Marketing Mix Drivers of New Brand Success

Product & Brand ManagementAtaman, M. B.; Mela, C. F.; van Heerde, H. J. · 2008Marketing Science
Topicsnew product launch·marketing mix·distribution·advertising elasticity·brand building·cpg·dynamic linear model

Imagine your packaged goods launch plan funds media and treats distribution as logistics. Distribution breadth is how widely a brand is stocked, weighted by store size. Market potential is a brand's long-term sales ceiling; growth rate is how fast sales approach it. Does distribution breadth belong in your launch investment case?

Distribution breadth has the strongest link with a new brand's growth rate and market potential.

Data chart

Distribution breadth ranks first for long-term market potential

Each lever's share of the combined size of seven measured links with a new brand's long-term sales ceiling, in percent.

Distribution breadth54%In-store feature and display20%Distribution depth9%Product line length7%Regular price5%Advertising2% (n.s.)Discounting2%
  • Distribution breadth outweighs the other six levers combined.

Distribution breadth has a larger measured link with long-term market potential than the other six levers combined.

Figure 4 (p. 1047), based on 225 new packaged goods brands in France, 1999-2004. Shares compare link sizes and remove direction: regular price and discounting have negative ceiling links; advertising's ceiling link is unclear (Table 4, p. 1046). Rounded shares total 99%. Distribution depth means the brand's share of a store's category product variants; product line length means the number of variants the brand offers. These are measured associations, not causal returns.

Data chart

Launch levers rank differently for growth speed and the long-term sales ceiling

Each lever's share of the combined size of seven measured links, separately for sales growth speed and the long-term sales ceiling, in percent.

Distribution breadth, growth speed31%Distribution breadth, sales ceiling54%In-store feature and display, growthspeed12%In-store feature and display, salesceiling20%Distribution depth, growth speed0% (n.s.)Distribution depth, sales ceiling9%Product line length, growth speed12%Product line length, sales ceiling7%Regular price, growth speed15%Regular price, sales ceiling5%Advertising, growth speed10%Advertising, sales ceiling2% (n.s.)Discounting, growth speed20%Discounting, sales ceiling2%
  • Discounting has a negative link with the long-term sales ceiling.

Distribution breadth leads both rankings, while discounting and advertising have larger shares for growth speed than for the long-term sales ceiling.

Figure 4 (p. 1047) supplies the shares; Table 4 (p. 1046) supplies their directions. Higher regular price has negative links with both outcomes; in-store feature and display has a negative growth link; discounting has a negative ceiling link. Advertising's ceiling link and distribution depth's growth link are unclear. Figure 4 prints distribution depth's growth share as 0%; the Conclusions print 0.1% (p. 1051). Rounded ceiling shares total 99%.

Action guide

  1. Put broad distribution first in your launch investment case.Before approving other spending, compare national and phased launches.
  2. Build your launch mix proposal on broad distribution.Judge lower prices and broader lines on both outcomes, and advertising on growth rate.
  3. Set separate goals for growth rate and market potential.Discounting is linked to faster growth but lower market potential; weigh both before approving promotions.
  4. Have finance test distribution and advertising spending at your category's margins.In a simulation at assumed margins, extra distribution breadth pays off more easily than extra advertising.
  5. Judge advertising increases on growth rate and category economics.At typical budgets, the simulation gives little support for more.

Evidence

  • Distribution breadth accounts for 54% of the combined size of seven launch levers' links with market potential, more than the other six together, and 31% for growth rate.
  • A simulated permanent 10% rise in each lever changes sales value in the first year most for distribution breadth (about +8%), regular price (about -5%) and distribution depth (about +3%). Product line length and in-store feature and display come next; advertising and discounting change it least.
  • In that simulation, a 10% spending increase pays off when the lever already costs under about 23% of retail revenue for distribution breadth, but about 1% for advertising. Both thresholds assume 25% retailer and 40% manufacturer gross margins. At typical budgets, more advertising is unwarranted on average.
  • A national rather than phased launch matters more for simulated sales and growth than pricing, advertising or product line timing. A national launch also strengthens the links of lower prices and broader lines with both outcomes, and of advertising with growth rate. These interactions suggest broad distribution is a precondition for the rest of the mix to work.
  • Discounting has a 20% share for growth rate and advertising 10%, against 2% each for market potential. Discounting's link with market potential is negative; advertising's is unclear.

Key takeaway

For new packaged goods brands, treat distribution breadth as brand strategy, not logistics.

Limitations

The evidence covers new national packaged goods brands in France, 1999-2004, and measures sales, not investment returns. The best spending choice differs by category.

Source

Ataman, M. B., Mela, C. F., & van Heerde, H. J. (2008). Building Brands. Marketing Science, 27(6), pp. 1036 to 1054. https://doi.org/10.1287/mksc.1080.0358.

https://doi.org/10.1287/mksc.1080.0358

Exact values behind the rounded figures: a permanent 10% increase changes simulated first-year sales value by +7.61% for distribution breadth, -5.13% for regular price and +3.18% for distribution depth; the advertising breakeven baseline cost threshold is 0.8% of baseline retail revenue for a 10% spending increase.