Research synopsis: The Family Business Label: A Marketplace Advantage?
Family-owned businesses are a significant part of our economy accounting for as much as 64% of the US gross domestic product and employing roughly 100 million workers. Almost half of entrepreneurs come from a family business background. Family business success is critical to local economies, so it is important to share empirical research that examines the impact of family business strategies.
With this in mind, this article reviews the findings of a 2020 study by Professor Anyuan Shen and Professor Surinder Tikoo entitled, “Family Business Identity, Consumer Product Evaluations, and Firm Size,” published in the Journal of Product & Brand Management (https://www.emerald.com/insight/content/ doi/10.1108/JPBM-10-2018-2057/full/html).
At the heart of this study is the question, “should a family promote its family business identity to differentiate itself from nonfamily competitors”? Answers to this question have been mixed, with studies finding that family businesses are seen as trustworthy, having brand authenticity, being socially responsible, and focusing on quality. But other studies have found that family businesses are seen by some as being less efficient, less professional or even irrational. Consumers may see “family business” as a category and evaluate businesses within that category according to particular pre-conceived ideas. We see many examples of companies featuring their family business status in their branding, relying on positive associations, for example “SC Johnson, a family company” for example. Smaller, regional businesses use a similar strategy, like Adams Fairacre Farms, a family owned and operated business in the Hudson Valley.
Shen and Tikoo first surveyed some consumers to understand consumer perceptions of family business, and to determine whether and how family business identity and the size of the firm affect product evaluations. The survey revealed that consumers tend to perceive family firms as small in size, but the “family business” categorization could sway their perceptions of quality positively or negatively. They then conducted an experiment and found that evaluations of a family business are affected by the size of the business. Negative perceptions of family business are accentuated when consumers know the business is small in size, but those negative perceptions are reduced when they know the business is large. So, for perceptions of family business, bigger is better.
So, what can we learn from Shen and Tikoo’s work? First, family businesses need to understand that accentuating their family business status could have both positive and negative impacts. And second, since most family businesses are small, they may want to be careful when communicating information about their company size. Overall, the label “family business” may not be a strong differentiator in the marketplace.
As always, we have to be judicious in our application of research findings to business practice. We hope you use these findings as a jumping off point to explore your family business strategy, and to learn more about how you can steer your family business toward sustainable success.
Anyuan Shen, Ph.D., Professor of Marketing, School of Business, SUNY New Paltz, New Paltz, New York email@example.com
Surinder Tikoo, Ph.D., Professor of Marketing, School of Business, SUNY New Paltz, New Paltz, New York firstname.lastname@example.org