How Brands Grow: What Marketers Don't Know

by Byron Sharp

NBD seems to describe the purchase frequencies of all brands, and has done so for decades (it was discovered in 1959 by Andrew Ehrenberg).

Every buyer group (or weight) changes25. When marketing is successful in delivering more sales and market share, it does so by giving the brand more heavy buyers, more medium buyers and a lot more light buyers.

Sales growth for Colgate, or any brand, won't come from relentlessly targeting a particular segment of a brand's or the category’s buyers.

When marketing succeeds in increasing a brand's market share, then buying propensities change across the board. This tells us that marketing has the best chance of being

successful when it has as much reach as possible. Marketing is particularly successful when it reaches light and non-buyers of a brand.

The serious academic studies report the same finding: loyalty programs

generate small or no shifts in market share

This is a good example of how difficult it is to bring about sustained growth by targeting only heavy buyers. If this weren't the case, then

Conversely, marketing that targets light buyers of the brand, and/or non-buyers, has far greater chance of success. This is because such marketing has great reach.

Acquisition is vital for growth and maintenance.

Reaching all buyers is vital, especially light, occasional buyers of the brand.

The key discovery of these studies is that competing brands sell to the same sort of people. Within each brand's customer base there is a lot of variation (i.e. different types of people), but each brand has the same variation.

In each of these categories the typical deviation is small, apart from some rather obvious differences, such as:

By definition, the more market share they gain, the more normal their customer base becomes.26

People tend to have opinions about the brands they buy, and not think or know much about brands they don't use. Behaviour is a powerful driver of awareness, perceptions and attitudes – something that both academic and market researchers have a tendency to forget.

Behaviour is a powerful driver of awareness, perceptions and attitudes – something that both academic and market researchers have a tendency to forget.

Attitudes reflect how much a buyer buys the brand, that is, they reflect loyalty.

Brand managers often add variants – also known as stock-keeping units (SKU) – to their brand in the belief that this allows the brand to reach different buyers. Let's look at variants. They are interesting because their clear functional differences could mean they are used by different people.

It's a common assumption that product variants are developed for

particular types of buyers.

What this means is that unscented low-allergy fabric conditioners mainly sell to normal fabric conditioner buyers who occasionally feel allergic (or at least think about it).

The big discovery is that the customer bases of brands in a category are very similar – except in numbers of buyers.

One way of thinking about it is that there isn't a vanilla ice-cream buyer and a different type of person who buys strawberry – there are just ice-cream buyers who sometimes buy vanilla and very occasionally buy strawberry.

It's wrong to assume that a brand appeals to a particular type of buyer; most don't and they shouldn't want to.

Of course, there are some expected differences, such as sugary breakfast cereal brands eaten more by children, and expensive products selling to wealthier people (who have sufficient funds to buy them). But within these sub-markets there is little difference between brand's user bases; for example, Versace sells to the same wealthier buyers as Gucci does.

But your niche appears to be the whole market, so there is plenty of growth potential. All that is standing in your way is a degree of brand loyalty, and the fact that you have competitors with similar growth aspirations. Of course, this implication also works in reverse. Your competitors see that your customers are just like theirs, so there is nothing structural preventing them from stealing your customers. This is another reason why it's not time for the marketing department to go home.

They look for a reason why they have all these very similar brands and conclude that each must appeal to different sorts of buyers, whereas in reality they appeal to different buyers, but not different types of buyers (i.e. they appeal to the particular buyers that know them).

Mass marketing.

2) Product-variety marketing.

Target marketing.

This empirical evidence counters Kotler's idea that individual brands sell to distinctly different segments of buyers – brands share customers.

Customer-sharing data gives insight into who competes against whom.

Logically, brands that are direct competitors within a product category should show higher levels of sharing, and brands that target different segments should share fewer customers.

The extraordinary fact about the sharing analysis is not that Pepsi buyers also buy Coca-Cola (although this surprises some people), but that each brand shares a near identical proportion of its customer base with Coca-Cola.

Duplication of purchase tables refer to a particular time period, for example, the people during the year who bought brand A who also bought brand B.

The analyst should choose a period

long enough to capture a degree of repeated purchase, that is, a period long enough to allow most people to have bought multiple brands. Readers of duplication tables need to note that they refer to a particular period, there is never an absolute metric; one can't simply say, '70% of Pepsi buyers drink Coke' – it's 70% in a year

Segmentation studies overstate very small differences, and it's assumed that brands with different features (e.g. price levels) must sell to very different people, or for very different buying situations.

The duplication of purchase law can be used to find partitions and, therefore, to understand the structure of a market.

Importantly, it can help prevent the blinkered, production-oriented vision that comes from category definitions based on product features or production processes. These are rife, and are typically too narrow.

For example, the chocolate market can be divided into dozens of sub-markets –

block, bars, pieces, individually wrapped, candy coated, chocolate co...

product-oriented category definitions isolate brand managers from real buying behaviour.

Brand managers prefer category definitions that make their brand appear to have a substantial market share – no one like to be ranked seventeenth. Therefore, narrow category definitions are commonly adopted. These also make growth potential, particularly penetration potential, appear more limited than it really is.

In addition to giving guidance regarding category definition, and showing which brands compete with which, the duplication of purchase law can also be used to predict where new brands will steal sales from.

both. In general, perceptual maps often suggest more market segmentation than really exists (Sharp 1997b). This is partly due to the underlying statistical methods, which are designed to highlight differences; these methods are also sensitive to outliers in the data set.

What marketers should worry about is whether or not their brands are distinctive. Are they easy to recognise and distinguish from others? If they are not, the brand's advertising won't work – and consumers won't see the product on the shelf. So brands should look different (this is what branding is about) even if they don't compete as differentiated brands

Marketers should also worry about the total portfolio effects of price promotions. When one of a company's brands is on special, this not only takes full-priced sales that would have happened anyway, it also steals full-priced sales from the company's other brands.

First, in artificial tasting situations people are far more likely to trust their eyes than their sense of taste, this phenomenon has been observed across decades of taste testing research.

familiarity breeds liking.