Marketing Guide: marketing in a recession

Are you wondering if you should change your marketing plans? Is there pressure to cut budgets (again)? How should you react to the recession?

Here is a report from the Ehrenberg-Bass Institute on marketing in a recession.

I wrote this with guidance from my colleagues as an “informed opinion piece”, i.e. different from usual Institute reports for our corporate sponsors that are about discoveries. It covers questions such as:

Can I get away with lowering my advertising spend?
Will premium brands suffer more?
Should I lower my price?
Is a recession a good time to launch a new product?
Will private labels gain further share?

To download the article “Marketing Guide: what to do in a recession” click here.


Loyalty Program Misleading Effects

The Journal of Marketing last year (2007) published an article titled “The Long-Term Impact of Loyalty Programs on Consumer Purchase Behavior and Loyalty” by Yuping Liu. It purports to show the impact of a loyalty program on the buying rates and loyalty of those who join the program. The key finding is that very large changes are observed for the lighter and moderate buyers in the loyalty program while the heaviest buyers exhibited no change.

However, this finding, and the consequently very large sales effects that the program seemed to generate, are actually artifacts of the analysis method. Continue reading

The loyalty patterns of repertoire and subscription markets

In 2002 I published with Malcolm Wright and Gerald Goodhardt on an empirical discovery. Repeat-purchase markets are polarized into those that show repertoire patterns and those that show subscription patterns of loyalty. With no markets showing ‘in between’ patterns.

We also found that the Dirichlet model of repeat-purchase fitted both sorts of markets, predicting brands’ loyalty metrics rather well. This was a surprise. It highlights what an achievement this scientific theory is.

Here is the paper for download.

Sharp, Byron, Malcolm Wright, and Gerald Goodhardt (2002), “Purchase loyalty is polarised into either repertoire or subscription patterns” Australasian Marketing Journal, 10 (3), 7-20.

There is also a related test of the boundaries of repertoire markets:

Sharp, Byron (2007) “Loyalty Limits for Repertoire Markets”, Journal of Empirical Generalisations in Marketing Science, Vol. 11.

Portfolio Management – do you need to worry about brands treading on each others’ toes ?

Should you worry if you have several brands that are rather similar ? Should you collapse them together, sell some, or strive to position them differently ?

In general, the answer is don’t worry.

Companies often find themselves with similar brands, that sell to similar, or the same, populations. Mars have Milky Way (Mars Bar) and Snickers. P&G has Tampax and Always. General Motors has Saturn Astra and Chevy Aveo. Coke has Diet Coke and Coke Zero (and Regular Coke for that matter).

This in itself isn’t something to worry about. It’s normal for brands in a category to compete against one another and sell to near identical customer bases. Even brands that are obviously quite different (e.g. KFC and McDonalds, Visa and AmEX) still compete pretty much head on.

McDonalds doesn’t worry that it sells coffee as well as burgers, Heinz doesn’t worry that it offers Tomato soup as well as Vegetable. Similarly you shouldn’t worry about having similar brands. If a fantasy soft-drink company were started up and it could choose to own/market any two brands should it choose Coke and something like Fanta ? No it should choose Coke and Pepsi, these are the biggest brands globally.

What you should worry about is whether or not your brands are distinctive.  Are they easy to recognise and distinguish from others ? Without this your advertising can’t work for your brand. And consumers won’t see you on shelf. So your brands should look different (this is what branding is about) even if they don’t really compete as differentiated brands.

And you should be aware of (and calculate) the total portfolio effects of price promotions. When you put one of your brands on special you aren’t only giving away some full priced sales that would have happened anyway, you are also stealing full-priced sales from your other brands.

If brands grow they will always steal from all the other brands in the same product category. The exact amount of cannibalisation you should get between your own brands can be predicted by the Duplication of Purchase law. What you need to watch out for is excessive cannibalisation, firms tend to be good at stealing sales from themselves because their brands go through the same sales force, same distributors etc. You need to acknowledge and accept this, but then be on the look-out for excessive cannibalisation.

Finally, the decision to drop, phase out or sell brands should be largely made on viability, cost and operating issues. Not on how similar you think the brand is to another of your brands.

Professor Byron Sharp, 2008.

Review of “How Customers Think” by Gerald Zaltman: This book talks a lot about insight but doesn’t deliver much.

Disappointing.  If you have read some bestsellers touching on recent findings in neuroscience (e.g. Antonio Damasio) and memory (e.g. Daniel Schacter) then what’s left of this book for you is largely an advertisement for Zaltman’s commercial and patented (!!) market research technique called ‘Zaltman’s metaphor elicitation’.

Yes there are good reasons to doubt focus groups Continue reading