Bronnenberg, B.J.J.A.M.

Dhar, S.

Dube, J.-P.

English

Research Papers in Economics

Journal of Marketing Research
Vol. XLIV (February 2007), 26–28 26
© 2007, American Marketing Association
ISSN: 0022-2437 (print), 1547-7193 (electronic)
*Bart J. Bronnenberg is Professor of Marketing, Anderson School of
Management, University of California, Los Angeles (e-mail: bart.bronnen-
berg@anderson.ucla.edu). Sanjay K. Dhar is James H. Lorie Professor of
Marketing (e-mail: sanjay.dhar@chicagogsb.edu), and Jean-Pierre Dubé is
Professor of Marketing (e-mail: jdube@chicagogsb.edu), Graduate School
of Business, University of Chicago.
BART J. BRONNENBERG, SANJAY K. DHAR, and JEAN-PIERRE DUBÉ*
National Brands, Local Branding:
Conclusions and Future Research
Opportunities
We begin by thanking Mike Kruger, Len Lodish, Berk
Ataman, Carl Mela, and Harald van Heerde for their
thoughtful comments on our article (Bronnenberg, Dhar,
and Dubé 2007). After responding to these comments, we
summarize several general directions for further research
that have emerged from this discussion. Both Kruger’s
(2007) and Lodish’s (2007) comments confirm that practi-
tioners are well aware of the striking geographic differences
in performance that many brands face across U.S. markets.
Although the sources of these differences remain unclear,
marketers nevertheless routinely take great care to tailor
their marketing to local brand performance. Determining
the sources and the economic consequences of these differ-
ences presents an excellent opportunity for additional aca-
demic research, which, to date, has studied geography in a
limited context. Ataman, Mela, and Van Heerde’s (2007)
comment takes a different angle. Replicating our analysis
on a different data set, they show that the geographic pat-
terns in the U.S. market do not emerge strongly in France.
Their findings point toward more general questions about
the spatial scale at which geography might be expected to
matter and, perhaps more important, the scope of an “inde-
pendent market.”
Kruger (2007) agrees that national brand manufacturers
are aware of geographic differences in brand shares and that
they account for such differences when they set regional
marketing plans. He points out (p. 21) that managers may
not be aware of the ubiquity of this phenomenon: “A contri-
bution of Bronnenberg, Dhar, and Dubé’s (2007) article
may be to reassure marketing managers that they are not
alone in these regional skews; almost everybody has them.”
He also points out that managers remain unaware of the
specific sources of these differences. Although Kruger is
unable to provide a rationale for the sources of these
regional differences across U.S. markets, he offers three
compelling arguments for why such differences would per-
sist over time.
First, Kruger (2007) notes that advertising and promo-
tional allowances are frequently allocated to markets on the
basis of a brand’s performance through such measures as
the brand development index. This practice does not point
to the specific origins of why brand shares differ across
markets, but it offers an explanation for why differences in
brand shares would persist over time. This line of reasoning
also implies that the historic initial conditions within a mar-
ket may be important for understanding current marketing
outcomes. Bronnenberg, Dhar, and Dubé (2006) provide
some evidence that historic entry patterns in the ground-
coffee and mayonnaise categories are good predictors of the
observed current differences in market shares across mar-
kets. Kruger’s argument presents a potential explanation for
why historic entry patterns would persist in such a manner.
Second, Kruger (2007) posits the existence of feedback
loops between brand share and retail distribution; that is,
success begets success. Not only do strong brands receive
better distribution (e.g., Bronnenberg, Mahajan, and Van-
honacker 2000; Farris and Reibstein 1995), but new prod-
ucts may also fare better in a market if they are offered by a
leading manufacturer. Again, this line of reasoning helps
explain the persistence of market shares over time and how
historic initial conditions in a category might continue to
influence brand performance over time.
Third, Kruger (2007) conjectures that there may be a
confound between a retailer effect and the geographic
effect. In the soft-drink industry, he finds systematic evi-
dence for a brand × retailer interaction. However, this find-
ing does not appear in the bottled-water category. We exam-
ine this issue using all 30 categories in Bronnenberg, Dhar,
and Dubé (2006) and find no corroborating evidence of a
brand × retailer interaction. Testing for a retailer effect is
tricky because retailers that operate in only one market are
