power of brand in the multichannel world: the good, the bad, and the… best
DESCRIPTION
TRANSCRIPT
Power of brand in the multichannel world: the good, the bad, and the …..best
Kusum L. AilawadiCharles Jordan 1911 TU’12 Professor of
MarketingTuck School at Dartmouth
Back in the ClassroomTuck Reunion, October 2013
The Power of Consumer Loyalty
Willingness to search for
preferred store
Willingness to search for
preferred brand
Assortment Access Service Private LabelCompeting Channels
Legal/Institutional Norms
Product quality Advertising TechnologyCompeting Brands
Consumer Data
Consumer Loyalty
Channel Power Brand Power
Challenges for brands…. Brand equity vis a vis retailers Managing distribution coverage Preserving loyalty when search is costless Preventing price erosion online
Challenges for brands….
Brand equity vis a vis retailers
Managing distribution coverage Preserving loyalty when search is costless Preventing price erosion online
Brand Equity of Some Manufacturers and Retailers
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
5
10
15
20
25
30
35
40
Sony Samsung Apple
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
5
10
15
20
25
30
35
40
Amazon Best Buy Walmart
Data: Brand Asset Valuator ©
Some Retailers and Their Private Labels
Walmart Sam's Choice Great Value0
2
4
6
8
10
12
14
16
Costco Kirkland0
2
4
6
8
10
12
14
16
Target Archer Farms0
2
4
6
8
10
12
14
16
Whole Foods 365 Brand0
2
4
6
8
10
12
14
16
Retailers and their PLsThe brand equity of CPG retailers’ PL
continues to be low.A useful contrast: Kenmore and Craftsman
have higher brand equity than their retail owner. Now in Costco and Ace Hardware.
Another useful contrast: Trader Joe’s had a pure PL strategy, now bringing in national brands
How much PL power do US retailers have and are they “using it up”?
Challenges for brands…. Brand equity vis a vis retailers
Managing distribution coverage
Preserving loyalty when search is costless Preventing price erosion online
Distribution Share Curves
Source: Farris, Antitrust Bulletin 2004
Convexity of curve in CPGConsumers don’t search – likely to switch if
preferred brand is unavailable in the store.Large retailers stock multiple brands but last
few points of distribution carry only a few.Of course, large brands also get more
distribution.Increasing returns drive pressure to expand
coverage.
ShareDistribution
Source: Reibstein and Farris, Marketing Science 1995
But, in other contexts?Consumers search for durablesSearch is easy online But, higher preference + WTP at branded
and previously visited websites (Brynjolfsson & Smith 2000)
If these are also the sites with good SEO and search advertising, curve can be VERY concave
Brands can get most of the market share returns at the first few points of online distribution
Challenges for brands…. Brand equity vis a vis retailers Managing distribution coverage
Preserving loyalty when search is costless
Preventing price erosion online
SearchWhat do consumers search for?How much?Where?
Branded vs Generic Search
Direct ROI on branded keyword paid search ads > generic (more clicks & conversion, lower cost/click).
Generic search can spill over to branded through “awareness of relevance” (Rutz and Bucklin 2011), increasing generic ROI.
