Is marketing a science or an art? The answer probably depends on whom you ask (and their specific role in marketing) but How Brands Grow provides clear arguments that marketing is an evidence-based science.
Much of older marketing books that focus on differentiation and building loyalty were not based on scientific study – it was purely marketing theory. This book, on the other hand, shows that there is a clear science behind marketing and that there are “marketing laws” that should be followed if you want to grow your brand, do proper advertising, and focus on those activities that actually make marketing add value to the brand.
Book Summary & Notes
All text that is quoted & italicized is taken directly from the book.
- Double jeopardy law: “brands with less market share have far fewer buyers, and these buyers are slightly less loyal (in their buying and attitudes)”
- Retention doubly jeopardy: “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)“
- Pareto law 60/20: “slightly more than half a brand’s sales come from the top 20% of its customers. The remaining sales come from the bottom 80% of its customers (i.e. the Pareto law is not 80/20)”
- Law of buyer moderation: “in subsequent time periods heavy buyers buy less often than in the base period that was used to categorise them as heavy buyers. Also, light buyers buy more often and some non-buyers become buyers. This ‘regression to the mean’ phenomenon occurs even when there has been no real change in buyer behaviour.”
- Natural monopoly law: “Brands with more market share attract a greater proportion of light category buyers.”
- User bases seldom vary: “Rival brands sell to very similar customer bases.”
- Attitudes and brand beliefs reflect behavioural loyalty: “Consumer know and say more about brands they use, and think and say little about brands they do not use. Therefore, larger brands always score higher on surveys that assess attitudes to brands because they have more users (who are also slightly more loyal).
- Usage drives attitudes (or I love my Mum and you love yours): “Buyers of different brands express very similar attitudes and perceptions about their respective brands.”
- Law of prototypicality: “Image attributes that describe the product category score higher (i.e. are more commonly associated with a brand) than less prototypical attributes.”
- Duplication of purchase law: “A brand’s customer base overlaps with rival brands in line with its market share (i.e. in a time period a brand will share more of its customers with large brands and fewer with small brands). If 30% of a brand’s buyers also bought brand A in a period, then 30% of every rival brand’s customers also bought brand A.”
Marketing has law-like patterns, and consumers as a whole are predictable. However, it’s important to remember the difference between randomness and predictability. Take a casino: it’s impossible to tell which customer will win, but total numbers of wins/loses are easy to calculate. The same holds true for marketing and consumers.
Three key takeaways from the book: 1) market share growth is due to gaining more customers – and most customers are light buyers. 2) Differentiation has little to no impact – brands compete as if they were lookalikes. 3) Brand competition and market share growth is due to mental and physical availability. If people cannot buy your product, or if they don’t know your product you won’t sell.
There’s a long list of marketing mistakes. These include: changing packaging in confusing ways (reduces awareness), not building on existing ads/marketing so as to reinforce memory, no branding on advertisement, not making the branding/advertising distinctive and noticeable, investing too much in loyal customers (-> new buyers drive growth), setting high prices and then doing price promotions (teaches customer to buy when the product is cheap), doing advertising outburst and then going silent (need constant reinforcement), paying significant amount of money for targeted low-reach media (to reach light buyers you need to have a high-reach).
Loyalty doesn’t differ much between brands. If the brand is bigger (i.e. high penetration) slightly higher purchase rate can be expected, but this is not significant.
Defection rates follow the double jeopardy law: bigger brands lose more customers, but proportionally small brands lose more customers.
Growth is almost entirely due to new acquisition, not due to poor defection management (defection rates tend to follow market share size).
There’s a skewed distribution of buyers: a small number are heavy buyers, but the vast majority are light buyers. Brands that want to grow or maintain sales need to focus on the infrequent buyers due to the sheer number of them, and because they are most likely to forget about your brand (by definition heavy buyers will encounter your brand more often).
So to grow you need to focus on acquisition, and trying to reach all buyers – especially the tail end of the distribution: infrequent buyers.
Buyers only differ from each other by the brands they buy. And in fact it’s their buying behaviour that results in attitudes and opinions about brands. Buyers have opinions about the brands they buy, and don’t think much about the brands they don’t buy.
In a category all brands will share their customer base proportionally to their size. This means that all brands share a lot of customers with the big brands, and a few customer with the small brands.
Brands will acquire most new customers from big brands, and fewer from small brands. So if a brand is losing a disproportionate amount of customers to a small brand (relative to their market share) it warrants further investigation. Similar marketing campaigns? Overlap in physical stores? Something else?
Marketers need to worry about brand distinctiveness (not brand differentiation): are customers able to recognise and distinguish their brand? Another worry is price promotions: do they result in cannibalisation of full priced sales, and (if ongoing), does it develop a memory structure that the brand should only be bought whilst on promotion.