confounded with the so-called market effect by construc-
tion. To avoid this confound, we focus only on retailers that
operate in two or more geographic markets. Our results
indicate that retailer-specific effects account for only
approximately 20% of the share variation and thus do not
appear to explain the strong geographic patterns in shares.
This still leaves the possibility that retailer effects exist in
selected categories. The largest soft-drink manufacturers
use expensive direct-store delivery systems and are respon-
sible for their own shelf placement in stores. As with theNational Brands, Local Branding 27
geographic effects, in cases in which retailer effects are
present, it would be interesting to study their origins.
Lodish (2007) points out that practitioners are aware of
the share differences described in our article. Indeed, we
adapted the title of our article from the SABMiller (2005, p.
13) Web site, which further makes the point that the U.S.
beer market “operates as a series of smaller, very different
markets” and that the company uses a marketing strategy
tailored to the different conditions of each market.
Lodish (2007) provides an interesting discussion of how
he spearheaded an initiative through Information Resources
Inc. (IRI) to document differences in the marginal effective-
ness of promotional instruments on sales across geographic
markets. The initiative then encouraged marketing man-
agers to tailor their marketing efforts across markets
accordingly. Similar geographic differences in promotion
responses have been documented in recent academic litera-
ture (Boatwright, Dhar, and Rossi 2004). To the extent that
manufacturers have followed IRI’s recommended guide-
lines, these findings are consistent with Kruger’s (2007)
observation that consumer packaged good (CPG) manufac-
turers routinely allocate marketing budgets differently by
market on the basis of the belief that the marginal benefit of
marketing instruments varies from market to market.
In general, we fully agree with Lodish’s (2007) closing
remarks about the importance of determining the sources of
these cross-market differences. On the basis of both
Kruger’s (2007) and Lodish’s comments, we deduce that
besides the recognition of geographic differences, little is
known about the origins of these differences. We also agree
that a better understanding of these long-term geographic
patterns in share levels and marketing effectiveness may
have a fundamental impact on practitioners’and academics’
abilities to formulate better marketing strategies.
Finally, Ataman, Mela, and Van Heerde (2007) attempt to
replicate our analysis using a French multicategory retailer
account-level CPG data set with analogous time and loca-
tion indexation. Notably, they are unable to replicate our
main findings of a strong geographic component to market
share variation in the French context. Consistent with our
results, they find a large brand × market interaction effect
(76.5% of the variation) when they pool their data across
time, market, and brand. However, most of this variation is
driven by a strong brand main effect and a relatively small
market main effect; effectively, the geographic component
is very small. The lack of a geographic effect is evident
directly in their raw data, which exhibit little dispersion in a
brand’s market share across French regional areas. The geo-
graphic dispersion in shares for national CPG brands in the
United States is approximately four to five times larger than
in France (see Table 1 in our article [Bronnenberg, Dhar,
and Dubé 2007] and Table 1 in Ataman, Mela, and Van
Heerde’s [2007] comment, respectively). Not surprising, the
lack of a sizable geographic component implies that Ata-
man, Mela, and Van Heerde find a larger temporal compo-
nent to the share variation in their data. From a marketing
practitioner perspective, their evidence suggests that brand-
share performance is considerably more stable across
French regional markets than across U.S. regional markets.
Therefore, the development of a truly national marketing
campaign could be easier in the French context.
Ataman, Mela, and Van Heerde’s (2007) findings raise
the question as to when geography might be expected to
matter. Despite the striking role of geography in U.S. brand
shares, the lack of geographic differences in France is per-
haps not surprising. France encompasses a considerably
smaller area, with approximately 7% of the land area and
20% of the population of the continental United States. In
terms of land area, spatial analysis of brand shares in
France would roughly correspond to confining the spatial
analysis of the United States to Texas. At this spatial scale,
