New brands: Near-instant loyalty

Academic Papers New brands: Near-instant loyalty Received (in revised form): 11th May, 2001 Andrew Ehrenberg has been Professor of Marketing at South Bank University since 1993. He was previously 23 years at London Business School and in industry for 15 years. He has also held academic appointments at Cambridge, Columbia, Durham, London, NYU, Pittsburgh and Warwick. Gerald Goodhardt is Emeritus Professor, City University; Visiting Professor, Kingston University; Adjunct Professor, University of South Australia; Visiting Research Associate, South Bank University. He was formerly Sir John E. Cohen Professor of Consumer Studies, and Dean of the City University Business School. He spent 20 years in industry and commerce prior to 20 years as an academic. Abstract It is widely thought that loyalty to successful new brands or line extensions evolves slowly. An unexpected but striking finding therefore is that loyalty to a new brand is nearly instant in some 20 cases examined so far: the new brands’ average purchase frequency at launch is already ‘normal’, ie at the same level as a year or two later and also as that of competitive established brands. The finding was unexpected but now makes much sense with hindsight. More empirical work is in hand. INTRODUCTION Andrew Ehrenberg South Bank Business School, Southwark Campus, London Road, London SE1 0AA, UK. Tel: ⫹44 (0)20 7815 6169; Fax: ⫹44 (0)20 7815 6166; e-mail: An exploratory analysis of 23 successful new brands or line extensions has shown an unexpected but clear finding: the new brands’ purchase frequency is almost instantly normal. So are most other standard loyalty-related measures. The exception is quarter-by-quarter repeat buying which was consistently low. Hence it seems that there were some initial ‘triers’ of the new brand who never became loyal to it at all. But customers who did adopt the brand were loyal from the start. Traditionally, however, it seems to have been thought that a new brand’s repeat-buying loyalty would grow slowly over time (see, for example, Franzen1 and many earlier references — the authors plan to survey such professional expectations more formally). In the past, the growth of loyalty has 䉷 Henry Stewart Publications 0967-3237 (2001) therefore been widely modelled in terms of consumers’ so-called ‘depth of repeat’, meaning that repeat-buying would tend to increase whether a consumer had already bought the item once, twice, three times, etc.2–7 Despite 25,000 new products a year being launched in the USA alone,8 Hardie and his colleagues,9 Wright and Sharp,10 and others have long noted how there was in fact little systematic knowledge about how loyalty to new brands develops: ‘One thing is certain — there is no rule about the level of repeat-purchasing to be expected at different levels of penetration’.11 ‘We expect there will often be a period of instability during which consumers’ preferences for the new product are evolving’.12 Vol. 10, 1, 9-16 Journal of Targeting, Measurement and Analysis for Marketing 9 Ehrenberg and Goodhardt The study This paper therefore seeks to examine how newly-launched brands performed on a variety of repeat-buying and brand-switching performance measures. The approach was explicitly exploratory, since with new brands it was not known what to look for. Extensive empirical regularities and matching theory (the NBD–Dirichlet model) have however long been available for established brands.13–18 This provided grounded benchmarks and a conceptual basis against which to evaluate the performance of new brands. The analysis was for newly-launched brands or line extensions which had been broadly ‘successful’, ie available for retail sale for at least a year or two.19 The cases were mainly for grocery products, selected for the study by Taylor Nelson Sofres (TNS), and two prescription drugs provided by Dr Philip Stern. New brand failures (or near-failures) have been outside the scope of these early analyses, since detailed in-market data for them are more sparse. much the smallest sample base and not statistically significant). Nonetheless, more extensive follow-up work is now being pursued. The product categories (new brand cases) were: — — — — — — — — — antidepressants (2) cereal bars (1) chocolate biscuits (1) coffee (1) detergents (11), mainly the then new liquid brand variants fruit drinks (1) shampoos (1) tea (1) toothpaste (4). RESULTS Consumers’ purchasing of a given Brand X in an analysis period like a quarter of a year can be broken into two main factors: — the penetration: the percentage of consumers who bought X at least once in the period — the purchase rate: how often on average buyers of X bought in the analysis period. Methods For simplicity, data suppliers were asked to use their standard quarterly analysis periods. Sometimes data for three or four such quarters from launch were available, sometimes more. The first quarter in each case was then partially discounted, since the precise timing of the launch in the quarter was unclear (hence the ‘near-instant’ in the title of this paper). Listed below are the five product categories — prescription drugs, food, drink, personal and household cleaners — in which there is a total of 23 new-brand or line-extension cases, as well as comparison data on almost 100 established brands as benchmarks. All but one of these cases gave the same instant-loyalty type of result. (The exception was on 10 The main finding is that virtually from the start, a successful new brand’s average purchase rate was at or near its subsequent ‘normal’ levels, and equal to the rates for the established brands in the category. This also occurred for all but one of the other loyalty-related measures analysed. In contrast, a new brand’s quarterly penetration at times increased greatly, especially for a ‘real winner’ (as in Table 1). In many other cases the number of buyers in a quarter levelled out quite soon. An example: Prozac The antidepressant Prozac was very successful when it was launched in the Journal of Targeting, Measurement and Analysis for Marketing Vol. 10, 1, 9–16 䉷 Henry Stewart Publications 0967-3237 (2001) New brands: Near-instant loyalty Table 1: Prozac Percent prescribing Average prescription rate* Quarters V (QI†) II III IV 1 1.0 3 2.3 8 2.2 10 1.7 17 1.9 VI VII VIII Average QII–VIII 18 2.9 17 2.9 21 2.3 14 2.3 *Average new prescriptions a quarter per prescribing doctor †The brand launched sometime in this quarter Table 2: New brands’ quarterly purchase rates (average purchase frequencies per quarterly buyer) Quarters (I)† II III Last quarter Established brands* Pharmaceutical drugs (2 cases) Mixed products‡ (6 cases) Detergents (10 cases) Toothpaste (4 cases) 1.5 1.1 1.4 1.5 1.9 1.8 1.9 1.3 2.1 1.9 2.0 1.4 2.5 1.9 2.0 1.4 2.3 2.2 2.0 1.4 Average (22 cases) 1.4 1.8 1.9 2.0 1.9 †Launch quarter. ‡Cereal bars, chocolate biscuits, coffee, fruit drinks, shampoos, tea. 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