Building Brands

W marketing strategies are most effective for introducing new brands? This paper sheds light on this question by ascribing growth performance to firms’ postlaunch marketing choices. We decompose the success of a new brand into its ultimate market potential and the rate at which it achieves this potential. To achieve this aim we formulate a Bayesian dynamic linear model (DLM) of repeat purchase diffusion wherein growth and market potential are directly linked to the new brand’s long-term advertising, promotion, distribution, and product strategy. We perform the analysis on 225 new-brand introductions across 22 repeat-purchase product categories over five years to develop generalized findings about the correlates of new-brand success. We find that access to distribution breadth plays the greatest role in the success of a new brand, and that investments in distribution and product innovation lead to greater marginal increases in sales for new brands than either discounting, feature/display, or advertising. Moreover, distribution interacts with other strategies to enhance their effectiveness. These findings underscore the utility of extending marketing mix models of new-brand performance to include product and distribution decisions.

[1]  Markus Christen,et al.  Using Market-Level Data to Understand Promotion Effects in a Nonlinear Model , 1997 .

[2]  J. Eliashberg,et al.  The Impact of Competitive Entry in a Developing Market Upon Dynamic Pricing Strategies , 1986 .

[3]  Sumit K. Majumdar,et al.  Wearout Effects of Different Advertising Themes: A Dynamic Bayesian Model of the Advertising-Sales Relationship , 2007 .

[4]  Hani I. Mesak,et al.  Incorporating price, advertising and distribution in diffusion models of innovation: Some theoretical and empirical results , 1996, Comput. Oper. Res..

[5]  Philip Hans Franses,et al.  Optimal Data Interval for Estimating Advertising Response , 2006 .

[6]  Dominique M. Hanssens,et al.  Competitive Reactions to Advertising and Promotion Attacks , 2005 .

[7]  Carl F. Mela,et al.  The Dynamic Effect of Innovation on Market Structure , 2004 .

[8]  G. Tellis,et al.  Research on Innovation: A Review and Agenda for Marketing Science , 2006 .

[9]  Carl F. Mela,et al.  Managing Advertising and Promotion for Long-Run Profitability , 1999 .

[10]  Tieshan Li,et al.  The Lead-Lag Puzzle of Demand and Distribution: A Graphical Method Applied to Movies , 2005 .

[11]  S. Kalish.  A New Product Adoption Model with Price, Advertising, and Uncertainty , 1985 .

[12]  Pradeep K. Chintagunta,et al.  A Bayesian Model to Forecast New Product Performance in Domestic and International Markets , 1999 .

[13]  Siva Balasubramanian,et al.  Long-Term Forecasting with Innovation Diffusion Models: The Impact of Replacement Purchases , 1986 .

[14]  D. Aaker.  MEASURING BRAND EQUITY ACROSS PRODUCTS AND MARKETS , 1996 .

[15]  Scott A. Neslin,et al.  Decomposition of the Sales Impact of Promotion-Induced Stockpiling , 2007 .

[16]  Rebecca J. Slotegraaf,et al.  The Impact of Brand Equity and Innovation on the Long-Term Effectiveness of Promotions , 2008 .

[17]  M. Keane.  Modeling Heterogeneity and State Dependence in Consumer Choice Behavior , 1997 .

[18]  Philip M. Parker,et al.  Price Elasticity Dynamics over the Adoption Life Cycle , 1992 .

[19]  Vithala R. Rao,et al.  Do Slotting Allowances Enhance Efficiency or Hinder Competition? , 2006 .

[20]  J. Steenkamp,et al.  Consumer and Market Drivers of the Trial Probability of New Consumer Packaged Goods , 2003 .

[21]  S. Chib,et al.  Understanding the Metropolis-Hastings Algorithm , 1995 .

[22]  Robert G. Cooper,et al.  Product Leadership: Creating And Launching Superior New Products , 1998 .

[23]  Donald R. Lehmann,et al.  The Long-Term Impact of Promotion and Advertising on Consumer Brand Choice , 1997 .

[24]  T. S. Robertson,et al.  A Propositional Inventory for New Diffusion Research , 1985 .

[25]  S. Kalish.  Monopolist Pricing with Dynamic Demand and Production Cost , 1983 .

[26]  Dominique M. Hanssens,et al.  The Long-Term Effects of Price Promotions on Category Incidence, Brand Choice, and Purchase Quantity , 2002 .

[27]  Hermann Simon,et al.  Diffusion and Advertising: The German Telephone Campaign , 1987 .

[28]  E. Muller,et al.  Models of New Product Diffusion Through Advertising and Word-of-Mouth , 1978 .

[29]  Yogesh V. Joshi,et al.  New Product Diffusion with Influentials and Imitators , 2007 .

[30]  Philip M. Parker,et al.  Specifying competitive effects in diffusion models: An empirical analysis , 1994 .

[31]  Robert P. Leone.  Generalizing What Is Known About Temporal Aggregation and Advertising Carryover , 1995 .

[32]  Tammo H. A. Bijmolt,et al.  New Empirical Generalizations on the Determinants of Price Elasticity , 2005 .

