Abstract

Kotler popularised the Segmentation, Targeting, Positioning (STP) theory of brand competition. This theory still dominates marketing textbooks. In this article we show how the discovery of scientific laws concerning how brands compete, grow, and decline clash with the STP theory. The contradiction between these empirical regularities and STP theory has led to the recent emergence of a new market-based asset view of brand competition. We show how this theory fits the now well-established empirical laws, and we discuss some promising areas for future research.

Introduction

Many disciplines have a central question. In business strategy research, the central question is along the lines of ‘why do some firms earn more or less profits than their competitors?’. A candidate for marketing science’s central question is ‘why do some brands sell more or less than their competitors?’. The fact that rival brands can offer similar products, at similar prices, but sell vastly different volumes has long intrigued scholars, and also marketers and investors. Yet, the traditional view of brand competition that has dominated marketing education for sixty years fails to provide an adequate explanation for why some brands sell far more (or less) than others. Nor does this traditional view fit with several now well-documented empirical laws.

In this article we outline what has been the dominant Segmentation, Targeting, Positioning (STP) theory of brand competitiveness, popularised by many, especially Philip Kotler.1 We show how STP theory does not predict, let alone fit with the empirical laws which describe how brands compete, grow, and decline. We present extensive evidence, that covers many countries and a vast number of product/service categories, that supports a market-based asset theory of brand competitiveness. In turn, this theory and evidence provides an explanation of why some brands are much bigger than others.

Conclusion

‘It doesn’t matter how beautiful your theory is, it doesn’t matter how smart you are. If it doesn’t agree with [the] experiment, it’s wrong.’ – Professor Richard Feynman, Nobel Prize Winner.

In this paper we presented several known, law-like patterns in how brands compete and challenge that their existence would not be possible if STP theory is to be believed. The views that come from STP theory have been challenged in the past due to the lack of compelling evidence (Wright and Esslemont, 1994) and there has been no convincing evidence in the three decades since, despite many academics and marketers still accepting and practicing the mantra to segment, target and (differentiate their) position. The market-based asset theory presented in this paper challenges traditional marketing thinking and can provide marketing practitioners a clear framework about how brands compete and grow, based on empirical evidence.

Scientific theory is retained until it does not fit the known evidence. Over the past 50 years a considerable amount of evidence, from an array of sources/perspectives, has coalesced into a non-intuitive but coherent picture of how brands compete. In this article we have only had space to give a brief overview of this evidence and introduce the current theory that fits with this evidence. No doubt the market-based assets theory presented in this paper will be further adapted in light of evidence, and probably eventually replaced by another theory altogether. But today it stands as something rather unusual in the marketing literature in that the market-based assets theory of brand competition is a theory that fits with a catalogue of empirical laws that cover a very wide range of conditions, categories and countries. While this is the norm for science, it is new for marketing theory and signals the maturing of our discipline.