by Byron Sharp
And now a more serious example...
Table 5.4 showed that, like other categories, there is little difference in the user profile for different credit cards. But one financial institution said, “Our brand is different”, and they seemed to have a case. This Australian credit card gives a small donation to a local maternity hospital for every dollar that users spend on the card. It even features a picture of a baby on the card itself.
It is obvious that this card would have a customer base skewed towards women. Not just because the card would appeal to women but also because it wouldn't appeal to groups like young men (and maybe even young women). The marketing department told us this must be the case. But then the data came in (see Table 5.7). Cardholders are ever slightly more likely to be female than non-cardholders; but they are also more likely to be single and no more likely to have children. It appears that you don't have to be a mother to value this credit card.
Table 5.7: Cardholds c.f. non-cardholders
Male (%) Female (%) Single (%) Couple with no kids (%) Family with kids (%) Other (%)
Cardholders 37 63 15 32 52 1
Non-cardholder customers 42 58 12 34 53 1
Source: A telephone survey based on customer lists provided by the credit card provider; see Sharp, Tolo & Giannopoulos 2001.
I love my Mum (and you love yours)
What about differences in how a brand's buyers perceive the world? As previously explained, a brand's buyers hold much the same values as buyers of other brands (see Table 5.8); but what about the buyer's attitudes towards your brand?
Table 5.8: Percentage point deviations from the brand norm: values held by brand users
Credit card
brand
Children should express themselves freely I am happy with my standard of living I can’t bear untidiness I try to keep up with technology I always look for special offers
Barclaycard Visa 0 -1 0 0 -1
TSB Trust card 0 -2 2 -4 2
Access Natwest 1 0 1 0 -2
Access Midlands -1 0 1 0 -3
Access Lloyds 1 1 1 1 1
Bank of Scotland Visa 2 2 0 2 -2
Adapted from Kennedy and Ehrenberg (2000), "Brand user profiles seldom differ," Report 7 for Corporate Members: Ehrenberg-Bass Institute for Marketing Science.
There is one obvious way that buyers of one brand vary from another: their brand buying. This affects their attitude to brands and their brand knowledge. People tend to have opinions about the brands they buy, and not think or know much about brands they don't use. Behaviour is a powerful driver of awareness, perceptions and attitudes – something that both academic and market researchers have a tendency to forget.30
Attitudes reflect how much a buyer buys the brand, that is, they reflect loyalty. We know that loyalty metrics don't vary a lot between brands. Consequently, the buyers of brand A have the same opinion of brand A as buyers of brand B have of brand B. I call this the 'my mum' phenomenon: my own mother is the best mum in the world, she's lovely, but she can also be rather annoying sometimes. Does that sound like your mum?
Another lovely example of this was a global survey of tourists conducted by the Ehrenberg-Bass Institute. The survey asked the tourists to describe why they chose their last holiday destination. The open-ended, qualitative responses were collated for each destination; unexpectedly, the researchers noticed a high degree of similarity in the responses for each destination, for example:
•somewhere new and exciting
•interesting people and culture
•nice shopping
•somewhere to relax.
Obviously people did not talk about the snow if they went to a beach location, or the surf if they went to a mountain. But aside from these descriptive differences, the tourists' stated motivations and benefits were uncannily similar. This is another way that a brand's customer base is similar to that of other brands.
Different variants
Brand managers often add variants – also known as stock-keeping units (SKU) – to their brand in the belief that this allows the brand to reach different buyers. Let's look at variants. They are interesting because their clear functional differences could mean they are used by different people.
Table 5.9 shows the normal market shares for regular (63% share) and diet/no sugar (35% share) soft drinks, and then their market shares in particular demographic groups. This sort of analysis, popular in market research reports (where indices are often used) can exaggerate differences in that it is possible to have an unusually high share, but in a tiny demographic group, so that your overall customer base isn't much different. I've deliberately chosen this style of analysis to show even tiny potential differences, but as you can see there isn't much to show. Read the table downwards for each variant. Regular soft drink has an overall share of about two-thirds – it also has this share in each demographic. Diet soft drink has a share of about one-third, both overall and also in each demographic sub-group. So neither variant appeals especially to any particular segment (and that's in spite of years of diet soft drink advertising trying to target women).31
Table 5.9: Gender profile of different types of soft drink
Market share in a particular demographic group Regular soft drink (%) Diet soft drink (%)
Overall market 63 35
Male 66 33
Female 60 37
1 person household 60 38
3+ person household 64 34
Children in household 65 32
No children in household 61 38
<34 years old 74 24
55-74 years old 59 38
AB socioeconomic 59 38
E socioeconomic 66 32
Source: Kantar Worldpanel; data analysis by Dr Giang Trinh, Ehrenberg-Bass Institute.