our data display less share dispersion and stronger brand
effects, as Ataman, Mela, and Van Heerde find. In the U.S.
data, we find evidence of spatial dependence up to 500
miles. If we extrapolate this result to the French context,
this would imply roughly only two to three independent
regions in France.
In the U.S. context, there are several precedents for think-
ing of ACNielsen Scan Tracks as independent markets. As
Ellickson (2006) discusses, supermarket firms cluster their
distribution centers in major cities and serve surrounding
areas from these facilities. Trade Dimensions uses these dis-
tribution networks to divide the Untied States into 52 distri-
bution regions, roughly comparable to ACNielsen’s 50 U.S.
Scan Tracks. Similarly, U.S. CPG manufacturers routinely
develop regional marketing plans. For example, Miller
Brewing has divided the United States into 61 submarkets,
each with its own marketing plan. For these reasons, it is
not surprising that even federal antitrust authorities also
routinely treat ACNielsen Scan Tracks as independent mar-
kets in legal matters (see, e.g., FTC v. Coca-Cola Co., 641
F. Supp. 1128 1986). Because of space constraints, Ataman,
Mela, and Van Heerde (2007) are unable to provide a moti-
vation for how they constructed their submarkets in France
and why they expect them to constitute independent mar-
kets. However, given the small spatial scale, the highly con-
centrated population (i.e., in Paris), and the lack of major
natural barriers (versus the East–West Rocky Mountain
Divide and the Great Lakes in the United States), it is
unlikely that geography would play as strong a role in the
French context as in the United States. A more comparable
analogy to the spatial scale of the United States is Western
Europe. Therefore, an interesting replication of this analysis
would examine pan-European brands (as in Ter Hofstede,
Wedel, and Steenkamp 2002) and analyze the data at the
county or provincial level.
In summary, this discussion highlights several important
findings and several directions for further research. The
striking geographic differences in a national brand’s shares
and marketing responsiveness across U.S. markets is of
practical importance to managers and of substantive interest
to academics. Furthermore, marketing managers are fully
aware of these patterns and take them into account when
they set locally tailored marketing plans. However, first,
neither managers nor academics are able to account for the
sources of these differences. Future academic research that
can account for the sources of these differences would have
a fundamental impact on the understanding of marketing
strategy.
Second, current marketing practice allocates budgets pre-
dominantly to strong markets, implying that managers vir-
tually forgo “fighting” for their weaker markets and accept
their fate. It would be ideal to determine ways that firms
could reinitialize the market conditions. In particular, is
there anything a firm that faces weak local conditions can
do to improve its long-term performance in the market?28 JOURNAL OF MARKETING RESEARCH, FEBRUARY 2007
This line of research may require access to true long-term
data sets, especially sources that contain the initial launch
periods in a category. Recent efforts at IRI to compile a
publicly available database may be a big step toward this
end. For mature categories, researchers may need to consult
historic archives to compile information on the conditions
under which different regions launched new categories.
Third, to generalize beyond the U.S. context, another
question that arises from this discussion is how the geo-
graphic scope of a market is defined. At what level of geo-
graphic disaggregation should firms target their marketing
efforts? Similarly, at what level of granularity should aca-
demics collect data to obtain a precise read on marketing
outcomes, such as shares, and the marginal impact of mar-
keting variables, such as prices, promotions, and
advertising?
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Annual Report

Another Reason Academics and Practitioners Should

Consumer Packaged Goods in France:

Consumer Packaged Goods in the United States:

Does Sutton Apply to Supermarkets?”

How Geographic Variation Persists: Comments on ‘Consumer Packaged Goods in the United States: National Brands,

Identifying Spatial Segments

Market Share and Distribution: A Generalization, a Speculation,

The Emergence of Market Structure in New Repeat-Purchase Categories:

National brands, local branding: Conclusions and future research opportunities.

National brands, local branding: Conclusions and future research opportunities.

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