This document summarizes a presentation on challenges facing brands from retailers and the importance of consumer loyalty. It discusses how brand equity compares to retailer equity over time. It also examines how consumer search behavior impacts brand versus retailer power online, with some categories seeing more branded search than generic. The document analyzes purchase behavior with and without prior search, finding over half of purchases involve searching three or fewer sites. It discusses challenges for brands in managing distribution coverage and preventing price erosion online.

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. 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. Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when search is costless
 Preventing price erosion online

4. Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when search is costless
 Preventing price erosion online

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. 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. 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. Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when search is costless
 Preventing price erosion online

9. Distribution Share Curves
Source: Farris, Antitrust Bulletin 2004

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. 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. Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when search is
costless
 Preventing price erosion online

13. Search
 What do consumers search for?
 How much?
 Where?

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. 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. 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. 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. 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. 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. 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. Highest Share Websites
25.00%
20.00%
15.00%
10.00%
Mkt. Share
5.00%
0.00%
Excluding travel, tickets, and other services

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. Challenges for brands….
 Brand equity vis a vis retailers
 Managing distribution coverage
 Preserving loyalty when search is costless
 Preventing price erosion online

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. Distribution and pricing control
 Brands that are not on Amazon
 RPM
 MAPs and UMAPs
 Product control

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