The Latest Marketing Myth — Big Brands Are Dying

October 26, 2017

Once again, The Ehrenberg-Bass Institute have come forward in their latest report to puncture another myth—the belief that big brands are dying. According to the report:

There is quite a long history of such alarms, going back at least to 1993’s “Marlboro Friday”. Recently, there have been claims that big/global brands are losing to small/local brands. Theories have hastily been put forward why this might be, leading to marketing strategy recommendations. 

In the report, Byron Sharp et al puncture a number of these types of marketing myths with the type of fact-based evidence they have become known for.  Below are seven of the myths that the report goes on to refute:

Myth #1

Big/global brands are declining, while small/local brands are growing.

The evidence shows that more big brands have grown than declined…although they may not be gaining market share, which is an important distinction.  As Sharp notes, “It’s easy to confuse, oneself or others, when analysing growth. Growth/decline in category share does not necessarily mean growth/decline in sales revenuebecause overall category sales can also grow or shrink. Small brands are able to post higher percentage growth than large brands because any growth is from a low sales base. But they are also more likely to fall completely out of the market than big brands. ‘Survivor bias’ can cause another error in analysing growth: it’s only the shares of surviving small brands that are tracked so the average performance of small brands is inflated. Big brands are more secure and their sales are less variable than small brands. This makes them more valuable to investors. One might also fear that the natural trajectory of leading brands is downwards – yet the resilience of leading brands has been rather astonishing in the face of much social and technological change; the lists of top brands in many consumer goods categories look remarkably similar decade after decade. This, ironically, is what gives new brands motivation to invest to try to win share because if they get big they might be able to stay big.”

Myth #2

Brand Loyalty is declining.

However, the evidence from a 2015 study by Dawes et al showed no general decline in brand loyalty. The same was observed by in a 1997 study by Dekimpe et al, where it was stated: “little support is found for the often-heard contention that brand loyalty is gradually declining over time” and “the brand loyalty pattern for market-share leaders is found to be more stable than for other brands.

Myth #3

Young people increasingly distrust and reject brands.

The evidence from a recent Ehrenberg-Bass study rejects this notion: “new research…examined the brand shares and penetrations among younger consumers (defined as those aged 18-24) and those aged over 25 for the top 5 brands of fourteen categories. Our results show that there are minimal differences in how many consumers aged under 25 purchase leading brands compared to older people. In over 40% of category/year analyses, leading (top 5) brands actually have a higher market share among younger consumers sales than among older consumers.”

Myth #4

Small brands command high levels of loyalty.

Evidence from a 2017 Ehrenberg-Bass research refutes this popular notion: “Our latest research (Franke et al 2017 ) reveals that, even after accounting for Double Jeopardy, only one in ten small brands (excluding private labels) have loyalty levels higher than expected, and none higher than large brands. While 60% of small brands have loyalty levels even lower than expected (an expectation which is already lower than for large brands.”

Myth #5

Digital media has given small brands a cheap way to reach consumers – “levelling the playing field.”

However, the value of “free” social media has been shown to be false, as Sharp explains: “It is now well established that the value of ‘free’ earned media for brand building was substantially overvalued. Earned media tends to be lower value in that it reaches the brand’s most easy to reach, heaviest, most loyal customers (see Nelson-Field et al 2012). Few brand videos ever go viral, and total sharing is strongly driven by buying exposures. About half of digital media spend is on search and directory advertising, something long available to small brands. The shift of this advertising to online has not disadvantaged large brands – though they could certainly over-spend on it. Much of the other half of digital media spend is largely paid display and video on YouTube and Facebook, where leading brands should suffer no disadvantage. The rest of digital media is display advertising largely bought programmatically. These second two areas, especially the latter, have been plagued with problems of fraud, non-human exposures (wastage), ‘middle man’ costs, and lack of ad viewability (see Hoffman 2015, and recent examples). Leading brands have probably lost more marketing dollars in this area than start-up companies/brands.”

Myth #6

Small brands are successful without advertising.

While there are examples of small brands growing due to technological superiority (Google) or major demographic trends favoring them (Starbucks), “many growth success stories, such as Chobani or Blue Buffalo, advertise on TV and other platforms. In 2014 the Wall Street Journal reported ‘When it comes to advertising Greek yogurt, there’s no contest between Chobani and Oikos.’ Chobani spent $56 million in the US alone that year, and has been spending more since.”

Myth #7

E-commerce has opened up direct-to-consumer opportunities for small brands.

While this is true and there are examples of successful e-commerce brands (Harrys), “Large brands had the same opportunity – they were slower in realizing this opportunity until it become a threat. Perhaps because large brands depend heavily on sales through large retailers they may be reluctant to sell direct to consumers for fear of upsetting their relationship with these very large retail channels. One solution may be to use different brands for different channels as previously done to satisfy specialist retailers not wishing to stock supermarket brands (e.g. Unilever brand TIGI “by hairdressers, for hairdressers”, and Mars specialty pet-food brand Royal Canin).”

KEY TAKEAWAY:

As Sharp et al note, we must be careful to sound the alarm that large consumer brands are on the road to long-term decline. While they have certainly made mistakes in the past (including: too much spending on trade/price support, excessive SKU proliferation, allocating too much spending to digital media, creating too much low-quality advertising content, and failure to gain distribution and expertise in fast-growing channels), all are reversible, and large brands still need support along the path to purchase to grow both mental and physical availability. Of course, large brands can also learn from how successful smaller brands are gaining attention in today’s landscape. Armed with the laws of marketing science and an in-depth understanding of both mental and physical availability, we can help clients of all sizes along the path to purchase find real growth.