Kusum L. Ailawadi
Charles Jordan 1911 TU’12 Professor of Marketing
Tuck School at Dartmouth

Back in the Classroom
Tuck Re...
The Power of Consumer Loyalty
Assortment
Access
Service
Private Label
Competing Channels

Consumer
Data

Willingness to se...
Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when sear...
Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when sear...
Brand Equity of Some Manufacturers and Retailers
40

35

10

5

Samsung

15

10

Sony

20

15

2008

25

20

2006

30

25
...
Some Retailers and Their Private Labels
16

16
14

14

12

12

10

10

8

8

6

6

4

4

2

2

0

0

Walmart

Sam's Choice...
Retailers and their PLs
 The brand equity of CPG retailers’ PL continues to
be low.
 A useful contrast: Kenmore and Craf...
Challenges for brands….
 Brand equity vis a vis retailers

 Managing distribution coverage
 Preserving loyalty when sea...
Distribution Share Curves

Source: Farris, Antitrust Bulletin 2004
Convexity of curve in CPG
 Consumers don’t search – likely to switch if preferred

brand is unavailable in the store.
 L...
But, in other contexts?
 Consumers search for durables

 Search is easy online
 But, higher preference + WTP at branded...
Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage

 Preserving loyalty when sea...
Search
 What 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...
Categories where Search is Branded
"Ereader"
120
100
80
60
40
20
0
ereader sony

kindle
ereader

nook ereader

nook

best ...
More ……
"Coffee Maker"
120
100
80
60
40
20
0
keurig coffee keurig coffee
maker

keurig

cuisinart

cuisinart
coffee maker
...
Categories where search is generic
"Digital Cameras"
120
100
80
60
40
20
0
camera

digital
camera

best digital best camer...
Branded versus Generic Search
Varies across categories:






Brand Relevance in Category (Fisher, Volckner & Sattler ...
Extent of search before purchase…
 Based on web sessions in which consumer purchased:

Shoes, bed & bath, baby supplies, ...
Purchase without Search
Category

#1

#2

#3

Audio/Video

Walmart 35%

Amazon 19%

Best Buy 16%

Baby Supplies

Amazon 30...
Highest Share Websites
25.00%

20.00%

15.00%

10.00%

Mkt. Share

5.00%

0.00%

Excluding travel, tickets, and other serv...
Where do consumers search?
 Which is the biggest online “shopping mall”
 Google vs. Amazon
 Which consumer segments sea...
Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when sear...
Prices and Price Sensitivity Online
 Prices levels are lower online
 “Integrity” in posted prices common among mulitchan...
Distribution and pricing control
 Brands that are not on Amazon
 RPM
 MAPs and UMAPs
 Product control
Power of Brand Online
Brand Equity

More price and
image control

Fewer
distribution
points

Lower e-tailer
dependence

Br...
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Power of Brand in the Multichannel World: The Good, the Bad, and the… Best

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Power of Brand in the Multichannel World: The Good, the Bad, and the… Best

  1. 1. Kusum L. Ailawadi Charles Jordan 1911 TU’12 Professor of Marketing Tuck School at Dartmouth Back in the Classroom Tuck Reunion, October 2013
  2. 2. The Power of Consumer Loyalty Assortment Access Service Private Label Competing Channels Consumer Data Willingness to search for preferred store Consumer Loyalty Channel Power Legal/Institutional Norms Product quality Advertising Technology Competing Brands Willingness to search for preferred brand Brand Power
  3. 3. Challenges for brands….  Brand equity vis a vis retailers  Managing distribution coverage  Preserving loyalty when search is costless  Preventing price erosion online
  4. 4. Challenges for brands….  Brand equity vis a vis retailers  Managing distribution coverage  Preserving loyalty when search is costless  Preventing price erosion online
  5. 5. Brand Equity of Some Manufacturers and Retailers 40 35 10 5 Samsung 15 10 Sony 20 15 2008 25 20 2006 30 25 2004 35 30 2002 40 5 0 2012 2010 Apple 0 2002 2004 2006 Amazon Data: Brand Asset Valuator © 2008 Best Buy 2010 2012 Walmart
  6. 6. Some Retailers and Their Private Labels 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 Walmart Sam's Choice Costco Great Value 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 Kirkland 0 Target Archer Farms Whole Foods 365 Brand
  7. 7. Retailers and their PLs  The 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”?
  8. 8. Challenges for brands….  Brand equity vis a vis retailers  Managing distribution coverage  Preserving loyalty when search is costless  Preventing price erosion online
  9. 9. Distribution Share Curves Source: Farris, Antitrust Bulletin 2004
  10. 10. Convexity of curve in CPG  Consumers 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. Distribution Share Source: Reibstein and Farris, Marketing Science 1995
  11. 11. But, in other contexts?  Consumers search for durables  Search 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
  12. 12. Challenges for brands….  Brand equity vis a vis retailers  Managing distribution coverage  Preserving loyalty when search is costless  Preventing price erosion online
  13. 13. Search  What do consumers search for?  How much?  Where?
  14. 14. 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
  15. 15. Categories where Search is Branded "Ereader" 120 100 80 60 40 20 0 ereader sony kindle ereader nook ereader nook best ereader ereader books kobo kobo ereader pandigital ereader pandigital "Power Tools” 120 100 80 60 40 20 0 hitachi tools hitachi power tools hitachi dewalt dewalt tools dewalt power electric power chicago chicago tools bosch power tools tools power tools tools
  16. 16. More …… "Coffee Maker" 120 100 80 60 40 20 0 keurig coffee keurig coffee maker keurig cuisinart cuisinart coffee maker best coffee coffee makers single coffee coffee maker clean coffee maker maker reviews maker "Running Shoes" 120 100 80 60 40 20 0 nike running shoes nike running nike shoes best running shoes asics running asics asics running shoes new running shoes running shoes women
  17. 17. Categories where search is generic "Digital Cameras" 120 100 80 60 40 20 0 camera digital camera best digital best cameras canon digital cameras cameras canon cameras sony cameras sony digital nikon digital cameras cameras nikon cameras "Electric Toothbrush" 120 100 80 60 40 20 0 electric toothbrush best best toothbrush electric toothbrush sonicare sonicare sonicare toothbrush toothbrush reviews electric toothbrush braun electric toothbrush reviews braun toothbrush oral-b toothbrush
  18. 18. 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 
  19. 19. 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
  20. 20. Purchase without Search Category #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
  21. 21. Highest Share Websites 25.00% 20.00% 15.00% 10.00% Mkt. Share 5.00% 0.00% Excluding travel, tickets, and other services
  22. 22. Where do consumers search?  Which is the biggest online “shopping mall”  Google vs. Amazon  Which consumer segments search at Amazon  Which segments do you want to capture online?
  23. 23. Challenges for brands….  Brand equity vis a vis retailers  Managing distribution coverage  Preserving loyalty when search is costless  Preventing price erosion online
  24. 24. Prices and Price Sensitivity Online  Prices levels are lower online  “Integrity” in posted prices common among mulitchannel retailers  Pure-play prices lower than multichannel prices  But price dispersion is greater  high share e-tailers don’t have the lowest prices  And 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
  25. 25. Distribution and pricing control  Brands that are not on Amazon  RPM  MAPs and UMAPs  Product control
  26. 26. Power of Brand Online Brand Equity More price and image control Fewer distribution points Lower e-tailer dependence Branded Search More clicks, lower cost/click +SEO+Affiliates = Search Equity

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