Research

James Swift

12 October 2020

Strategist’s Digest: How market share impacts brand activism 

Contagious digests the most interesting and relevant research from the world of advertising and beyond, because there’s just too much to read and too little time

Photo by Tim Mudd on Unsplash

Should Your Brand Pick a Side? How Market Share Determines the Impact of Corporate Political Advocacy 

By Chris Hydock, Neeru Paharia and Sean Blair. Published in the Journal of Marketing Research.

Give it to me in one sentence.

Brands with a small market share are likely to gain from taking a stand on divisive political issues while dominant players are likely to lose.

Give me a little more detail.

The researchers investigated what happens at the market level when brands engage in polarising corporate political advocacy (CPA).

Distinct from CSR, which at worst elicits ambivalence from customers, CPA addresses knotty issues and provokes both support and opposition.

Through experiments, the researchers showed that customers are more likely to choose a brand that shares their values (because they identify with it) and less likely to choose one that diverges from their values, to the extent that they are even willing to sacrifice price and product quality for a chance to reinforce their identity.

But they also found that CPA is characterised by a negativity bias, which means people are more likely to be driven away by a brand whose stance they disagree with than to flock to one that’s on their side.

As a result of this dynamic, only small-share brands typically benefit from CPA at a market level because the pool of uncaptured customers who agree with its stance is larger than the pool of misaligned customers it will lose.

The researchers even figured out that the optimal market share, below which CPA becomes a net benefit for a brand, is 33% (based on the assumption that customers are split 50/50 on the issue and the negativity bias ratio is 2:1).

And with a small enough market share, even a wildly unpopular stance can win customers. In one experiment, even though 72% of the sample group opposed Brexit, a brand’s pro-Brexit stance increased the number of people who chose it from 5% to 16%.

Why is this interesting?

This experiment takes a game-theory approach to the effects of brand activism and builds on the findings of another piece of research that we covered (here) about the asymmetric effect of corporate political advocacy.

Of course, it’s not as simple as ‘big brands should keep away from divisive topics’, as even the researchers themselves are careful to state. For one, this research focuses instances where a brand’s customers are politically heterogeneous. In some cases (perhaps Nike’s Colin Kaepernick campaign), big brands may want to target customers based on political values.

Any weaknesses?

The researchers talk about authenticity (a lack of which, they found, attenuates the positive effects of CPA but doesn’t mitigate the negatives). We’re not sure how brands that engage in CPA based on a market share calculus can be said to be acting with authenticity. Perhaps ‘perceived authenticity’ is a better term.

Where can I find the whole report?

You can download a free, unformatted, draft of the report, here.

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