June 17, 2007

Information Resources, Inc. (IRI) announced the first top-line results from its IRI Long-Term Drivers Consortium Study that was initially launched in mid-2006. Since its inception, the study has been utilizing brand information from a consortium of national CPG manufacturers to quantify the importance of TV advertising, in-store promotion, distribution and brand variety on the long-term health of brands and the overall CPG industry. Due to the overwhelming success of the study, IRI is currently recruiting for the second IRI Long-Term Drivers Consortium Study that will begin late this summer.

“The pressure to produce positive financial returns in the current quarter often ignores the long-term viability of the brand,” said IRI Global Services President Sunil (Sunny) Garga. “It may take years to create a strong and prosperous brand, but the current metrics for brand evaluation are short-term focused.”

“The IRI Long-Term Drivers Consortium Study participants are taking a closer look at their own brands and quantifying the importance of TV advertising, in-store promotion, distribution and brand variety on the long-term health of their brands and the overall CPG industry, so that they can understand both short- and long-term drivers of brand sales,” continued Garga. “They can objectively make the right trade-offs in spending allocations, deliver required short term ROI, and build sustainable brand value. This is about brand reforestation; that’s exciting.”

Top-Line Results

The consortium reviewed more than 24 categories and drilled down to 10 categories and 30 brands during the first wave of analysis. They studied five years of history to separate short-term versus long-term drivers and analyzed such categories as adult nutritionals, salty snacks, processed cheese, packaged fruit, air care, food storage bags, spirits, soup, juices and household cleaners to name a few. The following are the initial top-line results that are representative of major CPG categories and sectors:

- TV and Distribution Remain Critical to the Mix: TV advertising and distribution are key drivers of a brand’s ability to maintain long-term growth with TV being the largest driver.
- Today’s Success Doesn’t Guarantee Tomorrow’s Success: Short-term response to TV advertising does not always result in long-term growth.
- TV Advertising and Price Often Go Hand In Hand: TV advertising can, but does not always, lower price elasticity; distribution/variety was more likely to be associated with lower elasticity.
- Trade Promotion Delivers Double-Edged Sword: Quality trade promotion offers a marketing dilemma: It is an important driver of short-term volume and long-term growth, but it also raises price elasticity in the long term.
- Discounting Has Long-Term Implications: Price discounting drives increased price elasticity over time.

The IRI study, which extends academic research from M. Berk Ataman, Tilburg University; Harald J. van Heerde, Tilburg University; and Carl F. Mela, Duke University, uses proprietary modeling methodology to control for short-term effects, while quantifying the key drivers of long-term brand health and growth, including TV advertising, in-store promotion strategies, distribution breadth and depth and brand variety. This new modeling technique uses five years of baseline sales and price sensitivity as indicators of a brand’s overall health.

“In the face of increasing price pressure and private label growth, considerable interest has emerged in identifying the drivers of these trends and how to reverse them,” said Carl Mela, professor of marketing, Duke University. “Our partnership with IRI on this study has led to new insights into the role of marketing strategy in building CPG brands over the long run.”

The second IRI Long-Term Drivers Consortium Study will also use brand information from a consortium of six to ten national CPG manufacturers to illustrate the relative importance of each driver to brand growth and health over time and will include an analysis of long-term effects relative to the short-term impact of in-store promotion and TV advertising. Consortium members will receive an in-depth analysis of the long-term drivers of their own brands as well as a view of how those brands compare to the CPG industry. They will also receive a positioning and strategy recommendation for brand growth, shaping the way their brands go to market in the future.

For more information at http://us.infores.com


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