21 septembre 2010

A Marketing giant has disappeared - About Professor Andrew Ehrenberg and “How his research happened”


Professor Andrew Ehrenberg a giant in marketing has passed away the 25 August 2010. I therefore would like to remember his important contributions over the last sixty years to marketing knowledge about topics ranging from consumer behaviour (e.g. brand loyalty) to how advertising works. This article outlines how the research of Andrew Ehrenberg, who was Professor of Marketing at the London Business School and London South Bank University, over the last 60+ years came about. it could be synthetize as Science should be simple and generalizable

With hindsight, he was always aiming at findings that were both simple and generalizable. Simple findings so that everybody could see the patterns in data which at first often looked complex. This attempt was published in his famous book in 1975 “Data Reduction” which was reprinted in the Journal of Empirical Generalisations in Marketing Science, 2000, 5, 1-391. It maintains that much of the approach to research methods and prediction depends on finding patterns in data and this is much aided by its presentation in simple tables. Such tables also aid communication of results. The basic ideas are very simple. They depend on the principles of how memory works as the great Nobel Prize Herbert Simon had reported that people could not remember numbers of more than two digits: clear layout of simple tables, rounding of figures, placing figures to be compared in the same column and showing averages.

Generalizable, within stateable conditions, to provide validated benchmarks, possibly lawlike in due course. Andrew Ehrenberg believed that the methods of physical science are applicable to social science. The discovery and development of such lawlike relationships was expressed in an article in the hard science journal Nature (1993) entitled "Even the social sciences have laws". In it he asserted that even in a field dominated by people's impulses to buy, that of marketing, there are striking regularities.


In 1955 Andrew Ehrenberg moved into marketing research working on consumer panels. His first milestone paper was "The Pattern of Consumer Purchases" (Ehrenberg 1959) which showed the applicability of the NBD-Negative Binomial Distribution (a heterogeneous mixture of Poissons distributions) to the numbers of purchases of a brand of consumer goods.

In the early 1980s, Ehrenberg extended the NBD model to the Dirichlet model to account for brand choices. This model gave a very close fit to the majority of observed purchasing data and it has been shown to hold over different product categories, big, medium, and small brands of very varied grocery-type products from soap to soup and mascara as well as soap operas, different countries, time, and for both subscription and repertoire repeat-purchase markets. Such a quantified regularity was unprecedented in marketing. So it was (and is still today) exciting. Andrew Ehrenberg had stumbled accidentally on an empirically widely-grounded theory to benchmark how many people do or should buy any brand how often. The theory itself was also exciting. It assumed that consumers behaved “as-if probabilistically”. That is very irregularly.

'The Dirichlet', as it became known, has been described as one of the most famous empirical generalisations in marketing, along with the Bass model of diffusion of innovation. It helped him be faithful to his “holy” scientific principles to deliver simple lawlike benchmarks for a number of empirical generalisations, including Double Jeopardy, the Duplication of Purchase law, Polygamous Brand-Buying and Natural Monopoly. These generalizations can be found in his book “Repeat-buying: facts, theory and applications” (1988). This is possibly the most important marketing book ever written on buyer behaviour.

The idea of "Double Jeopardy" proved particularly important, in arguing that a big brand will possess a greater number of loyal customers than a similar, smaller rival almost entirely because of its scale. More specifically, it suggested that repeat buying and other loyalty measures do not vary greatly between individual brands, meaning that increases in penetration are typically behind any growth in sales. One consequence of this finding for marketers was that the most cost-effective use of resources may be to "nudge" occasional customers to buy, rather than trying to "squeeze more out of" dedicated clientele.

Ehrenberg's interests furthermore centered upon establishing empirical generalisations applicable in areas like brand buying, TV viewing, consumer attitudes and reactions to price changes. (A wide-ranging summary of his contribution to the industry is available here). He derived from these models of buyer behaviour a view on advertising for established brands. It mostly serves to publicise the advertised brand, but seldom seems to persuade. Promotions have only a short-term effect, and do not affect a brand's subsequent sales or brand loyalty. The extra buyers during the promotion have been seen almost all to have bought it before the promotion rather than being the hoped for new buyers.

Andrew Ehrenberg set up the Centre for Research in Marketing at London South Bank University. At the university of South-Australia the The Ehrenberg-Bass Institute for Marketing Science was raised up for his honors. Both centres have worked with a large number of marketing-oriented companies to address critical issues in marketing. Over the years they contributed to marketing learnings based again and again on reliable, reusable marketing knowledge (empirical generalizations) or the Laws of Marketing.

