I have recently been reading Byron Sharp’s ‘How brands grow – what marketers don't know.’
The book aims to debunk the received wisdom of marketing via the appliance of science (to use a phrase made popular by marketing). Author Professor Byron Sharp is the Director of the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia, which sounds fairly impressive, particularly because it has ‘science’ in its name. The book is a thought-provoking read that starts with a checklist of common strategic assumptions / misconceptions. Like, for example:
- differentiating a brand is a vital marketing task
- customer retention is cheaper than acquisition of new customers
- buyers have a special reason to buy your brand
- your buyers can be defined as a particular type of person
- the top 20% of your buyers deliver 80% of your sales
(Yep, those do sound familiar.) The book then sets out to disprove these tenets of conventional wisdom one by one, citing evidence-based research to prove its points. The author proposes a set of empirically derived ‘scientific laws’. These ‘laws’ are based on recurring patterns across multiple examples, from which he argues that a general rule can be inferred.
The double jeopardy law: brands with a smaller market share have fewer buyers and those buyers are less loyal. (Fewer and less - that's the double bubble.) This means that market share increases depend on growing the size of your customer base, not on getting your loyal customers to buy more.
Retention double jeopardy: all brands lose some buyers. This loss is proportionate to market share. So, big brands lose more customers, but these losses represent a smaller percentage of their total customers. Because all brands are always losing customers, you need to win new customers just to stand still.
Half a brand’s sales come from its top 20% of customers. This contradicts the oft-quoted “80/20 rule”, which says that 80% of sales come from the most loyal 20% of customers. Loyal customers account for a much smaller proportion of sales than is usually believed. The other half of sales comes from the 80% of less loyal, infrequent buyers.
It’s interesting stuff and while at W+K we are familiar with many of the arguments in the book (see Martin Weigel’s widely circulated presentation on How To Fail) Sharp presents them in an interesting and apparently thoroughly validated way. I found the section on brand loyalty particularly thought provoking. The desirability of turning ‘customers’ into ‘fans’ is often discussed in marketing circles, and brands like Nike and Apple are frequently lauded for their ability to inspire passionate devotion.
Sharp seeks to debunk the very idea of passionate loyalty to brands and suggests that those passionate loyalists who do exist are commercially unimportant.
He argues that brand loyalty exists but that it is divided and strongly influenced by opportunity. Loyalty is more prosaic than it is passionate and is mostly due to habit, availability and indifference. Sharp wryly suggests that marketers want not just to sell products but to foster brand love because,
“Merely selling things sounds crass…(but) this makes the marketing profession seem so much more honourable… The idea that consumers have ‘relationships’ with brands is an old idea, which is routinely repackaged by marketing consultants. Kevin Roberts’ Lovemarks website is a classic and quite humorous example. To quote, ‘Lovemarks are brands that create an intimate emotional connection you simply can’t do without’… The Lovemarks website lists thousands of brands that have been nominated as Lovemarks by visitors to the website. These are brands that some people feel passionate about (or at least feel so some of the time)… This shows that any brand can have a few fans… but it does not show that some brands are special or that these fans are of any financial or strategic consequence to marketers. These make for an entertaining story and that’s all. Advertising agencies, who in general know very little about buyer behavior, love these stories.”
Ouch! Cheers, Professor. Sharp goes on to suggest that, contrary to received wisdom, the buyers of Apple and Harley Davidson are not unusually loyal. He says, in somewhat self-consciously fusty academic tones, “I’m sure that tattoo engravers (if that is the right word) receive more requests for Harley Davidson tattoos than they do for Kelloggs Cornflakes tattoos... but this says more about the respective product categories than it does about brand purchasing behavior.” In other words, the sort of people who love Harleys are just more likely to get a tattoo than the sort of people who love Kelloggs.
His conclusion on loyalty: “We try to bring our attitudes in line with our behaviour. Since brands aren’t very important to us, brand buying tends to have a strong effect on our rather weak attitudes – we like what we buy… Within every brand’s customer base there are a few people who feel much more emotionally committed to the brand… But the marketing consequences of these brand fan(atic)s turn out to be very limited. Most of a brand’s customers think and care little about the brand, but the brand manager should care about these people because they represent most of the brand’s sales.”
So, don’t worry about your fans – they’re not important. To grow market share, you need to increase brand popularity; that is, get many more buyers, most of whom are light users who occasionally choose your product. Growth comes from a combination of physical and mental availability. Brand that are easier to buy – for more people in more situations – get more share. So marketers need to make sure that their product gets noticed and they need continuously to reach large numbers of light buyers cost effectively.
Or, as Martin W puts it:
The book also contains some thought-provoking ideas on how advertising "really" works. I’ll come onto those in a subsequent post.