Are Australasian brands different?
| DOI | https://doi.org/10.1108/10610429810244648 |
| Published date | 01 December 1998 |
| Pages | 465-480 |
| Date | 01 December 1998 |
| Author | Malcolm Wright,Anne Sharp,Byron Sharp |
| Subject Matter | Marketing |
JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 6 1998, pp. 465-480 © MCB UNIVERSITY PRESS, 1061-0421 465
Introduction
The first major generalisations about the structure of competitive markets
were made by McPhee (1963). The most influential of McPhee’s
observations was the phenomenon of “double jeopardy”, or the fact that
small brands suffer twice; fewer people support them, and those that do both
like them less and are less loyal. Since McPhee drew attention to double
jeopardy, there have been a number of related generalisations developed
about the performance of competitive brands, particularly by Ehrenberg and
his colleagues (Ehrenberg, 1988; Ehrenberg et al., 1990).
Some of the more important generalisations in this area now include that:
• penetration (the number of customers buying a brand at least once)
varies a lot between brands, but average purchase frequency does not
vary much, except for a small double jeopardy effect;
• repeat-purchase loyalty measures tend to vary together, increasing
slightly as penetration increases (another double jeopardy effect);
• few brand buyers are 100 per cent loyal and typically they are not
particularly heavy purchasers;
• most people buy a particular brand relatively infrequently and other
brands more often;
• the duplication of purchase between brands varies according to market
penetration.
All of these patterns have been modelled successfully by Goodhardt et al.
(1984) using the Dirichlet model of buyer behaviour (see also Ehrenberg,
1988). The Dirichlet model assumes that a given market is stationary (i.e. no
major changes in share are occurring), unsegmented and non-partitioned,
and that buyer behaviour is stochastic, zero-order, with divided loyalties for
each consumer, and with different consumers having different preferences.
All these assumptions can be tested empirically. Given the widespread
success of the Dirichlet model in fitting observed buyer behaviour, these
assumptions seem justified – at least in the short to medium term, such as in
consumer markets over a year.
Most research documenting these generalisations and validating the
Dirichlet model has taken place in Europe, although a number of data sets
have also been analysed from the USA and Japan (Ehrenberg, 1988;
Are Australasian brands
different?
Malcolm Wright
Senior Research Associate at the Marketing Science Centre, University
of South Australia, Adelaide, Australia
Anne Sharp
Senior Research Associate at the Marketing Science Centre, University
of South Australia, Adelaide, Australia
Byron Sharp
Director of the Marketing Science Centre, University of South Australia,
Adelaide, Australia
The authors would like to thank the editor and two anonymous referees for helpful
comments on an earlier version of this paper. The Australian Research Council is
acknowledged for helping to fund the collection of data used in this work.
Structure of competitive
markets
Dirichlet model
Ehrenberg et al., 1990; Kau et al., 1998 in this special issue). By contrast,
there is relatively little work published in this area concerning Australia or
New Zealand.
Bednall et al. (1995) were able to identify the presence of brand repertoires
and the small number of solely loyal buyers in some Australian scanner data,
but they did not mention the Dirichlet model, and they did not identify or
discuss the other generalisations associated with this model. Sharp and Sharp
(1997) used the Dirichlet model to provide theoretical norms against which the
performance of a loyalty programme in Australia could be assessed, but they
did not investigate in detail whether the underlying generalisations applied to
their data. Other Australasian work has started to emerge, but is so far
unpublished except as work in progress conference presentations. This work
includes: that of Wright et al. (1996), who developed a method of estimating
the Dirichlet inputs from survey data; preliminary work from Stanton and
Balen (1997) who sought to show that Dirichlet-type regularities may arise in
the tyre market due to distribution arrangements; and the use of the Negative
Binomial Distribution (a predecessor and common component of the Dirichlet
model) by Hoek et al. (1997) to help assess the impact of a price promotion.
Given the increasing interest in the use of the Dirichlet model in Australia
and New Zealand, it seems important to ask whether the underlying
generalisations do in fact hold in these countries. So far the relatively sparse
Australasian work has focused on using rather than validating the model.
The sole exception (Bednall et al., 1995) only identified one aspect of the
generalisations, and did not attempt to analyse other important patterns
captured by the Dirichlet model.
As these generalisations have been consistently validated across different
markets and different product categories in Europe and North America, it
seems reasonable to expect that they will also hold true in Australasia.
However, the question of whether they do or not is an empirical one, which
can only be answered by an examination of the relevant evidence. Certainly
there are also plausible reasons why they might not actually hold, or might
operate in a different manner.
For example, in comparison to the economies where these generalisations have
been developed, Australia and New Zealand feature more concentrated markets
with fewer brands overall and quite often just a few brands commanding the
“lion’s share” of the market. In Australia a single company, Coles-Myer, holds
in excess of 20 per cent of all retail spending, while in New Zealand, the retail
fuel market consists of only four different brands. The Dirichlet model often
slightly under-predicts loyalty to market leaders, and this problem could
conceivably affect other brands in a highly concentrated market.
Australia and New Zealand are also relatively young countries with a recent
colonial history, and a strong reliance on primary industries, making their
economic history and structure quite unlike that of Europe, North American,
or Japan. This could conceivably affect the usual patterns of brand supply
and demand in some markets. There are also a variety of other differences,
ranging from the renowned informality of the culture of both countries, to
the extraordinary level of economic deregulation in New Zealand over the
last 15 years.
Consequently, it would not be totally surprising if market structures and
consumer behaviour were somewhat different in Australasia from in older,
more traditional societies, with more established and diversified economies.
466 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 7 NO. 6 1998
Underlying
generalisations
Relatively young
countries
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