Laws of Growth: Lessons from How Brands Grow

April 21st, 2021 | thinktv,

Book cover: How Brands Grow - What Marketers Don't KnowHow Brands Grow: What Marketers Don’t Know made waves when it was first released. The now-ubiquitous book by Byron Sharp is based on empirical research covering market share, brand equity, price promotions and advertising. Sharp challenges many traditionally held marketing beliefs – from the value of loyalty and the effectiveness of targeting to the importance of reach.

Sharp’s evidence-based marketing research continues at the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia, the world’s largest marketing research centre, where he and his team work with some of the biggest international brands, from P&G and Unilever to PepsiCo and McDonald’s.

We have summarized a few of the marketing principles below, but for a complete overview and updated case studies, be sure to register for the Ehrenberg-Bass Institute’s ‘Laws of Growth’ seminar on May 6, 2021 (which is being made available exclusively to ACA members by thinktv).

Market penetration – not loyalty – is the most critical factor for growth

One of Sharp’s more controversial pronouncements was that loyalty was limiting as a tactic and that increasing market penetration – attracting new buyers – will drive far more growth than loyalty-based initiatives.

Loyalty, though important, is limiting for several reasons: Heavy buyers are low in numbers; they already buy a lot (so are limited in how much more they can buy), and they are not as loyal as marketers believe them to be.

Sales growth comes from marketing to light and non-buyers

If growth through loyal customers is limited, how can marketers increase market penetration? Sharp contends that the unparalleled road to sales growth is to market to light and non-buyers – primarily because there are more of them.
The biggest growth will come from targeting the light and non-buyers of your brand. Roughly 70% of growth will come from non-buyers of your brand, roughly 20% will come from light buyers, and only about 10% of growth comes from heavy buyers of your brand.

There is a common adage amongst marketers that “80% of your sales come from 20% of your clients.” Sharp’s research found that the top 20% of buyers account for only 50% of sales on average, which means that a focus on loyalty ignores the group responsible for 50% of sales.

Mental availability plays a critical role in growing market penetration

Less controversial is the importance of mental availability. Buyers are more likely to buy what they remember – whether consciously or unconsciously. A brand must be easy to think of/remember (brand salience) and be available in as many situations as possible (consistently building and refreshing memory) by as many people as possible (reach).

Reach is essential for growth

Market penetration, attracting light and non-buyers, and growing mental availability all require reach. To maximize reach, it is essential to consider duplication. Aim for the most extensive reach medium first, and then add to it. Today, television continues to be a dominant mass-reach channel that captures most of the buyers in any category and has a meaningful impact on other activities such as search queries and e-commerce sales.

Ehrenberg-Bass Institute Seminar, ‘Laws of Growth’

Based on decades of research across several different categories, the rigorous scientific methodology behind the marketing laws in How Brands Grow is impossible to summarize effectively in under 600 words.

To learn more about these scientific marketing laws and their application for marketers today, be sure to register for the Ehrenberg-Bass ‘Laws of Growth’ seminar, available exclusively to ACA members.