How do B2C brands thrive despite crises? Here's the answer

A study conducted by Prof. Koushyar Rajavi and Prof. Tarun Kushwaha on the consumer packaged goods market in the United Kingdom has revealed some interesting insights into why some brands are able to thrive during periods of economic expansion and contraction, while others do not. How do they do it? Do they have superpowers? 

The analysis found that a combination of specific factors and by order of importance can contribute to the success or failure of a brand.

Formalizing the issue better: 

In the face of global economic shocks, how do strategic brand factors moderate their impact on brand equity? 

To answer this question, a "utility based framework" was developed (more about the tool below), using monthly data from 325 national consumer goods brands packaged in 35 categories for 17 years in the UK. So a simply stellar amount of information. The authors used this data to obtain quarterly estimates of brand equity based on sales.

The two stars

The six strategic brand factors examined are: 

1. Price positioning
2. Advertising spending
3. The assortment of the product line
4. The breadth of the distribution
5. Brand architecture
6. The market position

Of these factors, distribution and assortment emerged as the preeminent ones.

Avery wide distribution of our products is a key factor during contractions, expansions, and, indeed, for the overall health of a brand. Which is totally consistent with every piece of marketing evidence discussed in this magazine: the goal of marketers should be to lower the mental and physical barriers between customers and brands as much as possible. Greater distribution and a better network of "memory structures" guarantee the bulk of results.

the goal of marketers should be to lower the mental and physical barriers between customers and brands as much as possible.Francesco galvani, CEO of deep Marketing

Brands with widespread distribution are more likely to succeed in both good and bad times. Product line length can then help brands withstand economic downturns by allowing them to strategically increase their product offerings with lower prices or create new segments flexibly and when needed. The authors of this study found that when companies expand their product line or brand portfolio, awide variety of offerings can help create and strengthen brand equity.

The other factors

In addition to the two vital drivers related to assortment size and distribution mentioned above, advertising expenditure was also found to be another indicator contributing to branding success in both expansion and contraction situations. However, it was not found to be as influential, meaning that although good advertising can increase consumer recognition and recall of brands, it usually cannot replace in effectiveness the availability of quality products at different prices within a brand's ecosystem.

Realistically: better to combine excellent and continuous advertising, wide distribution, and a broad product line whenever possible.

In addition, the adoption of premium pricing positions and the use of umbrella branding structures (i.e., the unification of several sub-brands under one overarching logo) appear to have only modest effects on brand equity over time, regardless of whether companies are expanding or reducing their portfolios. Finally, the authors identified the presence of a strong market share as positively associated with consumer perception of brands, but also noted that its influence is relatively small compared to the other elements.

Overall, there does not seem to be a single strategy that always works at different stages of the business cycle, but there are elements that are more important than others at the universal level.

What is a utility-based-framework

Utility theory is a tool used by economists to understand how people make decisions and prioritize different goods and services. The theory suggests that individuals behave as if they have a mental utility function (like an innate algorithm) that helps them rank their preferences in terms of satisfaction. This utility function can be represented analytically, so even if an individual does not know his or her utility function or denies its existence, this does not necessarily contradict the theory. Economists are able to use experiments to determine the utility functions of individuals and the behavior underlying them.

By postulating a utility function, economists are able to understand how people evaluate different goods and services and their preference factors, thus enabling them to make better predictions about consumer behavior. Utility theory is an analytical way to evaluate which goods provide greater satisfaction or pleasure to people. Utility theory is a powerful tool that allows us to better understand how people prioritize the services and products they consume to maximize satisfaction or pleasure with minimal effort or cost.

In this context, therefore, a "utility based framework" is an approach whereby consumers of brands choose their preferred products by following their own "mental utility curve."

Thus we have confirmation that humans are are particularly motivated by the wide range of choices in prices, products, and types, and the fact that it is easy to find these products.