Is Category Expansion a Realistic Long-Term Objective for Established Brands?

How often do established CPG categories expand following a period of stationarity? To what extent can the levers under manufacturer control bring about persistent growth in total category value? The authors explore these questions in order to test the commonly held assertion that brand leaders in established markets can grow sales by expanding total category demand. Findings from a study of US household panel data describing the purchasing of nearly 500 small and large categories by 60,000 households over a nine-year period are presented. The observations focus on the growth impact of three sales levers, category penetration, purchase volume per buyer, and price per volume paid, in various strategic windows ranging from one to nine years. The results demonstrate that category penetration increase is the most likely lever for category growth. The association between over-time revenue increase and growth in buying household numbers is far stronger than that between unit price increases or category usage. While this clearly indicates a promising strategic direction for brand management, results also carry a health warning: categories are relatively volatile in the short term, but highly stable over time, therefore while the direction is clear the path is very narrow indeed

Marketing research faces two challenges and a world of opportunity with long-term panel data

There have been frequent calls in the literature for a more comprehensive understanding of marketing impact on long-term firm performance (Dawes, Meyer-Waarden, & Driesener, 2015; Hanssens & Pauwels, 2016; Lodish & Mela, 2007; Webster & Lusch, 2013). Retail scanner data has been the principal source of empirical evidence in this strategic domain, but it cannot explain the behavioural shifts that underpin sales dynamics. Now that far larger extended household panels are available, there is, for the first time, a valuable behavioural lens with which to observe long-term brand and category buying. In this paper we outline theoretical and methodological challenges to this new type of panel research. The first concerns an approach to extending established marketing theory to long-run repeat buying; the second relates to the inherent constraints of long-term panels. We present a new research agenda to progress explanatory theories of long-run brand building and category growth in this new but largely untapped resource

A rising tide lifts all boats: the role of share and category changes in managing organic sales growth

The strategic objective of marketing activities is to drive business growth by promoting the firm’s products. Beyond merger and acquisition, organic growth can be targeted from two sources: Market Share Gain and Category Growth. Market share is often the focus for corporate objectives and used as a success measure. This research explores the relative impact of these two elements on firm growth across product category and addresses whether market share should be the main focus for all organisations. The study covers 39 consumer packaged goods’ categories from the UK and US, across 189 manufacturers over three to five years of data, post-2010. We show that firm growth through market share gain is likely to benefit small firms, and large firms’ growth is likely to be driven by category growth. The results provide empirical support in the area of business growth and how marketing plays a crucial role in this pursuit

Premiumisation strategy as a way to grow

Explores the myths of premiumisation, adding evidence to the topic by identifying the appropriate growth strategy, as well as how to manage pricing and price promotions for the premium offer. Premiumisation should be a joint enterprise with channel partners, who should be involved early on, to get both insight and co-operation with the strategy. Three strategic lenses are considered when determining how to increase average purchase value: within industry, within category and within product format. A premium brand is not a mainstream brand, and should not be expected to sell volume like a mainstream brand, so consider de-emphasising volume objectives and ensure that whatever you do sell is at your intended price point. Price promotions are not a good way to attract new buyers. And there is an alternative way to attract them other than cutting price – advertising, better physical availability or sampling. We cannot share this article openly for copyright reasons. © WARC 2019 all rights reserved

Investigating Undercurrents of Stationarity and Growth With Long-Term Panel Data

There have been frequent calls in the literature for a more comprehensive understanding of marketing impact on long-term firm performance. Retail scanner data has been the principal source of empirical evidence in this strategic domain, but it cannot explain the behavioural shifts that underpin the sales dynamics it reports. With the availability of far larger and extended household panels, it is now possible to observe the effects of accumulating penetration on brand and category buying over many years. This type of data nevertheless presents theoretical and methodological challenges to researchers. In this article, we discuss an approach to extending established marketing theory to long-run repeat buying and then outline the inherent constraints of long-term panels. We illustrate these challenges using one-, five- and 10-year panel datasets and present a research agenda to progress explanatory theories of long-run brand building and category growth in this new but so far mostly untapped resource

How do retail distribution and market share measures relate in the wine category? A conceptual outline and speculation based on current knowledge

Purpose - This paper attempts to draw a conceptual outline of how the market share – distribution relationship may be characterised in the wine category. The aim of this paper is to explain the potential contribution of future research in this area. Design/Methodology/Approach - Current knowledge of the market share – distribution relationship is presented and its relevance regarding the wine category discussed. The paper establishes a range of speculative ideas and assumptions based on relevant concepts and market as well as category characteristics. Expected Findings - We expect a typical convex pattern to hold across markets. It is likely that the convex curve in the wine category is more pronounced compared to less dense and lower revenue categories {Wilbur, 2014 #13}. The occurrence of outlier brands, which do not fit the typical pattern is very likely. These could potentially be private label or iconic low-quantity brands, for example. Factors possibly associated with the relationship are regional/national circumstances, market and retail structure, retailer and store characteristics such as store performance, or the density of brands/SKUs in the category

Predicting Category Growth from Quarterly Penetration

Faced with persistent brand share equilibrium, managers now consider category expansion as a brand growth strategy. At present there is little evidence available about the incidence and nature of category dynamics in mature markets, and therefore little to inform decision-making. We report findings from a large-scale study of household penetration change in nearly 400 established consumer packaged goods categories, and show (1) almost two thirds remain near stationary (2) categories over the mean size of 21% are more stable, with lower incidence of increase (or decrease) and relatively small increments (3) smaller categories (under 10% penetration) are extremely volatile, and average change is up to thirteen times greater. Rate of change is closely linked to initial category size, and equally distributed between increase and decrease. The implications for management seem to be that persistent category expansion is rare and a fifty/fifty strategy at best

A large-scale investigation into drivers of effective retail strategies for wine

Purpose – Little is known about the relationship between distribution and market share in the wine category. Understanding the pattern of the relationship, and subsequently examining the market share variations of individual wine stock-keeping units (SKUs) from expected market share, has the potential to improve the market outcomes of wine brands. Understanding the influences of product and distribution characteristics at the SKU level and incorporating them into marketing strategy and planning has important managerial implications. Design/Methods/Approach – Sales of 3,524 wine SKUs across 4,218 stores and 4 states in the US for the year 2014 are analysed. We use the Reibstein-Farris equation (Reibstein & Farris 1995) to model the relationship between distribution and market share. We then use the market share deviations from the expected values and apply a secondary robust regression to investigate possible relationships between various product- and distribution characteristics and those market share deviations. Findings – The results show that the distribution and market share relationship in the wine category is convex and increasing, in line with previous findings for other consumer-packaged goods in the marketing literature. Beyond distribution breadth, we find that overall brand performance (above), unit price (above), packaging type (above), country-of-origin, grape variety, sales consistency (above) and store specialisation (below) are associated with above or below expected market performance of wine SKUs

Extending Farris: SKU characteristics - defining their position on the market share-distribution curve

Poster with abstract.Poster with abstrac