Attitudinal commitment to a brand is much weaker than marketing literature traditionally makes it out to be. Our beliefs and attitudes about a brand will depend on the situation – sometimes we might be ‘completely satisfied’ other times ‘somewhat satisfied’. We rarely think about brands anyway, so it’s logical that our opinion evolves based on the circumstances (mood, environment, et cetera). This also means that buying drives attitudes: when we buy something it has a strong effect on our weak attitudes about the brand.
New customers tend to spread more word of mouth than heavy buyers do (for them the brand is not news).
Customer do not usually associate a brand to a particular image. Instead, the level of brand uniqueness is seen as higher if there are fewer brands in the category.
[Marketing] “differentiation theory is like the neo-classical, economic, perfect competition model, in that it describes an abstract ideal world and the one that real brands compete it.”
Since buyers do not spend a great deal of time comparing differentiation between brands it follows that marketers don’t need t convince buyers that their products are different.
Instead, marketers should focus on distinctiveness – qualities that separate the brand from competitors. I.e. brand name, colours, logos, taglines, symbols, celebrity advertising, advertising styles. All of these elements reinforce memory structures and facilitates purchasing.
What makes something distinctive? 1) Uniqueness, meaning that an asset is uniquely linked to a brand. And 2) prevalence, meaning whether or not consumers link an element to the brand.
Advertising is usually difficult to find back in sales figures. First, the aim of advertising is to keep the market share. I.e. if there was no advertising customers would slowly forget (i.e. weakened memory structures) the brand and the brand would lose sales. Most companies do not invest enough to increase market share directly. Second, advertising sales effects are spread out over a long period. Since most buyers are infrequent, light buyers and since most analysts will focus on the short term effect of advertising there is no uptake after a marketing campaign.
Any marketing action, or advertising, only seeks to increase the probability that a customer will pick the brand in the future.
Advertising works because it refreshes or builds memory structures. Persuasive messages are optional – the key point is that the advertisement shows the brand links and cues (e.g. what triggers a customers to think about the brand?), and focuses on distinctiveness.
Recipe for successful advertising:
- “Reach all category buyers“
- “Don’t have long lapses in advertising”
- “Get noticed, not screened out, by consumers“
- “Use clear brand links – a brand’s distinctive assets indirectly brand advertising; mentioning (verbally and/or visually) the brand name is crucial; showing the product and showing the product in use is important.”
- “Refresh and build memory structures that make a brand more likely to come to mind and be easier to notice.”
- “If there is a piece of information that is genuinely persuasive, then say it, so long as it does not interfere with achieving the previous objectives.”
Price promotions only give temporary benefits: they urge infrequent buyers to buy now (cheaply), but afterwards they will resume their regular buying behaviour (which of course includes buying other brands as well).
One-off price promotions probably don’t have negative effects, but doing it continually will have them. Consumers’ reference prices for the brand will be lowered, plus the brand will be linked in their minds to price information.
Some studies show that on average a 10% price cut leads to 25% volume increase. But elasticity depends on a number of factors: if the price moves past a reference point (brand A is now cheaper than brand B), how explicit the price cut is signalled (e.g. ads in stores), the market share of the brand (big brands have smaller price elasticity), price increases usually have bigger effects on volumes (negatively), how close the brand’s price is to the average of other brands (the closer to the average and the bigger the decrease, the higher volume can be expected).
Loyalty programs don’t work very well because they skew towards heavier buyers. These buyers are more likely to notice the programs, and they have greater economic incentives to join. Infrequent buyers are less likely to notice these programs and probably don’t see the point in signing up.
“The key marketing task is to make a brand easy to buy; this requires building mental and physical availability.”
Mental availability means building memory links that relate to the brand. This can be in terms of quantity (more associations), or quality (higher strength and relevance of those associations).
Memory structures are build over time by using the same simple associations such as colour, pack shape, fonts and tones. Changing these cues, or not employing them, means consumers are less likely to notice the marketing effort.
Physical availability means making the brand easy to find and easy notice in as many potential buying situations as possible.
Seven rules for branded competition for sales:
- “1. Continuously reach all buyers of the brand’s service/product category, with both physical distribution and marketing communication.”
- “2. Ensure the brand is easy to buy.“
- “3. Get noticed. Without some processing, the brand’s communication dollars are wasted.“
- “4. Refresh and build brand-linked memory structures that make the brand easier to notice and buy.“
- “5. Create distinctive communication assets.“
- “6. Be consistent, yet fresh and interesting.“
- “7. Stay competitive, keep up the mass appeal; don’t give customers reasons not to buy the brand.”
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