Understanding brand performance measures: using Dirichlet benchmarks

• Published in: Journal of business research 2004-12, Vol.57 (12), p.1307-1325
• Main Authors: Ehrenberg, Andrew S.C., Uncles, Mark D., Goodhardt, Gerald J.
• Format: Article
• Language: English
• Subjects: Benchmarks; Brand names; Brand performance measures; Brands; Business; Dirichlet model; Double jeopardy; Loyalty; Manycountries; Market; Marketing; Marketing mix; Measurement; New brands; Penetration; Repeat-purchase markets; Sales; Segmentation; Studies
• ISSN: 0148-2963; 1873-7978
• DOI: 10.1016/j.jbusres.2002.11.001

Sales of a brand are determined by measures such as how many customers buy the brand, how often, and how much they also buy other brands. Scanner panel operators routinely report these “brand performance measures” (BPMs) to their clients. In this position paper, we consider how to understand, interpret, and use these measures. The measures are shown to follow well-established patterns. One is that big and small brands differ greatly in how many buyers they have, but usually far less in how loyal these buyers are. The Dirichlet model predicts these patterns. It also provides a broader framework for thinking about all competitive repeat-purchase markets—from soup to gasoline, prescription drugs to aviation fuel, where there are large and small brands, and light and heavy buyers, in contexts as diverse as the United States, United Kingdom, Japan, Germany, and Australasia. Numerous practical uses of the framework are illustrated: auditing the performance of established brands, predicting and evaluating the performance of new brands, checking the nature of unfamiliar markets, of partitioned markets, and of dynamic market situations more generally (where the Dirichlet provides theoretical benchmarks for price promotions, advertising, etc.). In addition, many implications for our understanding of consumers, brands, and the marketing mix logically follow from the Dirichlet framework. In repeat-purchase markets, there is often a lack of segmentation between brands and the typical consumer exhibits polygamous buying behavior (though there might be strong segmentation at the category level). An understanding of these applications and implications leads to consumer insights, imposes constraints on marketing action, and provides norms for evaluating brands and for assessing marketing initiatives.