Of course, you want to grow your brand… you’re in business for profit, right?
But how do you do it successfully in the real world?
If you’re a small business it’s hard, and scientifically-speaking, this could be why:
There’s a law in marketing called double jeopardy. It shows that bigger business gets more loyalty and is more popular.
And if you run a small business and you want to grow in a world where bigger businesses exist, double jeopardy is really not that helpful.
You’re probably being told that you need to differentiate your brand, that you need to build loyalty and relationships with your customers and potential customers. You need to create thought leadership pieces, so everyone knows you are the experts. You need a referral program.
Perhaps you do…
But when you buy dishwasher tablets do you want a relationship with the factory that makes them? Do you buy the tablets because the brand you choose is so different from the next one on the shelf? Would you go without if your usual brand weren’t available?
Or do you buy those particular tablets because they were:
Similarly, if you run a business that’s service based do your customers come to you because:
If the answers to these are honestly ‘yes’ then it follows your marketing strategy to grow needs to be based on something that’s not driven by loyalty, or building relationships or even differentiation.
The branding mantra is often ‘to be different or die’ and that you need a strong brand. But is there that much value in a brand strategy that a customer doesn’t perceive or even care about?
In this article:
Brands with higher market share have more buyers than brands with lower market share. They also have buyers who are slightly more loyal.
In 1963 social scientist William McPhee found that Hollywood actors who were more popular also had a bigger fan base. Known as Double Jeopardy it not only applied to Hollywood actors, it applied to radio presenters and comic strips too.
The more aware of a comic strip people were, the more popular the comic strip.
Soon after Andrew Ehrenberg, a world-leading marketing statistician, found that it was the same when it came to brand purchasing.
With Double Jeopardy the bottom line is that less popular brands have fewer buyers and fewer loyal customers, compared to popular brands.
For small businesses (especially those selling a similar product or service as others) or those selling single products (such as personal loans) what it means is you cannot grow without penetrating further and wider into the market and increasing your customer base. For those in the business of repeat sales and services, growth comes from increasing the customer base. And in getting existing customers to buy a little more often.
Subsequently they will become a little more loyal in the process.
Think about how many of your customers have only bought once. What would happen to your sales if all those light users bought twice?
Common thinking in marketing reverts to the Pareto Principle, or the 80/20 rule.
Pareto was an Italian civil engineer and economist who, while at university, discovered that only 20% of Italians owned 80% of the country’s land.
But the rule applied to many other areas of human functioning too. (Later, Management Consultant Joseph M Duran developed it in the context of marketing.)
Thus, the top 20% of your customers generate 80% of your business. So, it makes sense to focus on that 20% because they bring home the bucks. Or do they?
It’s definitely cheaper to target that repeat business, and that repeat business will maintain sales.
But can you GROW your brand this way?
Research from the Ehrenberg-Bass Institute – the world’s largest centre for research into marketing, based at the University of South Australia, shows something else…
Professor Byron Sharp is the institute’s director. His 2010 book ‘How Brands Grow’ (originally written for the institute’s sponsors) had a groundbreaking new approach to growing a business. Among the book’s findings is that this 80/20 idea is more like 60/20.
What this means in simple terms is that rather than 20% of your customers generating 80% of your business, that 20% of customers only generates around 60%. So, there’s a huge 40% of customers left behind that businesses aren’t targeting.
‘But if our aim is to grow sales then our efforts should be directed at those most likely to increase their buying as a result of our attention. It takes only a moment of thought to realise that customers who already buy our brand frequently are going to be difficult to nudge even higher.
…so, the idea that heavy buyers of your brand (“golden households” or “super consumers”) are your best target is flawed. Dangerously simplistic.’
Prof Byron Sharp – The Heavy Buyer Fallacy
By causing a shift in the buying patterns of that lighter 40% you can generate more growth.
To explain it better look at Coca Cola buyers in the UK. According to one TNS Impulse Panel (now Kantar) 50% of buyers buy only one or two cokes each year. The remaining coke drinkers buy three a year. The brand’s average is 12 per year. The average coke drinker numbers look high because a small percentage of coke drinkers are super-heavy.
What this means is that your brand will also have more light buyers than you imagine. And you’ve been told you should focus on the top 20%???
