Are You Available? (Part 2)

Feb 10 2016

In How Brands Grow Part 2, Jenni Romaniuk and Byron Sharp continue the arguments of the original book (read a review here) with much more evidence and detail on a range of specific topics including emerging markets, service categories and luxury brands.

The evidence they present is clear, consistent and comprehensively nails many of the marketing myths that they sought to challenge in the first book. And specifically they seek to challenge the “but my category is different” argument with data from a range of categories and markets including China and Indonesia that will be of interest to readers of this blog.

So if you still believe that 80% of your business comes from 20% of your customers or that your customers are more loyal than customers of other brands and “love” your brand, then I recommend that you read and reread How Brands Grow Part 2 and the many case studies and examples.

The first chapter of How Brands Grow Part 2 focuses on the double jeopardy law and the underlying argument of both books that brand growth is driven by penetration. That is, winning new customers is far more important than trying to improve the loyalty of existing customers.

Loyalty strategies such as improving brand attractiveness, rewarding loyalty and focusing on customer retention are believed to lower marketing costs through their focus on a narrower target. However, the evidence shows that brands grow by improving both penetration and “loyalty” although it is penetration that precedes loyalty and has the bigger impact on brand growth. Put more directly, your brand will only build higher loyalty if they substantially improve their penetration. The law of double jeopardy shows that market share predicts both penetration and loyalty (i.e., if you have higher share your penetration is higher and your loyalty is slightly higher too).

This law was identified in the 1960s by a sociologist looking at attitudinal data and then developed by Andrew Ehrenberg and Claude Martin who showed the same patterns in brand choice. They saw that smaller share brands have fewer sales because they have fewer customers (first jeopardy) who are also slightly less loyal (second jeopardy). In How Brands Grow Part 2, the authors present data from an incredibly broad range of countries and categories from concrete suppliers and coronary stents (used for surgical procedures) to toothpaste in China, bank services in Indonesia and e-commerce sites.

For example, looking at the example of data from Indonesian banking in 2014, we can see that different loyalty metrics such as number of products bought, attitudes and defection rates are all strongly correlated (although of course in reverse for defection rates where bigger brands have lower defection rates). To repeat, larger brands have more customers who buy them more often than smaller brands and this is seen consistently in every category including consumer, industrial, B2B and in every market from developing to developed.

Brands Penetration (%) Average number of products per customer Customers who say brand is their favourite Potential defection per year (%)
Bank Central Asia 64 1.8 57 13
Bank Mandiri 63 1.9 48 17
Bank Rakyat Indonesia 50 1.6 41 17
Bank Negara Indonesia 49 1.7 43 17
Bank Tabungan Negara 20 1.5 19 36
Average 49 1.7 42 20

Table 1: Double jeopardy metrics for personal banking in Indonesia (from Romaniuk and Sharp, 2016, p. 7)

These patterns are also seen in the growth of brands over time.  One example in the book is of a toothpaste brand that doubled its share in Brazil over a four-year period, with penetration rising by 82% and loyalty metrics growing more slowly (around 35% over the same period).

Year Market share (%) Household penetration (%) Average purchase frequency Average share of category requirements
2006 6.3 22 2.3 16
2007 10.1 31 2.8 19
2008 11.7 35 2.9 20
2009 14.1 40 3.1 22
% change 2006-9 124 82 35 38

Table 2: Example of a brand growing over time – toothpaste in Brazil (from Romaniuk and Sharp, 2016, p. 9; sourced from Nielsen Household Panel Brazil)

The only exceptions that the authors have found to the double jeopardy law are when brands have extremely high penetration or are trapped in a niche market (i.e., limited regional distribution). Thus niche brands often have less potential than small brands that have more potential for growth.

Popular brands have higher mental and physical availability. They are easy to find and buy and are more likely to be thought of in buying situation, leading more people to buy them. Expanding on this, very popular brands are thought of by more people across more occasions and are available to buy in more places. Conversely, smaller brands are in the opposite situation and, in addition, face the natural monopoly law that means that larger share brands have a greater proportion of their customer base made up from light category buyers.

This is why in the Indonesian banking example (see Table 1) Bank Tabungan Indonesia has a much higher defection rate. This is not because their customers are unhappy with the bank but because they have a smaller product range constraining mental availability and fewer branches constraining physical availability (around 100 branches versus Bank Mandiri with 2,000 and Bank Rakyat Indonesia with 4,000).

The implications for marketers are obvious. Focus on growing the whole market and do not rely on heavy buyers to drive growth. They won’t. There are only a few of them and they are already heavy buyers of the category with a larger repertoire of brands so the returns are potentially much smaller than from targeting lighter buyers and non-customers.

Light buyers in a category really matter for brand growth. There are lots of them and they are much more likely to buy more than they currently do. Brands typically follow a reverse J-shaped distribution of how many people buy once, twice, three times etc. There are many infrequent buyers and a long tail of very few frequent buyers. Larger share brands have more people buying them and slightly more frequently but the overall shape of this distribution doesn’t change.

The big opportunity for most brands is to move people from buying zero units of the brand to one unit per year (i.e., growing penetration). When brands grow most of the growth comes from light buyers and when they decline the loss comes from light buyers. Focusing on heavy buyers is thus mistaken as there is much less opportunity for growth.  This is illustrated in the book by an example of a Chinese toothpaste brand that increased its market share by 1.5% in one year, with almost all of this growth coming from moving non-users to users (i.e., from zero to one units per year) with very little shift in frequency at other levels.

The implication of the J-shaped distribution is that the usual interpretation of the pareto law (80/20 rule) is not true and that it is more typical that 50% of sales come from 20% of buyers. Heavy buyers account for about half of a brand’s sales and not four fifths as is usually believed.

