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

The launch plan reaches the investment committee with media, pricing, promotion, and the product line fully costed. Distribution appears as an execution assumption. That is the point to challenge. In the research, broad distribution was the strongest measured factor for both growth rate and long-term market potential, and it strengthened the rest of the mix.

Treat distribution as brand strategy, not launch logistics.

For new national packaged-goods brands, broad distribution, how widely the brand is stocked, had the strongest measured relationship with both growth rate and long-term market potential. Broad distribution also strengthened other parts of the launch mix. It belongs inside the CMO's brand-growth agenda, not outside marketing as a sales or logistics assumption.

Data chart

Long-term market potential responds most to broad distribution

Broad distribution54In-store feature and display20More brand products stocked perretailer9

Broad distribution stands far above every other measured factor in building long-term market potential.

Action guide

  1. Make distribution a CMO-level launch decision.Broad distribution led the measured response for both growth rate and long-term market potential.
  2. Assess the launch mix as a system.Connect pricing, product-line, and advertising decisions to broad distribution because broad distribution strengthened their effects.
  3. Separate growth rate from long-term market potential.Use both outcomes in launch reviews because discounting accelerated growth but reduced long-term market potential.
  4. Require margin-based cases for incremental launch spend.The simulation gave distribution a much more forgiving breakeven than advertising under its margin assumptions.
  5. Set advertising expectations around faster growth.Advertising supported growth rate, but the evidence did not establish a clear increase in long-term market potential.
  6. Apply this to new national packaged-goods brand launches.The data are 225 France launches, 22 categories, 1999-2004, measuring growth and market-potential response, not ROI; test before extending to durables, private labels, or other countries.

Evidence

  • Broad distribution represented 54% of measured long-term market-potential response and 31% of measured growth-rate response, ranking first on both.
  • In the simulation, a 10% permanent distribution increase produced about 7.6% higher sales value after 52 weeks, on average.
  • Extra distribution paid for itself while its cost stayed below roughly 23% of retail revenue; extra advertising paid for itself only below roughly 0.8% of retail revenue, under assumed 25% retailer and 40% manufacturer gross margins. For scale, a typical brand already spends around 3.75% of retail sales on advertising.
  • Broad distribution strengthened the effects of lower prices, broader product lines, and advertising in the launch simulations.
  • Discounting represented 20% of measured growth-rate response but 2% of market-potential response, with a negative market-potential effect.
  • Advertising represented 10% of measured growth-rate response; its 2% market-potential response was not clearly distinguishable from zero.

Key takeaway

For new packaged-goods brands, distribution belongs at the center of brand strategy, not the edge of launch execution.

Source

Ataman, M. B., Mela, C. F., & van Heerde, H. J. (2008). Building Brands. Marketing Science.

Evidence strength: Strong (an observational study of 225 new national brands across 22 frequently purchased packaged-goods categories in France, 1999-2004, with controls for marketing decisions responding to sales). Best suited to national packaged-goods launches; less certain for durable goods, private labels, brand extensions, word-of-mouth-driven products, other countries, channels, or periods.