Hills Bros is far from the only example. Heinz has always had a better share in its hometown of Pittsburgh and many other brands have significant regional variations in share, often long-lived. In the case of Hills Bros, the Chicago market dominance can be traced back to 1928 to a spectacularly successful market introduction where uniformed Hills Bros “red coats” drove around neighborhoods delivering free ½ lb cans of coffee to everyone.

These long-term brand loyalties are all the more surprising in that they often apply to products where there’s very little objective difference between them and the alternatives. Chicagoans may have loved our coffee but they couldn’t pick it out in a blind taste test. So, how to explain this phenomenon? You have to study the drivers that help a brand maintain a leadership position.

Consumer-Based Drivers

1. Mother knows best/habit: Past experience is the most important factor. Purchasing certain brands is a tradition passed down in the family from generation to generation. Buying products with this heritage is both reassuring and familiar and gives you one less thing to think about when you are at the store.

2. Conditioning: After a while, people get used to certain aspects of products that may be technically quite similar. The taste of Heinz, the smell of Tide, the thickness, the packaging, the color. Research has shown that this kind of brand loyalty is more prominent with products that are consumed directly from the package.

Competition-Based Drivers

The long-term share dominance of brands in some markets also speaks to the power and advantage that a leader enjoys and can leverage in what is less than a perfectly competitive market:

1. Distribution advantages: Market leaders become retail store category captains influencing what gets on the shelf and benefit from being able to justify more skus than anyone else. That tends to muscle out everyone else at the point of purchase.

2. Fixed costs: Many of the costs of doing business in consumer packaged goods are fixed. Trade ads, for example. These can be absorbed with much less P&L impact by market leaders than by the smaller players giving the leaders a continuing margin advantage.

3. Marketing: One place that they can spend those extra dollars is demand-pulling marketing activities that connect the brand to the important category drivers. Years of marketing spending build a strong brand foundation that’s difficult to undermine.

If you are the #1 brand in a CPG category whether locally or nationally, congratulations! You are in a strong competitive position and you are going to be difficult to dislodge as long as you continue to play to win, rather than playing not to lose.

If your task is to try and gain market share on a leading brand, you have a much more difficult task. Rather than spending a huge amount of money on the supply side with lower prices and promotions in what will still likely be a fruitless exercise in taking over the leadership position, your time and money may be better spent on innovation. Are there opportunities to speak to shifting consumer needs? Can the product be completely reimagined? In the end, what really hurt Hills Bros in Chicago was not Folgers price promotions, it was Starbucks and Keurig Green Mountain reinventing the coffee experience. Proving once again, every brand has a weakness.

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Drucker, widely regarded as the father of modern business management was a strong proponent of businesses going beyond maximizing quarterly profits for shareholder benefit. Why? In his words “Most people need to feel that they are here for a purpose, and unless an organization can connect to this need to leave something behind that makes this a better world, or at least a different one, it won’t be successful over time.”

So What Forces Are Pushing Companies In This Direction?

1. The Economy: Uncertain economic conditions always impact both consumer confidence and marketing budgets. As Allen Adamson points out in this Forbes article, such conditions foster purpose-driven branding: “a company whose employees can answer the question, ‘Why are we here?’ will be the company that makes stronger connections with consumers in search of solutions to life’s new normal issues.” A growing number of companies have heard the call of higher purpose and become mission-marketers in the U.S. and the UK including P&G, Unilever, Nestle, Wal-Mart, General Mills and Sony.

2. Changing Media Dynamics: The challenge with social media for traditional marketers is the “social” bit. It’s less about broadcasting and publicizing, more about 1:1 conversations and dialogue. And the fact is you just can’t have a very interesting chat about a box of cereal or a can of soda. As Dove shows, there’s much more social media potential talking about real beauty than there is talking about the new range of beauty bars and lotions. As the media change and evolve, so will brands.

To What Purpose?