Because heavier buyers also have a larger repertoire of brands, this means that your competitors usually have the same customer base as you. The empirical evidence shows that rival brands rarely have different customer profiles, and that the differences are almost always marginal when comparing user profiles.

So the terrifying (for some) reality is that customers (current and potential) buy other brands more than they buy you. A brand bought by most people in the market will also be bought by most of your customers and a brand bought by very few people will be bought by very few of your customers. The truth is that you need to attract new customers and that means gaining them from your competitors.

(c) Tom Fishburne

Gaining customers from competitors means building mental and physical availability. The next chapter of How Brands Grow Part 2 discusses how to build mental availability. The starting place is simply to increase exposure.

The authors point out that exposure and mental availability work in a virtuous cycle, with memory affecting buying behaviour, and buying behaviour affecting memory in turn. Put another way, we don’t buy brands that we don’t know and we don’t know brands that we don’t buy.

Our memory for brands (and anything else) is highly dependent on context and the author’s discuss the importance of “cued retrieval” with cues taken from a combination of the external environment and our internal mental processes. Thus building mental availability requires knowledge of the cues that buyers use when they think of options to buy and continuously building strong links to these cues. These are what the authors call category entry points (CEPs).

CEPs are pathways to the brand in the mental structures of buyers. They might be purchase situations, consumption situations, environment, social context, immediate needs or benefits that a brand can offer. Thus internal motivations and external context are key drivers of brand relevance and a focus of much of TapestryWorks’ own work on brand identity.

The CEP framework can be simplified into five questions to ask. Why? When? Where? With whom? With what? Big successful brands are not successful because they are strongly linked to a specific CEP, but rather because they are linked to a broader range of CEPs than smaller brands (they have a richer set of mental associations).

Likewise, one consideration set does not fit all purchase occasions in a category. Consumers do not have one large consideration set but many context-specific consideration sets. Successful brands are in as many of these context-specific sets as possible and evoked by the broadest range of situations. This suggests a very different set of brand equity metrics that focus on mental market share, the links between a brand and specific CEPs and the total number of such links rather than an overall measure of brand awareness.

The discussion of mental availability leads to a discussion of brand assets and the importance of simple and distinctive assets for a brand that can act as CEPs. Distinctive brand assets can include colours, logos, icons, characters, jingles, taglines and fonts that act as CEPs for the brand. Think of Coca-Cola’s distinctive bottle shape, colour and font style, or the distinctive “U” that used to signal the Uber app (but no more as you can read here).

Here again the authors suggest some useful metrics for measuring a brand’s assets. They define fame as the number of category buyers that link the brand name to a specific asset and uniqueness as the share of responses for that asset that go to a specific brand. These metrics can be used to estimate the likelihood that a specific asset will trigger a specific brand among category buyers. Ideally assets should have a high score for fame and uniqueness. Assets that are famous but not unique are as likely to evoke competitors as your brand, and assets that are unique but not famous need greater investment. The combination of fame and uniqueness really helps brands to stand out, get noticed and be remembered.

Achieving physical availability is not solely about physical distribution, although the evidence shows that this is critical not just for being there when customers want to buy, but actually in building mental availability too. In a ranking of brand touch points in the book, product or pack on shelf is the most important in China, Thailand and Vietnam as well as other markets.

The authors break physical availability into three key components

  • Presence – are you where you should be (i.e., channel strategy)?
  • Relevance – are you buyable (in the right formats)?
  • Prominence – are you easy to find (distinctive rather than different)?

For relevance, make sure that you have product options for all key variants in the category as well as options for those areas that are growing and avoid over-cannibalising by having too many similar variants. Also make sure that you help customers overcome barriers to purchase whether they relate to pack size, price point or payment options. Price, payment and delivery options can be particularly important in emerging markets where small packs can overcome income insecurity, delivery options can overcome accessibility and mobile payments can overcome lack of bank accounts.

Although online shopping follows the same rules as bricks and mortar, there is one interesting difference in the data in How Brands Grow Part 2, showing that loyalty is slightly higher for online purchases than offline ones and the authors speculate that this may be because of savable shopping lists and favourites (although they have no evidence on this). Whatever the differences, loyalty figures are still below 50% even for online purchase. Of course, mental availability is still very important and never forget that even perfect physical distribution via the internet cannot help sell a brand that a customer does not know.

In a chapter on launching new brands, the authors point out that heavy category buyers are not necessarily the best target for new product launches as they are very likely to try a new product in the category (they have large repertoires after all) but very unlikely to adopt a new product as a permanent part of this repertoire.

They also point out the importance of leveraging category linked assets (“borrow memories” in their terminology) pointing to the importance of semiotic analysis and cultural understanding to help new products use the archetypes, colours and symbols that are already linked to the category. You can read more about semiotics in many articles on this blog by clicking here.

In the final chapter they lay out clear evidence that luxury brands follow exactly the same laws as mainstream brands. For example, greater physical availability is good for luxury products (even if you describe something as exclusive at the same time).

This second volume of evidence from marketing sciences is strongly recommended for anyone working in marketing, advertising and research. It compellingly destroys many marketing myths and lays out clear, consistent and comprehensive evidence of the laws of buyer behaviour that explain brand performance across categories and markets. To paraphrase John Wanamaker, if you ignore these laws and the realities of buyer behaviour then you will be wasting much more than half of your marketing budget and you will never know why.


How Brands Grow: What Marketers Don’t Know by Byron Sharp

How Brands Grow Part 2 by Jenni Romaniuk & Byron Sharp

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