Back in 2010, two of the brightest CPG marketers I have ever worked with brought to my attention a new marketing book, How Brands Grow, by Byron Sharp, professor of marketing science at the University of South Australia.Sharp's book took an evidence-based look at the question posed in the title and, more specifically, whether marketers should invest in driving penetration (acquiring new customers) or driving purchase frequency (loyalty).
In early January of each year, we all see a lot of tips on how to market better in the year ahead. I implore you to read Sharp's book before acting on any marketing tips this year. Because if you don't begin with a clear understanding of what will grow your brand — and what won't — you're likely to waste time and money on a lot of less critical tactical shifts.
One thing I love about Sharp's work is its clarity. He minced no words and offered clear evidence in support of his answer: brands grow primarily through the acquisition of new customers. In fact, what Sharp's data shows — across categories and countries — is the only brands that get a lift in purchase frequency are those that grow the most customers, an outcome he calls the law of double jeopardy. All the market metrics CPG brands follow — average purchase frequency and average share of requirements — move only in concert with changes in share and household penetration. Said another way, if you don't grow your customer base, you won't grow purchase frequency.
The famous retailer John Wanamaker is often credited with having first said, "I know half our advertising is wasted. I just don't know which half." Professor Sharp's important work finally confirms that the half that is wasted is anything not aimed directly at growing market share. With the law of double jeopardy, only those who grow market share will grow purchase frequency.
The era of Big Data has possibly enticed more marketers to focus more resources on their best customers with the thought of driving higher purchase frequency and higher brand profits. But Sharp's research demonstrates that this is a fool's errand because your best customers can't be enticed to buy much more from you. Those resources can be used much more effectively attracting more light category buyers to your brand.
Frankly, with the empirical evidence put forth in How Brands Grow, its surprising to me how frequently CPG brand marketers will still suggest that their primary business opportunity lies in generating purchase frequency. Perhaps that is why Sharp and co-author Jenni Romaniuk, a research professor at the university, have recently published How Brands Grow, Part 2. They must feel, as I do, that too many marketers missed the message the first time around. Part 2 is just that — not new revelations, but even more evidence for the fundamental discovery that Sharp laid at our door years ago — growing your brand starts with getting light category buyers (there are a lot more of these than heavy buyers) to buy your brand once. Those efforts will also do the most to get those few heavy category buyers to buy you more often.