Brand Quarterly featured Gil Horsky’s article on the topic of How Brands Grow and the impact it had so far on the FMCG industry
When I started my career in marketing in the FMCG industry, I had a manager that advised me to focus my marketing efforts on my brand loyalists. In his words “You should try to make our loyal consumers even heavier users of the brand, as probably 20% of our them can represent 80% of our sales”. Given that I was familiar with the famous 80-20 rule, it all made lots of sense to me, and off I went full of motivation and energy to try and help my loyal consumers become even more loyal by purchasing our product 3 times per year vs. only twice as they did till then.
I am confident that many other marketers had similar conversations, believing that their number one marketing task should be to increase brand loyalty. That was the prevalent myth, till the marketing industry met Prof. Byron Sharp and his colleagues at the Ehrenberg-Bass Institute for Marketing Science, who authored the book: How Brands Grow: What Marketers Don’t Know. Sharp studied brand after brand, category after category, and proved that 20% consumers never generate more than 50% of sales.
Brand loyalty tends to be polygamous; people buy brands out of habit, not commitment. Buyers alternate between rival brands based on availability, in the UK for example 72% of Coke drinkers also buy Pepsi.
It is proven that brands grow when they increase penetration, and unless you have an unlimited budget (and if you do, please get in touch!), topping up your leaky bucket and attracting new consumers to your brand will be more cost effective than investing in increasing the purchase frequency of existing consumers.
Over the years the field of marketing has suffered at times from subjective opinions, based more on “gut feeling” than data. Now don’t get me wrong, plenty of outstanding quantitative marketing academic research is completed every year in academic institutes around the world, but unfortunately most of that research is not tailored to be applied in the industry.
You can read the full article on the Brand Quarterly website.