Everybody loves a winner. It’s human nature to herd to the winning side in order to reap the benefits of belonging to a dominant group. That maxim has long held true in sports, and new research shows how it applies to the complicated relationship between politics and branding.

Following a major election, consumer preferences shift. They buy more of the brands they view as aligned with the winning political party, and buy less of the brands aligned with the losing party, according to a recent study by Eugene Pavlov, assistant marketing professor at the University of Miami’s Herbert Business School, and Natalie Mizik, marketing professor at the University of Washington’s Foster School of Business.

In their paper, titled “Brand Political Positioning: Implications of the 2016 U.S. Presidential Election,” the scholars examined the outcome of the contentious 2016 election and found a measurable shift in consumer behavior around brands that reflected the values and perceptual attributes of the Republican Party. The shift was so significant that firms with a brand image compatible with the image of the Republican Party realized a 1.7% increase in their market valuation.

“Our findings show that the financial performance of a commercial entity is tied to the fortunes of the political entity its brand profile shares similarities with,” the professors wrote in their paper.

Pavlov and Mizik analyzed 48 separate brand attributes of 367 mono-brand firms that are publicly traded in the U.S. The scholars also examined the stock market performance of those firms before and immediately after the 2016 election. It is important to note that the positive financial returns were not tied to any preferential treatment that companies may have received because of campaign donations or other kinds of political support; the increased valuation and the increase in sales came between Election Day and Inauguration Day, before Donald Trump took office.

“Commercial brands imbued with the personality traits of the winning party convey a desirable identity to customers, which can lead to a demand shift toward these brands following an election,” the professors wrote.

MSI asked Pavlov and Mizik some questions about their study and its implications for marketers. Their answers appear below.

MSI: This topic is so timely, especially as we transition from a Republican to a Democratic presidential administration. What made you want to study it?

Eugene Pavlov and Natalie Mizik: We started talking about it after the 2016 election. It was hard to escape the public debate about politics and values after the 2016 election. With the heightened polarization in the U.S. political landscape and so much public attention drawn to debating the consequences of the election for the national culture, public policy and international affairs, it was natural to ask: “What does it mean for the firms? For marketing? For brands and branding strategies?” With the titanic shifts in the nature of public discourse, opinions and value structures exposed and precipitated by the 2016 election, we thought there might also be interesting developments for the corporate brands and strategies.

MSI: What are the key findings of your research? Were there any surprises?

Pavlov and Mizik: We report three major findings in this study. First, we find that, immediately following the announcement of the 2016 presidential election results, firms whose brand image is more similar to the image of the winning Republican (vs. Democratic) Party realized a 1.7% increase in their financial market valuation. This effect goes above and beyond and is incremental to the positive bump in valuation for the firms due to financial contributions to the winning party and candidate. The increase also cannot be explained by the industry effects (e.g., pharma/banks/etc.) as we explicitly control for them.

Next, we show that for the firms whose brands are perceptually similar to the brand of the losing versus winning political party, there is a significant relative drop in sales immediately following the election. We find this relative drop in the fourth quarter of 2016. That is, the sales react immediately after the election and way before the new administration comes to power. This is an important finding that points to changes in consumer behavior. Past research attributed positive financial returns to firms affiliated with ruling political parties (through campaign donations, family ties or board membership of key political figures) to preferential treatment these companies receive from the administration in power. Our sales analyses show that the positive stock market effects we document for brand positioning stem from consumer perceptions and accrue due to changes in consumer behavior.

Finally, we show how sensitive this mechanism is to even small changes in consumer perceptions. We use daily stock market and presidential approval data and show that in the post-inauguration period, the financial market valuation of firms is tied to the perceived performance of the new administration. Specifically, we show that brands with a brand image similar to that of President Donald Trump (vs. the Democratic Party) increase in value with increases in the president’s net approval ratings.

MSI: In the paper, you say that even when a brand doesn’t take a political position, consumers may still associate that brand as Republican or Democratic. How does that happen?

Pavlov and Mizik: Yes, that is correct. Firms can choose to abstain from taking positions on divisive social, economic and political issues. Doing so, however, will not eliminate the possibility that consumers would associate their brands with the Republican or Democratic political brands. The associations can form and can persist based on common perceptions of the traits shared by a commercial brand and a political party brand.

For example, in our data, the key differentiating dimensions of the Republican and the Democratic parties are “progressive,” “daring,” and “independent.” To the extent a commercial brand is perceived as daring and independent, it shares key perceptual attributes with the Republican Party and may be perceived as more of a Republican brand.

MSI: Your paper doesn’t make recommendations, but should marketers try to align brand image with the sitting political party to increase sales?

Pavlov and Mizik: This is an interesting question. At this point, we are saying that, at a minimum, firms need to understand their brand positioning within the context of a highly politicized and polarized social environment, and appreciate marketing risks stemming from the political regime changes.

Proactively managing a brand’s political positioning is the next step. We hope our study serves to highlight the importance of brand political positioning. and we hope it will spur more research on the intersection of branding and politics.

MSI: You studied the 2016 election, which saw a positive correlation between profits and brand political positioning with the Republican Party. Now that President Joe Biden is in office, do you expect the reverse to happen? Will brands that align with Democratic values see a rise in profits?

Pavlov and Mizik: Yes, we expect the effects to hold in the 2020 election cycle, and we are collecting data to verify this. What we show is that alignment with the winning party is rewarded by the immediate positive stock market reaction and relative increase in sales. We can replicate this effect for the 2008, 2004, 2000 and 1996 elections in the U.S.

MSI: What’s next for this line of research? 

Pavlov and Mizik: We are excited about this stream of research, and for our next study, we want to examine the individual consumer/voter behavior to understand better whose preferences are more likely to shift towards the winner and away from the loser in a major election. We hope to find more insights into the mechanism driving the phenomenon we identified in our “Brand Political Positioning” study.