How Brands Grow: What Marketers Don't Know

by Byron Sharp

No marketing activity, including innovation, should be seen as a goal in itself, its goal is to hold on to or improve mental and physical availability.

Growth in market share comes by increasing popularity; that is, by gaining many more buyers (of all types), most of whom are light customers buying the brand only very occasionally.

Brand competition and growth is largely about building two market-based assets: physical availability and mental availability. Brands that are easier to buy – for more people, in more situations –

Managers also need to research how buyers buy their brand, when they think of and notice it, and how it fits into their lives (and shopping). Marketers need to manage media and distribution in line with this knowledge.

Advertising works largely by refreshing, and occasionally building, memory structures (and less by convincing rational minds or winning emotional hearts).

“This is my preferred brand”, (the switcher group is the interesting one, as we can safely assume that both Crest's and Colgate's loyals will report that their brand is their preferred one.) As you can see, Figure 1.4 shows that Crest switchers are substantially more likely to say that Crest is their preferred brand.

The 'insights' suggested here reflect ignorance of relevant scientific laws about buyer behaviour and marketing metrics, laws that we'll cover in this book.

Colgate is half the size of Crest in this market. These metrics don't show why it is half the size; they are what they are because of Colgate's size. All will be explained in the forthcoming chapters (if you can't wait, turn to the end of the book for a list of laws including those that relate to this Colgate case study)

Consider that for an ad to work, at the very least, it needs to be noticed, processed and be linked to the correct brand. So only around 16% of these advertising exposures passed the two necessary hurdles; put another way, there was 84% wastage! 5

They found many (566) normative ('you should do') statements, but the texts failed to accompany the statements with supporting empirical evidence.

Second, bleeding continued because no-one conducted systematic research into its effects. If patients recovered from their illness then bleeding was credited as the cure; if they died ... well they were sick after all!

Patients demanded that doctors be seen to do something, and bleeding fulfilled this requirement. It's not hard to see similarities with many marketing interventions (like price promotions, bursts of advertising, and rushing into 'new media' like proverbial lemmings8).

The marketing equivalent of humoural imbalance theory may be the Kotlerian 'differentiate or die' world view where marketing success is entirely about creating superior products, selling these at a premium price, targeting the most likely buyers, and advertising to bring people's minds around to the product's superiority.

•failing to research what memory structures are devoted to the brand

These are findings that have a long use-by date because they have been found to hold for long periods of time, across all sorts of conditions (including across product and service categories, and countries).

Growth is an ingrained part of our business culture. Marketing departments are expected to plan for and deliver growth. Marketing initiatives have to be justified in terms of growth potential.

However, market share growth is difficult. Markets are more competitive than ever.

Theoretically there could be two brands of equal size, one with many buyers who buy the brand occasionally, while the other brand has half the number of buyers but they buy it twice as often12 See Table 2.1 for an illustration of this point.

This pattern is known as the 'double jeopardy' law because smaller brands get 'hit twice': their sales are lower because they have fewer buyers who buy the brand less often.

brands grow primarily by increasing their market penetration

both rising and declining brands displayed

more change in their penetration than in their purchase frequency.

Among the submissions for the Advertising Effectiveness Awards – run by the Institute of Practitioners in Advertising (IPA) – 82% reported large penetration growth, 6% reported both penetration and loy...

Finesse's brand manager could plan to reach market leadership by getting current customers to buy eight times a year. That would be enough to do it – in theory. But in practice that is impossible.

First, it's hard to get people to change their habits. Consider that

Second, it's hard to build non-obvious mental structures,

Advertising works best when it tells us things we already believe. It's strongest at refreshing existing memory structures, not building new, non-obvious ones.

That's why marketers who want to increase sales need to win more market share and/or enter new markets.

Campaigns that, unfashionably, aimed to increase penetration were more than twice as likely to report very large improvements in all hard measures of effectiveness including sales and profits. This pattern was strongest for durables and services. Yet only half the number of submissions aimed to increase penetration as aimed for loyalty/retention improvements or to change attitudes. Therefore, marketers are using the wrong targets.

targeting new customers outperform campaigns targeting existing customers.

An analysis (led by Frank Cotignola) by his Consumer Insight & Strategy department showed that 56% of their brand plans were trying to 'swim upstream' by raising purchase frequency,

Technically, a niche brand in a category should, for its market share, have an unusually small base of buyers who are unusually loyal.

Rather than thinking of niche brands as having excess loyalty more are best thought of as having less penetration (and market share) than we’d expect given their loyalty levels.

Spanish language TV channels in the US are an example. They are not watched by those who don’t speak Spanish but watched for many hours by those that do. Whatever the reason a brand’s lack of penetration is rarely something to boast about.

If selling new products to your own employees is difficult, then cross-selling to existing customers might not be so easy after all.

Every insurance brand has a customer base that, on average, buys one and a half services from them; each banking brand's customers buy two services.

Wells Fargo is the market leader in retail banking in the US, it also claims to be the leader in cross-selling. It says it has reached six products per household (out of a potential of 16). Of course, double jeopardy says Wells Fargo has to have the highest loyalty metrics because of its market share.

It’s often naively hoped that investing in current customers might yield greater net returns than seeking to expand the customer base.

In consumer settings long-standing customers may learn to pick the very best value items from a firm’s portfolio, or learn when price discounts are offered.

Modern marketing ideology says retention is cheaper than acquisition. But is it? And what returns are possible? How much emphasis should be placed on retention versus acquisition?

brand's defection rate is essentially a function of its market share, and the category it's in. This defection level does not vary substantially between competing brands.

growth is due to extraordinary acquisition. Contraction is due to dismal acquisition.

– customer base growth was mostly due to excelling in acquisition.

Again, it was good customer acquisition that led to growth, and poor acquisition that caused decline (Riebe

An implication of the skewed distribution of buying rates is that to maintain sales a brand needs to reach out to these masses of buyers. For two reasons: 1. there are so many of them 2. they buy so infrequently and could easily forget about you.

Our research (Sharp & Romaniuk 2007) of many dozens of brands, across product categories, shows that over a three-month period a 'fast-moving consumer good' brand will typically have a Pareto share of only 35%.

Which can be summed up by Professor Gerald Goodhardt's 20:30:50 law, which states that the 20% heaviest buyers account for 50% of purchases (proved true in Sharp & Romaniuk 2007), the 50% lightest buyers account for 20% of purchases, and so the middle 30% of buyers account for 30% of purchases.

Marketing's Pareto law is important, but the ratio isn't 80/20 and the traditional implications are incorrect.

The way the lightest buyers became heavier and the heaviest buyers became lighter is a 'regression to the mean' phenomenon.

law of buyer moderation.