Emerald Management Review:
Building brands

Abstract:

Purpose - To shed light on diffusion in repeat-purchase contexts by offering an integrated view across the entire marketing mix and to afford insights into introduction strategies that enhance the potential for successful roll-outs.

Design/methodology/approach - Explores the effect of marketing strategies on new-brand growth across 225 consumer packaged goods (CPG) brands and then develops a diffusion model for frequently purchased CPG brands that simultaneously considers the effect of repeat purchases, accommodates a variety of potential diffusion trajectories, separates short-term fluctuations in sales from long-term changes in brand performance arising from various marketing strategies, controls for endogeneity in the marketing mix and models the role of past performance on marketing spend.

Findings - Distribution and product play a greater role than discounting, feature/display and advertising in the sales performance of new brands in spite of a focus on these factors in the preceding literature. Overall, finds that access to distribution plays the greatest role in the success of a new brand and reveals that advertising plays a greater role in accelerating brand growth than increasing market potential and that discounting has a positive effect on the time to maturity but a negative effect on long-term market potential. Concludes that broad access to distribution is a necessary condition for effective marketing.

Research limitations/implications - Focuses exclusively on national brand introductions, excluding private labels, and recommends comparing marketing strategy efficacy of brand extensions with that of new brands, extending the model to durable goods contexts in which word-of-mouth plays a greater role, taking a more nuanced view of innovation and diffusion and presenting a formal accounting of retailer decision making.

Practical implications - Asserts that it is profitable on the margin to invest in distribution when distribution costs are less than 23% of retail revenue but that it is profitable to advertise only when the marginal cost of advertising is less than 0.8% of revenue. Adds that distribution effects are considerably larger than the effect of all other strategies and that national launch interacts with low price and broader lines to enhance market potential and growth and advertising to facilitate growth.

Originality/value - Conducts an empirical generalization pertaining to the efficacy of marketing strategies in the context of new-brand launch and by developing a methodology to achieve these aims.

Keywords:

Article Type:

Research paper

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