interested in the loyalty of their customer base. Increasingly this includes examin... more Marketers are interested in the loyalty of their customer base. Increasingly this includes examining behavioural loyalty inferred from the frequency or weight of purchase. A typical approach is to divide the customer base into arbitrary segments based on weight of purchase and then attempt to move customers from lighter to heavier segments, rather than have them reduce purchasing or cease buying altogether. Effects can be monitored by examining how purchasing by groups of individuals evolves over successive periods. However, much of the flow between segments represents random fluctuations in period‐to‐period purchasing rather than true change to underlying loyalty. Accurate analysis requires true change to be separated from these stochastic changes, for example through benchmarks derived from conditional trend analysis (CTA). While CTA considers the two‐period case, it provides no guidance for changes seen across three‐periods. The three‐period case is nonetheless regularly reported...
Purpose This study aims to independently test the predictive validity of the Persuasion Principle... more Purpose This study aims to independently test the predictive validity of the Persuasion Principles Index (PPI) for video advertisements for low-involvement products with a measure of in-market sales effectiveness. This study follows the inaugural test conducted by Armstrong et al. (2016) for print advertisements for high-involvement utilitarian products with a measure of advertising recall. Design/methodology/approach The method was in line with that developed by Armstrong et al. (2016) for rating advertisements and assessing the reliability of ratings. Consensus PPI scores were calculated for a data set of 242 matched pairs of television advertisements. For each pair, the authors determined whether the advertisement that better adhered to the persuasion principles performed better in-market. Findings Consensus PPI scores predicted the more sales effective television advertisement for 55% (confidence interval (CI) = 49%, 61%) of the 242 pairs. This result is no better than chance an...
Fifty years ago, Gerald Goodhardt's analysis of audience duplication across television progra... more Fifty years ago, Gerald Goodhardt's analysis of audience duplication across television programs led to the discovery of the Duplication of Viewing law. This law was then extended to describe and predict customer sharing within product categories: the Duplication of Purchase Law. Many replications and extensions documented the law‐like status of this generalisation, providing important insight into how brands compete and the composition of consumers' repertoires. In this article we build on that seminal research, using Duplication of Purchase as an analytical method to measure loyalty across categories, or, in other words, the purchasing of brand extensions. Brand extensions are commonly cited as a way to capitalise on brand equity, and when asked, respondents often report high intentions to purchase brand extensions. However, the actual cross category buying of brand extensions has not been systematically examined. In this research we analyse panel data to understand whether...
Brand Extensions: Does Buying a Brand in One Category Increase Propensity to Buy It in Another?
SSRN Electronic Journal, 2019
It is a common belief that users of a brand in one category are more likely to purchase brand ext... more It is a common belief that users of a brand in one category are more likely to purchase brand extensions than non-users of the brand. This study examines whether extensions actually do facilitate purchase of the brand in a second category. <br><br>We analyze one year of household purchasing data for approximately 60,000 US households to understand the level of cross-category purchasing brand extensions achieve. We investigate 98 extensions across 30 CPG category pairings. <br><br>This study finds:<br><br>• Purchasing a brand in one category makes a consumer, on average, 2.4 times as likely to purchase the same brand in a second category compared to a consumer who purchased a different brand in the original category.<br><br>• Extensions in complementary categories achieve the highest levels of cross-category sharing.<br><br>• Extensions in categories which are substitutable, or have high, moderate or low levels of similarity to the original product category all achieve cross-category purchasing higher than what is expected for two unrelated brands.<br><br>The overall finding provides empirical support for the theory of brand equity, specifically that usage &amp; familiarity with a brand name in one category facilitates purchase of that brand in other categories.
Forecasting advertising and media effects on sales: Econometrics and alternatives
International Journal of Market Research, 2018
The contribution of regression analysis (econometrics) to advertising and media decision-making i... more The contribution of regression analysis (econometrics) to advertising and media decision-making is questioned and found wanting. Econometrics cannot be expected to estimate valid and reliable forecasting models unless it is based on extensive experimental data on important variables, across varied conditions. This article canvasses alternative, evidence-based methods that have been shown to be useful for forecasting problems. These methods are described with the hope that they are more widely used for marketing forecasting. The approaches include media and copy experiments, analyses of individual level single source data, and structured expert judgment.
Double Jeopardy describes how smaller brands lose twice; they have fewer buyers who are slightly ... more Double Jeopardy describes how smaller brands lose twice; they have fewer buyers who are slightly less loyal. A common loyalty measure is how often people buy the brand in a given time period. An alternative loyalty measure is how much people spend, which reflects purchase frequency and price paid. The brand equity literature suggests that high equity brands should reap high purchase rates and high prices. It is therefore possible that Double Jeopardy might become obscured when using a revenue-based measure such as spend per buyer. The reason is that price variation could create more, and more pronounced deviations from the Double Jeopardy pattern. We demonstrate that Double Jeopardy holds for spend in thirteen consumer goods categories: smaller brands have fewer buyers who spend somewhat less on the brand. We further find no relationship between brand share and average price and no relationship between excess/deficit loyalty and average price.
Putting Correspondence Analysis to use with Categorical Data in Market Research
Developments in Marketing Science: Proceedings of the Academy of Marketing Science, 2015
Correspondence analysis is an under-utilised technique that is suited to many of the marketing re... more Correspondence analysis is an under-utilised technique that is suited to many of the marketing researcher's requirements for data reduction, analysis and display. This paper discusses two of the major applications of the technique which can be utilised with categorical data; the graphical representation of the data from two-way tables and the rescaling of ordinal data. The technique is seen as being particularly appropriate for perceptual mapping. A very practical focus has been taken with the examples outlined in the paper to provide both academics and practitioners with sufficient information to incorporate correspondence analysis into future research.
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