The main principle of double jeopardy says that growing your market share in large part means growing the size of your customer base too. But is it always the case?
Double jeopardy won’t occur where there is high repeat buying but low penetration such as for a supermarket’s own label goods. Here you have a limited distribution (restricted to only the supermarket stores’ shelves) but the nature of supermarket own brands means the numbers of people buying them will be high.
Seasonal brands have a high penetration but low repeat purchase rate. Easter eggs for example are available everywhere, but only for a restricted amount of time.
When someone makes a decision to buy a product or a service you need to have been in their thoughts already.
In an interview with WARC Sharp explains it like this:
“Finally, I’ve got enough money. I’m going to buy a luxury car… and if they’ve never heard of Aston Martin, then you’re not in the set. Even when it comes up on the screen, they just don’t know what it is.”
According to Sharp growth is driven by two key factors:
The bigger brands are better at having that mental and physical availability.
When customers go to make their choices, it’s more likely they will come across a brand that has a better distribution.
The bigger brands also have greater awareness, offer more choice, and are found in many more places than the smaller brands. And people tend to consider brands they’ve heard of. Combined, these factors impact both penetration and customer loyalty.
On top of that, light buyers are more likely to have heard of the bigger brands (and smaller brands won’t be as easily available) so they will consider the bigger brands first when making a purchase choice.
The result is that the bigger brands will attract more customers.
As well as physical and mental availability, what else is important?
Like many people you’re probably thinking that they’re basically the same thing.
…except they’re not.
Brand distinction is vital in getting a new customer base and helping grow your business and your customers probably won’t even understand or see your brand differentiation.
You want your brand to be seen as different, as a unique brand from your competitors. You position your business in a certain way and combine that with a unique selling proposition.
It may be certain words that create this differentiation, it may be the products you offer that give you a natural advantage to show that differentiation (Amazon is a great example of its offering being able to differentiate itself as a business – low prices, a huge catalogue and super-fast, convenient delivery).
T-Mobile differentiated itself from the bigger comms brands by targeting younger people living in urban areas and by ending long-term contracts, a known pain point for that audience.
It has been a huge success. But one thing that’s important to understand from this is that differentiation is strategic, and customers don’t necessarily perceive the differentiation.
This is where distinction is different.
A customer can see the distinction between two businesses.
Perhaps they don’t notice that Coke is about happiness and that Pepsi is about fun. But the different physical appearances of each brand are instantly recognisable. Distinction is about getting a look and feel that’s unique to you, that makes you instantly recognisable from your competitors. The coke bottle shape is instantly identifiable with Coke not Pepsi. And McDonald’s yellow arches are one of the most recognised elements of modern life.
(You can read more in this paper Evidence concerning the importance of perceived brand differentiation.)
Not all marketers buy into Sharp’s findings about how to grow your brand. And one argument is that it’s innovation that makes a company grow.
People change and markets change. And brands can be given a new lease of life by new products matching new customer needs. Innovation can bring new energy to a brand.
Whether you agree and whether it applies to your business, innovation is expensive and does immediately reduce the short term margins for long term gains. But creating a new product line is less likely to be an option for smaller companies.
It can be hard to take all this in at first. Marketers are taught that it is cheaper and easier to go after existing customers first, and that while it’s true that strategy will maintain sales, but not necessarily grow them.
For example, traditional brand growth strategies might mention:
Bear in mind that in the modern world getting your company to be truly unique is difficult. There are many businesses offering the same or similar products and services. For a customer the perceived differences usually aren’t very big at all.
While loyalty does of course exist, it’s more the case that a customer is loyal to a variety of brands, not just one. With the proliferation of online business, it’s even harder to generate the traditional sense of loyalty.
Sharp’s argument is that the big impediment to a brand’s growth is that in most cases that potential buyers don’t notice or think of your brand. The brand’s availability and physical presence isn’t there when the customer needs it. It’s not about segmenting to the nth degree and finding a highly specific target audience.
When an agency talks to you about improved loyalty, remember that according to double jeopardy you’ll have trouble growing loyalty without getting a better market share. They change at the same time.
And of course, if any of this has made you think then get in touch.