Estimating umbrella-branding spillovers: a retailer perspective

Abstract

Purpose The starting conjecture is that the market share of a brand in one category benefits from its performance in another category, and vice versa. The purpose of this paper is to assess the umbrella-branding spillovers by investigating the presence of synergy effect between categories when a retailer and/or a manufacturer decide to adopt/use the same name for his products. In fact, besides the cross-category dependency due to substitutability or complementarity, products can also be linked through their brand name in presence of an umbrella-branding strategy. Design/methodology/approach The authors propose an extended market-share model to account for the spillover effect at the brand level. The spillover is modeled to be generated by the brand's performance and not specific to marketing instruments, as done in the literature. They adopt a multiplicative competitive interaction (MCI) form for the attraction function. Based on aggregated data of two complementary oral-hygiene categories, the authors estimate the umbrella-branding spillover parameters using the iterate three-stage least squares (I3SLS) method. They contrast the results in three scenarios: no spillover, brand-constant spillover and brand-specific spillover. Findings The ensuing results indicate that umbrella-branding spillover is (i) significant and positive, i.e. the brand performance is boosted by its performance in a related category, through the so-called brand-attraction multiplier; (ii) asymmetric, i.e. the spillover is not equal in both directions; and associated to the market strength of each competing brand; (iii) variable across brands. The results show that not accounting for umbrella-branding spillover leads to misestimating the parameters and has a considerable impact on price-elasticities computation. Research limitations/implications Because store brands and some national brands exist in many categories, and thus because consumers make inferences when they face a large number of brands in different categories, spillover effects cannot be labelled as simply complementary or substitution-related. Future research may provide insight about the spillover phenomenon in a more general framework that would consider the spillover occurring between more than two categories. Practical implications Providing accurate assessment for umbrella-branding spillovers governing the competing brands, the results offer a relevant and straightforward method for decision makers to precisely assess the impact of a marketing effort in one category on the retailer's global performance. The findings provide better forecasts of market response in terms of sales and profit, within a cross-category perspective. Originality/value This study develops and estimates a market-share model with the aim of measuring brand-category spillover effects. The literature dealt with cross-category interactions in terms of substitutability or complementarity between the products offered in the two or more categories under investigation. Here, the focal point (and contribution) of the authors is the link at the brand level. Indeed, the authors only require that a minimum of one brand is offered in at least two of the categories of interest. Further, the spillover considered is not specific to marketing instruments, but is generated by the brand performance (attraction or market share), which is the result of both the firms marketing-mix choice and competitors marketing policies.

Opening the Umbrella: The Effects of Rebranding Multiple Category-Specific Private-Label Brands to One Umbrella Brand

“…Umbrella or family branding is often motivated on the assumption that the common brand name leads to a “connection in consumers’ minds,” which generalizes consumers’ preferences to the different product categories using the name (Fry 1967, p. 237). The underlying idea for such a halo or spillover effect is that one can not only take advantage of increased brand recognition and recall because of the added exposure potential but also leverage the reputation of the brand across categories (Sebri and Zaccour 2017).…”

Cross‐category revenue spillover in brand extensions: The role of within‐category experience

“…Further, the brand signals that both existing and future products under the same brand will also meet customer expectations, that is, brand‐quality expectations (Aaker & Keller, 1990; Silberhorn et al, 2017). Therefore, when making decisions about a new product, customers use their prior experience with the brand to reduce their perceived risk, especially when quality information is missing or not fully employed (Erdem & Chang, 2012; Sebri & Zaccour, 2017).…”

“…Prior literature on cross‐buying has documented that customers' brand preferences result in purchases from multiple categories and thus benefit firms by improving the duration of customer relationships (Dahana et al, 2018; Verhoef et al, 2001), purchase frequency (Reinartz et al, 2008; Venkatesan & Kumar, 2004), and profitability (Béal et al, 2019; Shah et al, 2012). In these studies, the mechanism behind the cross‐category spillover is that a need to transfer quality perceptions across categories arises from uncertainty about the true product quality because of asymmetric and imperfect information and thus customers' brand preferences can be correlated across categories (Erdem et al, 2006; Sebri & Zaccour, 2017). In the context of brand extensions, such correlated perceptions across product categories under the same brand are driven by beliefs about the brand, such that the firm's skill level or other key inputs determine the quality of all products it manufactures, and the firm has incentives to use the same brand for products that are similar in quality (i.e., brand trust; Krystallis, 2015; Miklós‐Thal, 2012).…”

Exploring the impact of brand placement repetition on the effectiveness of umbrella branding

“…Umbrella branding, also known as family branding (Keller et al , 2020), brand leveraging (Lane, 2000), brand stretching (Pepall and Richards, 2002) and brand extension (Völckner and Sattler, 2006), is widely used by modern multiproduct firms (Rasmusen, 2016; Sebri and Zaccour, 2017). The main premise of umbrella branding is that when consumers are uncertain about a certain product’s attributes, they may make inferences about them based on their experience with another product of the same brand (Erdem et al , 2006; Miklós-Thal, 2012).…”

“…Umbrella branding, the use of the same brand name for several products (i.e. complements, substitutes or independent products) developed by the company, is a popular strategy in modern business practice (Keller et al , 2020; Miklós-Thal, 2012; Sebri and Zaccour, 2017). Prior research has demonstrated that umbrella branding can help manufacturers reduce marketing costs and the risk of introducing new products, improve productivity and even alleviate moral hazard (Aaker, 1990; Erdem and Sun, 2002; Hakenes and Peitz, 2008; Rasmusen, 2016).…”