Back to Drucker. The sort of purpose he had in mind was not something superficial as represented by so many mission statements that companies have today. But something grand– like GE’s ambition to be: “the leader in making science work for humanity.”

I’ll leave you to pick through some examples to decide which of them seem grand vs. less grand. But, to give you some guidance:

More Grand If:

The purpose is connected to the intent of the founder (or a later visionary): Wal-Mart went through a few years where it was struggling to define itself. Should it move more upscale? Should it be more like Target? But then it looked back at its history and chose to embrace the vision of its founder, Sam Walton, which was, yes, to offer low prices but with the intent of helping people provide better lives for their families. With a renewed sense of purpose, Wal-Mart has direction and energy for its marketing programs and employee engagement with its “Save money. Live better” tagline. Charles Schwab is another company that rediscovered its purpose by considering its heritage.

Less Grand If:

It’s mainly about saving money: An umbrella campaign that features all the products in a portfolio can be much less expensive than spending money on each product individually. It’s a temptation for companies looking for ways to cut their marketing budgets. All they need is some kind of mission-statement-thingy that can cover all their stuff. With this kind of thinking, they usually end up with something bland and uninspiring to customers and employees alike. Or, as Jack Neff describes in the Advertising Age piece, mission statements that: “Can provoke eye rolls nearly strong enough to cause head trauma among journalists, not to mention the more cynical or maverick elements within corporations.”

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Tide has a 40% share of the market and has held this market lead for decades even though it’s more expensive than its competitors. Heinz, launched in Pittsburgh in 1876, has a better share in its hometown than in other cities. Tide and Heinz are just two examples. There are countless other longtime packaged goods market leaders and many other brands that have their best share in their home market* Why?

Eight Theories That Don’t Work (at least not completely)

1. Product superiority: Tide works better, smells fantastic. Heinz is thicker, has a secret formula. No doubt that actual product quality plays a role but it doesn’t explain why Heinz does better in Pittsburgh than anywhere else. Blind taste and use tests often show no significant difference between brands. Other factors are in play.

2. Buy Local: Local people support local brands and local brands support the local economy. Seems logical for Heinz which has always been active in a fiercely loyal community but it doesn’t explain why, for example, Milwaukee’s Miller Beer has always done so well in Chicago. (But maybe that’s, in part, because it’s at least not St Louis’ Anheuser-Busch.)

Consumer-Based Theories

3. Mother Knows Best/Habit: This can be a factor. Buying Tide/ Heinz may be for some a tradition passed down in the family from generation to generation. Buying products with this heritage is both reassuring and familiar and gives you one less thing to think about when you are at the store.

4. Conditioning: After a while, people get used to certain aspects of products that may be technically quite similar. The taste of Heinz, the smell of Tide, the thickness, the packaging, the color.

Competition-Based Theories

Then there are theories that speak to the power and advantage that a leader enjoys and can leverage:

5. Distribution advantages: Market leaders become retailers’ category captains influencing what gets on the shelf and benefit from being able to justify more skus than anyone else. Tide’s “wall of orange” crowds out everyone else at the point of purchase.

6. Fixed Costs: Many of the costs of doing business as a CPG company are fixed. Trade ads, for example. These can be absorbed with much less P&L impact by Tide than by smaller players giving Tide a continuing margin advantage that it can either bank or spend on other marketing activities.

7. Brand Equity/Marketing Investment: One place that they can spend those extra dollars is building up brand equity and connecting the brand to the important category drivers. Years of marketing spending build a strong brand foundation that’s difficult to undermine.

8. Competitors Are Followers: In large part, competitors have not tried or been able to disrupt the category by coming up with big enough product innovations.

This phenomenon is more pronounced in CPG products than in other categories. Being one-time leaders hasn’t helped retailers like A&P, Sears and Kmart. It’s not helped Yahoo!, aol or many others in the technology sector either.

Perhaps that’s because CPG products differentiate more by their identity than by physical factors? If consumers can’t differentiate between products (at least not in blind tests), they need to rely on other factors to make their decisions.

