Distribution key to building brands

Waikato marketing expert says distribution key to building brands

Launching any new brand is a high-stakes gamble: a US survey shows that 55% of new brands fail to reach the status of an established brand. Yet as market innovation gathers pace, firms are under pressure to find effective marketing strategies for introducing new brands.

New research out of the University of Waikato Management School indicates that the most significant factor in building a new brand is distribution, rather than the traditional marketing tools of advertising, discounting and a long product line.

The research, published in the prestigious international journal Marketing Science, is co-authored by Waikato’s Professor Harald Van Heerde, who has won a string of international awards for his work and was last year named top Australasian marketing researcher.

In their analysis of 225 new-brand introductions across 22 product categories over five years, the researchers found that broad distribution had the largest direct impact on sales of a new brand. Distribution accounts for 31% of new brand growth and 54% of building market potential – more than any other strategy.

Discounting, store flyers and in-store displays were also shown to speed up a brand’s growth to maturity. “Store flyers and in-store displays have always been seen as rather humble marketing tools,” says Professor Van Heerde. “But our research actually demonstrates that they play the second biggest role in achieving quick brand growth.

Discounting can also be a useful tool, he says. “However over the longer term it can hurt market potential because it makes consumers unwilling to buy your brand when it’s not on special.”

The researchers’ results also show that advertising is more effective at accelerating brand growth than increasing market potential.

The overall best strategy to conquer a national market, says Professor Van Heerde, is to aim for full distribution form the start with the full product line, rather than a more gradual approach.

“Initial prices are best kept low and then raised. Advertising should happen massively upfront and then can be reduced over time. Telecom’s overwhelming advertising campaign for its new XT network is exactly what we would recommend,” he concludes.

Professor Van Heerde’s co-researchers were Dr M. Berk Ataman of the Rotterdam School of Management, Erasmus University, in the Netherlands and Professor Carl F. Mela of Fuqua Business School at Duke University in the United States.

ENDS

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