Seminal research demonstrates that companies who underinvest in branding potentially face an extinction event as diminishing share of market and declining price support make profitability elusive. Even in the best market conditions, brand investments play a key role in deciding outcomes among competitors.
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A classic case study is that of Duracell and Energizer batteries. Alkaline battery sales began to take off in the late 1980s with the increase in handheld electronic devices. The two leading brands, Duracell and Eveready’s Energizer, started the race at about the same place in terms of unit sales, and they each sold millions of units more each year to meet the growing electronics demand.
At the end of 11 years, Duracell was selling substantially more. This occurred because of more effective marketing. Duracell’s advertising routinely doubled its ad-test benchmarks. By concentrating on its “longer-lasting” benefit and “high quality/trustworthy” brand personality, its campaigns surpassed those of Eveready in effectiveness.
After a decade of such advantage, Duracell maintained a 20-percentage-point advantage in brand preference, supporting a 19 percent higher price and a nine percentage point higher unit market share. This resulted in a profit for Duracell of $609 million versus $275 million for Eveready.
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Coincidentally, both brands were sold near the same time, establishing their financial values. Duracell sold for approximately $8 billion while Eveready sold for $3 billion. Effective marketing shifted the demand curve, benefiting Duracell in both volume and price, clearly leading to a higher financial value.
Contributed to Branding Strategy Insights by Jim Meier, retired Finance executive of Molson Coors Beverage Company, Trustee of the Marketing Accountability Standards Board (MASB), Co-Author, The Financial Value of Brands Imperative.
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