But, what is the volume of branded vs. generic search?Google Insight/Trends data 2007-2012
Categories where Search is Branded
ereader sony
kindle ereader
nook ereader
nook best ereader
ereader books
kobo kobo ereader
pandigital ereader
pandigital0
20
40
60
80
100
120
"Ereader"
hitachi tools
hitachi power tools
hitachi dewalt dewalt tools
dewalt power tools
electric power tools
chicago power tools
chicago tools
bosch power tools
0
20
40
60
80
100
120
"Power Tools”
More ……
keur
ig coff
ee
keur
ig coff
ee m
aker
keur
ig
cuisin
art
cuisin
art c
offee
mak
er
best
coff
ee m
aker
coffee
mak
ers
singl
e co
ffee m
aker
coffee
mak
er re
views
clean
coffee
mak
er0
20406080
100120
"Coffee Maker"
nike
runn
ing
shoe
s
nike
runn
ing
nike
sho
es
best
runn
ing
shoe
s
asics r
unni
ngas
ics
asics r
unni
ng sh
oes
new ru
nnin
g sh
oes
runn
ing
shoe
s wom
en0
20406080
100120
"Running Shoes"
Categories where search is generic
elec
tric to
othb
rush
bes
t
best
toot
hbru
sh
elec
tric to
othb
rush
son
icar
e
soni
care
soni
care
toot
hbru
sh
toot
hbru
sh re
view
s
elec
tric to
othb
rush
bra
un
elec
tric to
othb
rush
review
s
brau
n to
othb
rush
oral
-b to
othb
rush
0
40
80
120
"Electric Toothbrush"
cam
era
digi
tal c
amer
a
best
dig
ital c
amer
as
best
cam
eras
cano
n di
gita
l cam
eras
cano
n ca
mer
as
sony
cam
eras
sony
dig
ital c
amer
as
niko
n di
gita
l cam
eras
niko
n ca
mer
as0
20406080
100120
"Digital Cameras"
Branded versus Generic Search Varies across categories:
Brand Relevance in Category (Fisher, Volckner & Sattler 2010),
Repeat purchase categories “Technical feature” categories
More branded search => focus on harvesting rather than generating demand
More branded search for high equity brands Higher brand equity => Higher “search
equity”=> More control over where the clicks and purchases go online
Extent of search before purchase…Based on web sessions in which consumer purchased:
Shoes, bed & bath, baby supplies, tools etc., handheld devices, audio/video, office supplies, sport & fitness, health & beauty products.
20% of purchases are at first site visited, 37% at first two, and 51% at first three. Little difference across categories.
Among purchases made at first site visited, Amazon 22% of the time, Wal-Mart 9%, QVC 5%, Amway 4%, JCP 3%
Significant differences across categories…….Source: comScore, Inc. 2011 data for random sample of ≈ 70K panelists
Purchase without SearchCategory #1 #2 #3
Audio/Video Walmart 35% Amazon 19% Best Buy 16%
Baby Supplies Amazon 30% Walmart 19% ToysRUs 12%#
Bed & Bath Walmart 15% JCP 12% Amazon 11%
Handhelds Amazon 53% Walmart 13% Apple 10%
Health & Beauty
Amazon 23% Amway 13% QVC 8%
Office Supplies Walmart 24% Amazon 16% Office Depot 13%
Shoes JCP 8% Zappos 7% QVC 7%
Sport & Fitness Amazon 44% Walmart 12% Cabelas 7%
Tools Amazon 40% Sears 12% Home Depot 10%
Walmart, JCP, QVC drop with search
Highest Share Websites
Excluding travel, tickets, and other services
Amaz
on
Wal
-Mar
tQVC
Amway
Yahoo
Best B
uy
Apple
Dell
Victor
ia's S
ecre
t
JC P
enne
y0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Mkt. Share
Where do consumers search?Which is the biggest online “shopping mall”Google vs. AmazonWhich consumer segments search at AmazonWhich segments do you want to capture
online?
Challenges for brands…. Brand equity vis a vis retailers Managing distribution coverage Preserving loyalty when search is costless
Preventing price erosion online
Prices and Price Sensitivity OnlinePrices levels are lower online
“Integrity” in posted prices common among mulitchannel retailers
Pure-play prices lower than multichannel pricesBut price dispersion is greater
high share e-tailers don’t have the lowest pricesAnd price sensitivity is not!
Specially in presence of additional service and information on non-price attributes
WTP higher at branded and familiar websites=> Can/should limit price erosion with distribution
control
Sources: Lynch & Ariely 1998; Brynjolfsson & Smith 2000; Smith & Brynjolfsson, 2001; Ancarani & Shankar 2004
Distribution and pricing controlBrands that are not on AmazonRPM MAPs and UMAPsProduct control
Power of Brand OnlineBrand Equity
Branded Search
More clicks, lower
cost/click
+SEO+Affiliates
= Search Equity
Lower e-tailer dependence
Fewer distribution
points
More price and image
control