[33]  D. Horsky,et al.  Dynamic Advertising Strategies of Competing Durable Good Producers , 1988 .

[34]  D. Horsky,et al.  Advertising and the Diffusion of New Products , 1983 .

[35]  Michael A. West,et al.  Bayesian Forecasting and Dynamic Models (2nd edn) , 1997, J. Oper. Res. Soc..

[36]  Qiong Wang,et al.  Kalman Filter Estimation of New Product Diffusion Models , 1997 .

[37]  John A. Norton,et al.  Optimal Entry Timing for a Product Line Extension , 1989 .

[38]  Ambar G. Rao,et al.  Bayesian Estimation and Control of Detailing Effort in a Repeat Purchase Diffusion Environment , 1981 .

[39]  Lakshman Krishnamurthi,et al.  Analysis of New Product Diffusion Using a Four-Segment Trial-Repeat Model , 1994 .

[40]  I. Png,et al.  Market segmentation, cannibalization, and the timing of product introductions , 1992 .

[41]  C. Bulte.  New Product Diffusion Acceleration: Measurement and Analysis , 2000 .

[42]  Bart J. Bronnenberg,et al.  Market Roll-Out and Retailer Adoption for New Brands , 2004 .

[43]  H. Mills.  Marketing as a Science , 1961 .

[44]  Koen Pauwels,et al.  How retailer and competitor decisions drive the long-term effectiveness of manufacturer promotions for fast moving consumer goods , 2007 .

[45]  M. Meler,et al.  New product diffusion models , 1995 .

[46]  Scott A. Neslin,et al.  Are there associations between price elasticity and brand characteristics [Ready-to-eat food cereal brands, level of market share, average price, average advertising share, level of sugar and stage in the brand life cycle, quality; USA]. , 1983 .

[47]  Vijay Mahajan,et al.  New Product Diffusion Models in Marketing: A Review and Directions for Research: , 1990 .

[48]  M. Dekimpe,et al.  The Impact of a Product-Harm Crisis on Marketing Effectiveness , 2007 .

[49]  Masataka Yamada,et al.  Forecasting with a repeat purchase diffusion model , 1988 .

[50]  R. Kohn,et al.  On Gibbs sampling for state space models , 1994 .

[51]  E. Rogers.  New Product Adoption and Diffusion , 1976 .

[52]  D. Jain,et al.  Effect of Price on the Demand for Durables: Modeling, Estimation, and Findings , 1990 .

[53]  S. Kalish,et al.  A MARKET ENTRY TIMING MODEL FOR NEW TECHNOLOGIES * , 2004 .

[54]  Dipak C. Jain,et al.  Why the Bass Model Fits without Decision Variables , 1994 .

[55]  S. Frühwirth-Schnatter.  Data Augmentation and Dynamic Linear Models , 1994 .

[56]  Hani I. Mesak,et al.  Incorporating Price and Replacement Purchases in New Product Diffusion Models for Consumer Durables , 1995 .

[57]  Günter J. Hitsch.  An Empirical Model of Optimal Dynamic Product Launch and Exit Under Demand Uncertainty , 2006 .

[58]  Leonard M. Lodish,et al.  How T.V. Advertising Works: A Meta-Analysis of 389 Real World Split Cable T.V. Advertising Experiments , 1995 .

[59]  Peter S. Fader,et al.  An Empirical Comparison of New Product Trial Forecasting Models , 1998 .

[60]  G. Tellis,et al.  The International Takeoff of New Products: The Role of Economics, Culture, and Country Innovativeness , 2003 .

[61]  Engelbert J. Dockner,et al.  Optimal advertising policies for diffusion models of new product innovation in monopolistic situations , 1988 .

[62]  Markus Christen,et al.  Demand and Supply Dynamics for Sequentially Released Products in International Markets: The Case of Motion Pictures , 2003 .

[63]  Siva Balasubramanian,et al.  Long-Term View of the Diffusion of Durables: A Study of the Role of Price and Adoption Influence Processes via Tests of Nested Models , 1988 .

[64]  D. Horsky.  A Diffusion Model Incorporating Product Benefits, Price, Income and Information , 1990 .

[65]  Carl F. Mela,et al.  Consumer Packaged Goods in France: National Brands, Regional Chains, and Local Branding , 2007 .

[66]  J. M. Jones,et al.  Incorporating distribution into new product diffusion models , 1991 .

[67]  Alain Bultez,et al.  A NOTE ON OPTIMAL STRATEGIC PRICING OF TECHNOLOGICAL INNOVATIONS , 1982 .

[68]  Dominique M. Hanssens,et al.  Performance Regimes and Marketing Policy Shifts , 2007 .

[69]  Eric T. Anderson,et al.  Long-Run Effects of Promotion Depth on New Versus Established Customers: Three Field Studies , 2004 .

[70]  Bart J. Bronnenberg,et al.  The Emergence of Market Structure in New Repeat-Purchase Categories: The Interplay of Market Share and Retailer Distribution , 2000 .