It's Official—Big Brands Aren't Dying
A report published earlier this month by The Ehrenberg-Bass Institute for Marketing Science at the University of South Australia analysed seven popular marketing perceptions, and discovered that perception is not always reality.
Are big global brands declining while small local brands are growing? Is brand loyalty in decline? Are young people increasingly distrusting and rejecting big brands? Do small brands command high loyalty? Has digital media levelled the playing field for small brands? Are small brands successful without advertising? And last but not least, has e-commerce made it easier for small brands to grow?
The report, ‘Are Big Brands Dying,’ authored by Professor Byron Sharp, Professor Magda Nenycz-Thiel, James Martin, Zac Anesbury and Professor Bruce McColl, examined scientific research published in peer-reviewed journals to understand which of these opinions were indeed fact and which were actually fiction.
**1. Are big global brands declining, while small local brands are growing? **
4-5 years of recent US Nielsen store scanner data was analysed for 105 leading brands from 21 packaged goods categories, ranging from baby food to beer, and there was no consistent pattern. 44% of leading brands lost share, but 44% gained share. The majority that lost share were in growing categories. This meant that although they lost category revenue share, their actual sales revenue grew, e.g. “Apple has lost a dramatic amount of share in the smartphone category while simultaneously experiencing dramatic growth in sales revenue.” The top five brands in any category were more likely to be growing sales than losing them, despite competition from small brands and retailer own label! Additionally, yes some small brands grew, but some failed and disappeared and then weren’t counted, consequently inflating the average performance of small brands.
2. Is brand loyalty in decline?
A longitudinal study published in 2015 (Dawes, J., Meyer-Waarden, L. and Driesener, C.) examined repeat purchase behaviour in 26 FMCG categories over six to 13 years in the US and UK, and observed no general decline in brand loyalty. Only categories with increased numbers of SKUs saw small decreases in loyalty, as the number of choices available expanded. More recent research awaiting publication from Denmark (Casteran, G; Chrysochou, P; and Meyer-Waarden) reports the same result.
The reality is that loyalty or repeat purchase is for the most part repeat behaviour. Habitual purchases reduce the number of decisions that we need to make each day, making our lives easier. If your brand does what it’s supposed to do, then the odds are your customers will buy you again for one simple reason – it’s one less thing to think about!
**3. Are young people increasingly distrusting and rejecting big brands? **
1,950 sub-brands in 19 consumer goods categories were analysed (Anesbury, Z; Driesener, C; Page, B; Bellman, S & Sharp, B (2017)). New sub-brands had only a slight skew towards younger category consumers, which disappeared if the sub-brands became successful.
Research for this report examined the buying habits over seven years of 18 to 24 year olds and 25+ UK consumers for the top five brands of 14 categories, and found minimal differences between the ages. What they did discover was that for over 40% of category/year analyses, the top five brands actually had higher market share amongst younger consumer sales than older – so the opposite! Any skews favouring one age group over another was slight and variable year-to-year.
Further research published this year (Anesbury, Z., Winchester, M. & Kennedy, R.) scrutinised over 700 brands, from more than 60 consumer packaged goods categories, on over 160 variables, and found that brand user profiles rarely differ. ”Brand growth requires recruiting all types of buyers.”
All the evidence demonstrates that younger consumers neither distrust nor reject big brands.
**4. Do small brands command high loyalty? **
The Double Jeopardy Law proven time and time again states that big brands have more buyers who buy slightly more often, while small brands have significantly fewer buyers who buy slightly less often.
Published this year, new UK research (Franke, K., Bennett, D., and Graham, C) demonstrated that after accounting for Double Jeopardy, only one out of ten small brands had higher loyalty levels than expected, and more importantly none greater than big brands. 60% had lower than expected.
5. Has digital media leveled the playing field for small brands?
Half of digital media spend is on search and directory advertising. Most of the other half is on paid display and video on YouTube or Facebook, neither of which disadvantage big brands. The remaining spend is largely on programmatic display advertising, where big brands are advantaged.
Given the well-documented issues of fraud, wastage and lack of transparency, big brands have probably lost more than small brands.
6. Are small brands successful without advertising?
Some brands have become successful without advertising due to technological superiority, e.g. Google and/or major trends aiding them. Many haven’t. But once a brand makes it big, to stay there it needs mass reach and penetration, which it achieves through mass advertising.
7. Has e-commerce made it easier for small brands to grow?
E-commerce is a channel. No brand can get big and stay big relying on one channel only. Some brands have got big through e-commerce, but to stay big they’ve had to expand into traditional channels, e.g. Amazon. A big brand needs to be available across all of its customers touch points in order to stay relevant.
The report outlines six strategic mistakes that big brands have made in the last twenty years that have only recently come to light. These, they posit, are due to failing to take an evidence-based approach and relying instead on ‘conventional’ wisdom:
- “Increasing trade expenditure (mostly price discounting) at the expense of out-of-store advertising expenditure.”
- “Excessive SKUs proliferation cannibalizing core offerings; over-complicated and confusing ranges making it easier for consumers to buy rival brands.”
- “Allocating too much advertising expenditure to overly targeted new digital media with unproven abilities to reach consumers and build mental availability.”
- “Creating too much low quality advertising content in an effort to cater for media fragmentation and capitalize on the (over-estimated) value of targeting.”
- “The effect has been to increase the percentage of non-working media spend.”
- “Failing to develop channel expertise and gain their share of physical availability in the fastest growing distribution channels.”
The good news is that Sharp et al believe that the future is still bright for those brands that are both mentally and physically available, and are proven to make our lives simple. That is, as long as they take a more evidence-based approach.