So, Can Anything Dislodge A Package Goods Market Leader? Yes, If:

1. The Leader Falls Sleep At The Wheel: The #1 brand is well protected from the competition for the reasons described above. And usually such brands have time to recover even if they make a series of missteps (New Coke?). But protracted neglect and no marketing investment may give challenger brands at least an opportunity.

2. Big Market Changes Happen That Disrupt The Model: Typically, the pace of change in CPG is relatively slow compared to other categories (like consumer electronics) and there’s less chance of a leader being caught completely unawares of new trends. Changing demographics (e.g. the rising influence of the Hispanic consumer, preference for healthier, natural foods) can have an effect and certainly creates opportunities for brands that previously were considered niche to become more mainstream (e.g. Nescafe Clasico).

3. Category Reinvention: What business is Heinz in? Just ketchup? All condiments? BBQ vs. other meal choices? In the end, the biggest danger for market leaders like Heinz may come from the declining relevance of their categories. If ketchup becomes a less important part of the American dining experience, Heinz will suffer even it stays the leader. And, today, all packaged goods are suffering from the center-aisle problem with fresh alternatives on the perimeter gaining ground.

Bottom Line: If you are a #1 brand in a CPG category, congratulations. You are in a strong competitive position for all sorts of reasons. Unfortunately, you’ve still got plenty to worry about. Retailers are scaling back shelf space for packaged goods to give more room to fresh products and, at the same time, they are launching own-label brands that are becoming more and more of a threat. That’s where the real battle is these days.

* Current share in markets of origin for brands launched back in the late 1800s and early 1900s is 12 percentage points higher than their national share. Source: Brand history, geography and the persistence of brand shares by Bart J. Bronnenberg Tilburg University, Sanjay K. Dhar University of Chicago Booth School of Business, Jean-Pierre H. Dubé, University of Chicago Booth School of Business

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There was much weeping and gnashing of teeth from the brand managers and a whole slew of complaints and concerns. “Nestlé doesn’t mean anything”, “Nestlé only stands for chocolate”, “I don’t have room on my label” (that was my excuse and I used my little 3oz jar of Coffee-mate to illustrate the point).

Of course, all such complaints were politely ignored and now the Nestlé logo appears on most Nestlé products (one pretty obvious exception is pet food). So, what has Nestlé gained by its insistence all those years ago:

1) People no longer think of Nestlé as being only a chocolate company
2) Nestlé’s portfolio of products and brand are better connected – useful for sales, cross promotions, PR and investor relations
3) Now that Nestlé is better known, its use on the label adds a level of stature and acts, as intended, as a quality seal. This is particularly helpful for new brands that are launched
4) Nestlé’s corporate reputation is strengthened by its more visible retail presence and its direct association with its brands

I’m not saying I was wrong all those years ago. I mean it was a small label.

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Research in the Journal of Consumer Research explores the differences between consumers who have strong brand loyalty and those that show very little commitment. It finds that loyalists focus on differences between their preferred product and its competition whereas the non-commital focus on the similarities. The study also finds that it’s possible to disrupt someone’s typical way of processing information about products. By asking brand loyalists to focus on the similarities between “their” brand and another and asking the non-brand loyal to focus on the differences, the researchers were able to influence the perceptions of both groups.

Interesting to think about Private Label strategy in light of these findings. The me-too approach of many Private Label brands is very much in line with the idea of emphasizing similarity. By making their product as similar to the better-known brands as possible, they aim to eat away at those brands’ loyal user commitment. However, more recent initiatives appear to be going in the other direction. Perhaps reflecting that the Private Label brands now have a critical mass of their own loyalists?

Meanwhile, this story in Ad Age focuses on how Private Label is winning the battle of the brands. One of the points it makes is that national brands are helping the cause of Private Label brands by focusing on price discounting. In essence, they are helping make the Private Label brands case that they are similar.

How are you creating brand loyalty? How easy can that bond be broken?

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