Why Brands Grow

Allan L. Baldinger,
Edward Blair,
University of Houston
Raj Echambadi,
University of Central Florida

Why do some brands grow over time? Why do some decline? What are the roles of market penetration and customer loyalty in this process? For example, is growth in penetration the key to growth in market share? If a brand is static in penetration, but does a good job of building customer loyalty, will it grow? Is loyalty the key to staving off decline?

The existing literature does not answer these questions. It tells us that market share correlates with market penetration across brands at a single point in time, and that share likewise correlates with loyalty (for example, Ehrenberg, 1997). But it does not tell us how share growth over time relates to changes in penetration or loyalty, or how these factors interact.