Share Of Requirements Research Articles

Investigating the Natural Monopoly Effect in Brand Purchasing: Do Big Brands Really Appeal More to Lighter Category Buyers?

The Natural Monopoly [NM] effect is that big brands appeal to somewhat ‘lighter’ or less frequent buyers of the product category, whereas small brands appeal to heavier category buyers. The NM effect has an important managerial implication. It implies that for a brand to grow from small to big, it must heighten its appeal particularly to lighter buyers of the product category. NM is potentially informative as to customer base analysis, providing empirical norms for a brand’s light and heavy category buyers. Moreover, NM could help managers understand loyalty metrics, because it pertains to systematic variation in the category purchase rate, which is an input into common loyalty measures such as SCR (share of category requirements). However, little is known as to the extent to which NM occurs and the extent to which it covaries with variables such as brand size, price and type (store brand, manufacturer brand). This study examines the NM effect in packaged goods markets using data on 24 FMCG categories in Holland. The analysis compares observed category purchase rates among buyers of each brand with theoretical ‘norms’ derived from the well-known NBD-Dirichlet model. It also examines the simple correlation between brand size and category purchase rate as a direct test of the NM effect. Analysis confirms the NM effect is quite pervasive, being present in most categories. The average correlation between brand size (i.e., penetration) and category purchase frequency is -0.36. This figure shows that buyers of large brands do buy the category less often on average. Second, the analysis finds the NBD-Dirichlet model produces accurate predictions of the average rate at which buyers of each brand buy the product category. However, there is nearly twice as much variation in the category purchase rates than predicted by the NBD-Dirichlet. As well as finding that bigger brands tend to have lighter category buyers, the study also finds lower-priced brands and store brands appeal more to heavy category buyers. The study also explains how bigger brands manage to be bought more frequently by their buyers, whilst simultaneously appealing to lighter category buyers. The answer is they obtain a higher share of requirements among light, medium and heavy category buyers: particularly heavy buyers. These findings are useful general knowledge for brand marketers and retailers. The NM effect will be subject to further research to test the extent that it is an empirical generalization.

A meta-analysis of correlations between market share and other brand performance metrics in FMCG markets

The strong relationship between market share and other metrics (i.e., penetration rate, purchase frequency, share of requirements) is well-documented in the marketing literature. However, there is no systematic meta-analysis of this important empirical generalization. This study quantifies the category-level correlations between market share and the aforementioned brand metrics. The category-level effects of promotional intensity, existence of sub-segments, purchase volume variation, and competition from private label and niche brands on these correlations are tested using grocery data from more than 400 categories. These factors have a negative effect all in three observed correlations with one exception. Promotional activity increases the correlation between market share and share of requirements. These results further generalize our knowledge of “Double Jeopardy” in FMCG markets and support the advice to brand managers to concentrate on increasing penetration rather than purchase frequency or share of requirements.

Internet’s information highway potential

Examines the Internet’s potential for becoming an information highway. Defines the information highway and the Internet. Describes the characteristics of an information highway. The concept of an information highway puts some requirements on the infrastructure. The users of an information highway, who are located in the residential and business environment, have their share of requirements as well, but they focus on the requirements put forward by the services or applications they will use on an information highway. Checks whether the Internet has implemented these properties and how, or if work is going on to develop them. The framework for this discussion is the TCP/IP reference model. Places some emphasis on the IP next generation protocol, IP version 6 (IPv6). Provides an overview showing all the properties with an indication of how well the posed requirements are met. Concludes that the Internet certainly has potential for becoming an information highway.