Unlocking the Keys to Sustained Brand Health

IRI study reveals the brand attributes that deliver long-term staying power.

By Joanna Cosgrove
Online Editor

The rapid fire introduction of new beauty products to the market can make cultivating brand loyalty a tough proposition, even when products are heavily promoted in-store, in print and on television. And in a sense, what’s happening in the beauty industry is a microcosm of the entire consumer product goods (CPG) market. In mid-2006, Chicago, IL-based Information Resources, Inc. (IRI) began what it called a Long-Term Drivers Consortium Study which utilized “brand information from a consortium of national CPG manufacturers to quantify the importance of TV advertising, in-store promotion, distribution and brand variety on the long-term health of brands and the overall CPG industry.”

According to IRI Global Services President Sunil (Sunny) Garga, the pressure to produce immediate financial returns often supersedes provisions that would pave the long-term viability of the brand. “It may take years to create a strong and prosperous brand, but the current metrics for brand evaluation are short-term focused,” he said.

“The IRI Long-Term Drivers Consortium Study participants are taking a closer look at their own brands and quantifying the importance of TV advertising, in-store promotion, distribution and brand variety on the long-term health of their brands and the overall CPG industry, so that they can understand both short- and long-term drivers of brand sales,” continued Mr. Garga. “They can objectively make the right trade-offs in spending allocations, deliver required short term ROI, and build sustainable brand value. This is about brand reforestation; that’s exciting.”

The study consortium reviewed more than 24 categories and drilled down to 10 categories and 30 brands during the first wave of analysis. They studied five years of history to separate short-term versus long-term drivers and analyzed a wide range of CPG categories. The following are the initial top-line results that are representative of major CPG categories and sectors:

•    TV and Distribution Remain Critical to the Mix: TV advertising and distribution are key drivers of a brand’s ability to maintain long-term growth with TV being the largest driver.

•    Today’s Success Doesn’t Guarantee Tomorrow’s Success: Short-term response to TV advertising does not always result in long-term growth.

•    TV Advertising and Price Often Go Hand In Hand: TV advertising can, but does not always, lower price elasticity; distribution/variety was more likely to be associated with lower elasticity.

•    Trade Promotion Delivers Double-Edged Sword: Quality trade promotion offers a marketing dilemma: It is an important driver of short-term volume and long-term growth, but it also raises price elasticity in the long term.

•    Discounting Has Long-Term Implications: Price discounting drives increased price elasticity over time.

But beauty customers can be fickle – in love with a product/brand one week and moving on to a competing product/brand the next. When asked which key drivers are of the utmost importance to the health of cosmetic, personal care and fragrance brands, Mr. Garga said the “increased product variety and TV advertising were the two biggest drivers of long-term growth and health of the brands we studied.

“Increasing distribution or variety is the key to brand growth and health,” he continued. “Supporting this with advertising targeted at the ‘new news’ was generally very beneficial to the brands that adopted this strategy.”

While the study documented the long-term pitfalls of discounting, Mr. Garga spoke briefly about the flip side: the sustained brand appeal of products that seem outlandishly overpriced – a scenario that’s all too common in the beauty segment.

“One of the brands analyzed used a strategy of introducing new, enhanced products within their brand at a higher price point,” he said. “The higher price was justified by the increased capability of the new product and they induced a portion of their existing customer base to trade up to this new, higher priced product. It should be noted that we looked at the effects on average or shelf prices in this study so the impact of increasing your base price in order to increase your perceived value was not analyzed.”

And given the importance of print and TV advertising to the success of cosmetic, personal care and fragrance products, Mr. Garga said the risk of over saturation wasn’t a legitimate threat.

“The brands that saw the largest long-term benefits from TV advertising were ones that were consistently on-air and had average GRP levels at or above the level of their peers,” he said. “Brands with very high average GRP levels were analyzed and there was no noticeable diminishing return from the GRPs observed, although this was not explicitly examined. Print advertising will be included in the Phase II study that is being conducted this year.

Looking Ahead

The IRI study, borne out of academic research from M. Berk Ataman, Tilburg University; Harald J. van Heerde, Tilburg University; and Carl F. Mela, Duke University, used proprietary modeling methodology to control for short-term effects, while quantifying the key drivers of long-term brand health and growth, including TV advertising, in-store promotion strategies, distribution breadth and depth and brand variety. The new modeling technique uses five years of baseline sales and price sensitivity as indicators of a brand’s overall health.

“In the face of increasing price pressure and private label growth, considerable interest has emerged in identifying the drivers of these trends and how to reverse them,” said Carl Mela, professor of marketing, Duke University. “Our partnership with IRI on this study has led to new insights into the role of marketing strategy in building CPG brands over the long run.”

IRI is currently recruiting for a second Long-Term Drivers Consortium Study which is tentatively scheduled to begin late this summer. The second installment will also use brand information from a consortium of six to ten national CPG manufacturers to illustrate the relative importance of each driver to brand growth and health over time and will include an analysis of long-term effects relative to the short-term impact of in-store promotion and TV advertising. Consortium members will receive an in-depth analysis of the long-term drivers of their own brands as well as a view of how those brands compare to the CPG industry. They will also receive a positioning and strategy recommendation for brand growth, shaping the way their brands go to market in the future.