The Dirichlet thus contributed to lawlike relationships. However, he was very controversy as his kind of theorising – which at base describes and explains already-established and generalised empirical discoveries and which thus post-dicts them – was anathema to many American academic marketing colleagues. They espoused much more ambitious and complex-looking econometric procedures which never worked in practice. Ehrenberg often spoke out against the pseudo-science of complex once-off statistical modeling which even lead him to label the American School of Modeling the “Scientification of Non-Knowledge-SoNK”. Hence he said “I SoNK therefore I Am”. Sadly, therefore has been little dialogue with US academics over the years. Was he too outspoken?

The marketing community has lost a legendary figure, in marketing, market research and the statistics field. It has been written on the website for the The Ehrenberg-Bass Institute for Marketing Science:”Over his life Professor Andrew Ehrenberg's contribution to the development of marketing science has been enormous."
But his work continues though to live and to influence the practice of both statistical science and marketing. Worldwide you can find his disciples in the “Dirichlet School”, such as Marc Uncles, Byron Sharp, Cam Rungie in Australia, Peter Fader in the USA who extended the NBD model to the BG/NBD model for customer lifetime value modelisation, in France Jean-Louis Chandon, Gilles Laurent, as well as Lars Meyer-Waarden and Christophe Benavent who recently directed a PHD thesis about the usage of these models to estimate the long term impact of sales promotions on customer lifetime value.

A giant in marketing has disappeared, but his work and his spirit are still alive. New baby disciples are born and continue to develop his work which is omnipresent in marketing literature and which continues to excite academics.

Bibliography:
  • Ehrenberg, A. (1959) The pattern of consumer Purchases, Applied Statistics, 8,1, 26-41.
  • Ehrenberg, A., (1964) Description, Prediction and Decision, Journal of the Market Research Society, 13, 14-33.
  • Ehrenberg, A., (1966) Laws in Marketing - A tailpiece, Journal of the Royal Statistical Society, Series C, 15, 257-268.
  • Chatfield C., Ehrenberg, A. and Goodhardt, G. (1966), Progress on a simplified model of stationary purchasing behaviour, Journal of the Royal Statistical Society A, 129, 317- 367.
  • Ehrenberg, A., (1968) The Elements of lawlike relationships, Journal of the Royal Statistical Society, Series A, 131, 280-329.
  • Ehrenberg, A. (1969), The discovery and use of laws of Marketing, Journal of Advertising Research, 9,2, 11-17.
  • Ehrenberg, A. (1975), Data Reduction, John Wiley, Chichester. Reprinted in the Journal of Empirical Generalisations in Marketing Science, 2000, 5, 1-391 (www.empgens.com).
  • Goodhardt G.J., Ehrenberg, A. and Chatfield (1984), The Dirichlet: A comprehensive model of buying behaviour, Journal of the Royal Statistical Society, Series A, 147, 621-655.
  • Goodhardt GJ, Ehrenberg A., Collins M. (1987), The television audience, 2nd ed. Gower, Aldershot, UK.
  • Ehrenberg A.(1988) Repeat-buying: facts, theory and applications, 2nd ed., Edward Arnold, London; Oxford University Press, New York. Reprinted in the Journal of Empirical Generalisations in Mark Science, 2000, 5, 392-770 (www.empgens.com).
  • Barwise, P. and Ehrenberg, A. (1988), Television and its Audience, Sage, London, 1998.
  • Ehrenberg, A , Goodhardt, G. and Barwise, P (1990), Double jeopardy revisited, Journal of Marketing, 54, July, 82-91.
  • Ehrenberg, A. (1993a), Even the social sciences have laws, Nature, 365, 30 September, 385.
  • Ehrenberg A. and Bound, J. (1993b), Journal of the Royal Statistical Society Series A, 156, 2, 167-206.
  • Ehrenberg A., Hammond K. and Goodhardt G. (1994), The after-effects of price-related consumer Promotions, Journal of Advertising Research, 34,4, 11-21.
  • Ehrenberg, A., Barnard N., Kennedy R., and Bloom, H. (2002), Brand advertising as creative publicity, Journal of Advertising Research, 42, 4, 7-18.
  • Ehrenberg, A. Uncles, M , and Goodhardt, G. (2004), Understanding Brand Performance Measures: Using Dirichlet Benchmarks, Journal of Business Research, 57, 12, 1307 - 1325.
  • Scriven, J.A and Ehrenberg A.S.C. (2004), Consistent Consumer Responses to Price Changes. Australasian Marketing Journal, 12, 3.

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