How Brands Grow

1. Brands grow by increasing mental and physical availability

The key marketing task is to make a brand always easy to buy for every buyer; this requires building mental and physical availability. Everything else is secondary.

Mental availability refers to the probability of a brand being noticed or thought of in buying situations. It's built through distinctive brand assets, consistent marketing, and reaching all category buyers. Physical availability means making a brand easy to find and buy across various touchpoints. Both work together to increase a brand's chances of being purchased.

• Mental availability components:

  • Brand recognition
  • Brand recall in buying situations
  • Associations with category entry points

• Physical availability factors:

  • Distribution breadth and depth
  • Shelf position and space
  • Online presence and searchability

Marketers should focus on enhancing these two key metrics rather than pursuing differentiation or targeting narrow segments. This approach aligns with how consumers actually behave in the marketplace, making decisions quickly and with limited cognitive effort.

2. Double Jeopardy Law: Bigger brands have more buyers and slightly higher loyalty

Brands with less market share have far fewer buyers, and these buyers are slightly less loyal (in their buying and attitudes).

The Double Jeopardy Law is a fundamental pattern in brand performance metrics. It shows that a brand's market share is primarily driven by its penetration (how many people buy it), with loyalty playing a secondary role. This law holds across categories, countries, and time periods.

• Implications of Double Jeopardy:
  • Growth comes mainly from acquiring new customers
  • Loyalty metrics are largely a function of market share
  • Small brands shouldn't expect high loyalty

Marketers should focus on increasing penetration rather than trying to boost loyalty among existing customers. This law challenges the common belief that niche brands can thrive with small but highly loyal customer bases. Instead, it suggests that all brands in a category face similar loyalty levels, adjusted for their size.

3. Most customers are light, occasional buyers of a brand

A typical Coca-Cola buyer purchases (for him- or herself) just one or two cans or bottles a year. That's half of all Coke buyers.

The NBD (Negative Binomial Distribution) describes the buying frequency distribution for most brands. It reveals that even for major brands, the majority of customers are light buyers who purchase infrequently. This pattern holds true across various product categories and markets.

• Implications of NBD:
  • Heavy buyers are important but rare
  • Most sales come from light buyers collectively
  • Reach is crucial for brand growth

Marketers should aim to reach all category buyers, including light and non-buyers, rather than focusing exclusively on heavy users. This approach ensures brands maintain and potentially grow their customer base. It also explains why continuous, broad-reaching marketing efforts are more effective than short, intense campaigns targeting loyal customers.

4. Brands compete as if undifferentiated, sharing customers based on size

Brands within a product category sell to nearly identical consumer bases; each brand's consumer base varies from the others chiefly in terms of size (i.e. the number of buyers), not in demographics, psychographics, personality characteristics, values or attitudes.

The Duplication of Purchase Law states that brands share customers with other brands in proportion to their market share. This means that all brands in a category compete with each other, regardless of perceived positioning or target markets.

• Key insights:
  • Brand user profiles are remarkably similar
  • Perceived differentiation is often weak
  • Partitions within markets are usually slight

This law challenges the traditional view of brand positioning and market segmentation. Instead of trying to carve out unique niches, brands should focus on being mentally and physically available to all category buyers. Differentiation, while it exists, plays a much smaller role in brand choice than previously thought.

5. Distinctive brand assets are crucial for recognition and recall

Paradoxically, the reduced emphasis on meaningful differentiation makes branding even more important. Loyalty is largely underpinned by mental and physical availability not love/hate. To encourage brand loyalty a brand must stand out so that buyers can easily, and without confusion, identify it.

Distinctive brand assets are the non-brand-name elements that uniquely identify a brand. These can include logos, colors, taglines, packaging shapes, and characters. They help brands get noticed and recalled in cluttered marketplaces.

• Types of distinctive assets:
  • Visual (logos, colors, packaging)
  • Auditory (jingles, sound effects)
  • Verbal (slogans, catchphrases)

Building and maintaining these assets requires consistency over time. Marketers should research which elements are truly distinctive for their brand and use them consistently across all touchpoints. This approach helps brands stand out and be easily identified, even when consumers are not actively engaged with advertising.

6. Advertising works by refreshing and building memory structures

The dominant way that advertising works is by refreshing, and occasionally building, memory structures. These structures improve the chance of a brand being noticed and/or recalled in buying situations; this in turn increases the chance of a brand being bought.

Effective advertising doesn't necessarily need to persuade or differentiate. Instead, it should focus on creating and reinforcing memory structures associated with the brand. These structures make the brand more likely to be noticed or thought of in buying situations.

• Key principles for effective advertising:
  • Consistent use of distinctive brand assets
  • Emotional engagement to aid memory
  • Broad reach to maintain mental availability

Advertisers should prioritize getting noticed and being correctly branded over complex messages or unique selling propositions. This approach aligns with how consumers process information in low-involvement categories and explains why seemingly simple or repetitive ads can be highly effective.

7. Price promotions provide short-term sales spikes but don't build brand equity

Price promotions boost sales volume in the short term; but by how much? The term used to discuss this is price 'elasticity' – the percentage change in volume from a 1% change in price.

Price promotions can deliver immediate sales increases but often at the cost of long-term brand building. They primarily attract existing category buyers who would have purchased anyway, just at a different time or from a different brand.

• Effects of price promotions:
  • Short-term sales spikes
  • Potential for decreased profit margins
  • Limited impact on long-term brand equity

Marketers should be cautious about relying too heavily on price promotions. While they can be useful tactical tools, they shouldn't come at the expense of investing in mental and physical availability. A balanced approach that maintains brand pricing power while occasionally offering value to consumers is often more sustainable.

8. Loyalty programs have minimal impact on long-term growth

Loyalty programs produce very slight loyalty effects, and do practically nothing to drive growth. The consequent effect on profits is presumably negative.

Loyalty programs often fail to deliver significant benefits because they primarily reach and reward customers who are already loyal. They struggle to attract light buyers, who collectively account for a large portion of sales.

• Limitations of loyalty programs:
  • Mainly attract already loyal customers
  • Limited reach to light category buyers
  • High costs of implementation and maintenance

Instead of investing heavily in loyalty programs, marketers should focus on strategies that increase mental and physical availability to all category buyers. This approach is more likely to drive long-term growth by attracting new customers and encouraging light buyers to purchase more frequently.

9. Customer retention follows the same patterns as customer acquisition

All brands lose some buyers; this loss is proportionate to their market share (i.e. big brands lose more customers; though these represent a smaller proportion of their total customer base).

The Law of Customer Retention shows that customer churn is a natural part of brand dynamics. Larger brands lose more customers in absolute numbers but retain a higher percentage of their total customer base.

• Key insights on customer retention:
  • All brands experience customer churn
  • Retention rates are linked to market share
  • Acquisition is crucial for all brands, regardless of size

This law challenges the common belief that it's much cheaper to retain customers than to acquire new ones. In reality, brands need to continually attract new customers to replace natural churn and drive growth. Marketers should balance their efforts between retention and acquisition rather than focusing solely on loyalty-building initiatives.

10. Brand growth comes through increasing penetration, not loyalty

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.

Penetration growth is the primary driver of market share increases. This means attracting more buyers to the brand, rather than trying to increase purchase frequency among existing customers.

• Strategies for increasing penetration:
  • Broad-reaching marketing campaigns
  • Improving physical distribution
  • Making the brand easier to buy in various situations

Marketers should focus on making their brands easier to buy for more people in more situations. This approach aligns with the reality of how brands grow and challenges the common practice of targeting narrow segments or focusing primarily on building loyalty among existing customers.

Last updated: September 9, 2024