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Building Brands

Rotterdam School of Management, Erasmus University, The Netherlands
Fuqua Business School, Duke University, Durham, North Carolina 27708
Waikato Management School, University of Waikato, Hamilton 3240, New Zealand
bataman{at}rsm.nl
mela{at}duke.edu
heerde{at}waikato.ac.nz

Which marketing strategies are most effective for introducing new brands? This paper sheds light on this question by ascribing growth performance to firms' post-launch marketing choices. We decompose the success of a new brand into its ultimate market potential and the rate at which it achieves this potential. To achieve this aim we formulate a Bayesian dynamic linear model (DLM) of repeat purchase diffusion wherein growth and market potential are directly linked to the new brand's long-term advertising, promotion, distribution, and product strategy. We perform the analysis on 225 new brand introductions across 22 repeat-purchase product categories over five years to develop generalized findings about the correlates of new-brand success. We find that access to distribution breadth plays the greatest role in the success of a new brand, and that investments in distribution and product innovation lead to greater marginal increases in sales for new brands than either discounting, feature/display, or advertising. Moreover, distribution interacts with other strategies to enhance their effectiveness. These findings underscore the utility of extending marketing mix models of new-brand performance to include product and distribution decisions.

Key Words: diffusion; new products; marketing mix; dynamic linear model; empirical generalization
History: Received: January 16, 2007;