Plot twist! Big brands AREN’T dying

Reports of the death of big brands “are greatly exaggerated”, according to New research by the University of South Australia.

In “Are Big Brands Dying?”, researchers for The Ehrenberg-Bass Institute sought to sift fact from fiction about the fate of big, global brands who are often said to be losing to small, local brands.

Here are the key questions that were investigated, and the researchers’ key observations…

Are Big Brands dying, while small local brands thrive?

No. While there have been shifts in the marketing environment which created new opportunities for newcomers, so too have there been changes potentially advantageous for large brands.

Is brand loyalty is declining?

No. A 2015 study of 26 fast-moving-consumer-goods categories in the USA and UK over 6-13 years found no general decline in brand loyalty.  New research from Denmark reported the same result.

Do young people increasingly distrust and reject big brands?

No. Brand rejection is remarkably low, and it is usually due to unfamiliarity. Unless you’re a private label, or a polarising offering, rejection is rarely an issue.

It’s easy to exaggerate the tendency of young buyers to determine trends when it comes to brand buying. However, new (and therefore, small) brands tend to have a younger customer base because they win more consumers entering the category and buying for the first time.

Fact is: younger consumers neither distrust nor reject big brands… they continue to buy them.

Do small brands command high levels of loyalty?

The latest research reveals that only one in ten small brands (excluding private labels) have loyalty levels higher than expected, and none higher than large brands. 60% of small brands have loyalty levels even lower than expected (an expectation which is already lower than for large brands).

As a small brand grows, its loyalty metrics rise along with the increased size of its customer base.

Has digital media given small brands a cheap way to reach consumers, “leveling the playing field”?

No. “Free” earned media for brand building has been substantially over-valued, the researchers say. Earned media tends to be lower value in that it reaches the brand’s most easy to reach, heaviest most loyal customers.

The shift to online media hasn’t disadvantaged large brands … though they can certainly over-spend on it and have probably lost more marketing dollars due to middle-man costs and waste.

But start-ups have less advertising budget, and are more cautious with their advertising spend.  They rarely gain the ROI advantage of programmatic media buys.

Larger brands can afford outstanding creative, broader media options, and greater reach at lower cost per contact.

Are small brands are successful without advertising?

While some new brands grew without much advertising (notably: Google, Starbucks)  they were taking advantage of specific situational opportunities.

Has e-commerce opened up direct-to-consumer opportunities for small brands?

While e-commerce is becoming increasingly important, it’s difficult for a small packaged goods brand to become a leading brand while depending solely on e-commerce.

Because large and convenience retailers favour stocking large brands, new small brands look to sell direct-to-consumers through necessity.

While large brands have the same opportunity, many were slow at first to leverage it until it became a threat.

The mistakes of the past

The researchers helpfully listed what they see as the biggest mistakes big brands have made over the past 10-20 years, including:

  • Increased trade expenditure (mostly price discounting) at the expense of out-of-store advertising expenditure.
  • SKU proliferation cannibalised core offerings; over-complicated product ranges and made it easier for consumers to buy rival brands.
  • Allocated too much ad expenditure to unproven digital media.
  • Created too much low quality advertising content, spread too thin across media channels.
  • Failed to develop channel expertise and gain their share of physical availability in the fastest growing distribution channels.

However, they conclude that these mistakes can and are being corrected.

“In short, the future looks to be benign-to-bright for large brands with proven consumer acceptance, and valuable mental and physical availability. Consumers are busier and wealthier than ever before in human history. As much as ever consumers globally are looking to highly available brands to simplify their lives.”

The report’s authors are Professor Byron Sharp, Professor Magda Nenycz-Thiel, James Martin, Zac Anesbury & Professor Bruce McColl.


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