Now let's look at pack sizes (see Table 5.10). The large can/bottle has double the market share of the small can/bottle. This is the case in every demographic group, except among older people where small bottles are slightly less popular.
Table 5.10: Demographic profile of small versus large sized soft drink bottles
Market share in a particular demographic group Small bottle (%) Large bottle (%)
Overall market 19 43
Male 25 38
Female 14 47
1 person household 22 44
3+ person household 20 41
Children in household 20 39
No children in household 17 46
<34 years old 37 23
55-74 years old 12 52
AB socioeconomic 17 46
E socioeconomic 17 47
Source: Kantar Worldpanel; data analysis by Dr Giang Trinh, Ehrenberg-Bass Institute.
Now let's compare cola with lemonade (see Table 5.11). We can see that lemonade brands do better with older buyers. But since 54-74-year-olds make up a small part of the overall market for soft drinks this skew does practically nothing to make lemonade's customer base different from cola's customer base.
Table 5.11: Demographic profile of colas versus lemonade
Market share in a particular demographic group Cola (%) Lemonade (%)
Overall market 40 13
Male 44 11
Female 37 14
1 person household 41 19
3+ person household 41 11
Children in household 39 10
No children in household 41 15
<34 years old 45 5
55-74 years old 34 21
AB socioeconomic 35 13
E socioeconomic 41 12
Source: Kantar Worldpanel; data analysis by Dr Giang Trinh, Ehrenberg-Bass Institute.
It's a common assumption that product variants are developed for particular types of buyers. For example, low-allergy fabric conditioner must sell to people who suffer from allergies. In which case, if we examined such variants we would see 'niche-type' patterns: such products would sell to a small group of highly loyal buyers. Yet generally this is not what happens. To use the specific example of (no fragrance, no colour) low-allergy fabri
c conditioners: these are not big sellers and they sell to a few buyers who only occasionally buy them (double jeopardy; see Chapter 2). Their loyalty metrics are barely higher than they should be as predicted by the double jeopardy law.
What this means is that unscented low-allergy fabric conditioners mainly sell to normal fabric conditioner buyers who occasionally feel allergic (or at least think about it). There will be a few allergy sufferers who only buy low-allergy fabric conditioners, but these few loyalists' make up a small part of the variant's customer base.
Table 5.12: Double jeopardy law – types of fabric conditioner, US
Loyalty-related metrics
Fabric conditioner variants Market share (%) Penetration (annual)
(%)
Average purchase frequency Share of category requirements (%)
Regular 72 63 5 74
Light 20 32 3 33
Unscented 4 9 2 28
Stainguard 3 9 1.7 19
Average
2.9 39
Source: IRI panel data; Singh, Goodhardt & Ehrenberg 2001; Singh, Ehrenberg & Goodhardt 2008.
Implications
The big discovery is that the customer bases of brands in a category are very similar – except in numbers of buyers. One way of thinking about it is that there isn't a vanilla ice-cream buyer and a different type of person who buys strawberry – there are just ice-cream buyers who sometimes buy vanilla and very occasionally buy strawberry.
When market research shows that a brand is selling to a different customer profile than competitor brands it's common practice for marketers to say, “We skew towards young women, so that's our media target.” But this thinking is incorrect. What they should be asking is, “Why? Is there something wrong with our marketing? Are we failing to reach some demographics (and therefore overweighting in others)?” It's wrong to assume that a brand appeals to a particular type of buyer; most don't and they shouldn't want to. A brand may sell to an unusual customer profile (more of some people and less of others) because it is currently marketed that way, or because of history or mistakes. None of which means that it will sell best if targeted to this audience.
A skew from the category norm needs to be checked carefully. The question is whether to market in line with this skew or to go with the category norm. Usually the answer will be the latter.
Of course, there are some expected differences, such as sugary breakfast cereal brands eaten more by children, and expensive products selling to wealthier people (who have sufficient funds to buy them). But within these sub-markets there is little difference between brand's user bases; for example, Versace sells to the same wealthier buyers as Gucci does.32
This is a very positive finding. It means that your brand is unrestrained, in the sense that it can grow its customer base. Because the buyers of other brands are just like your customers – they potentially could be yours. If your buyers were really different from buyers of other brands that would suggest that your brand was suited to a particular type of buyer and not others. That would suggest that you had filled your niche – time for the marketing department to all go home.
But your niche appears to be the whole market, so there is plenty of growth potential. All that is standing in your way is a degree of brand loyalty, and the fact that you have competitors with similar growth aspirations. Of course, this implication also works in reverse. Your competitors see that your customers are just like theirs, so there is nothing structural preventing them from stealing your customers. This is another reason why it's not time for the marketing department to go home.
Given how stark this finding is, and how readily available customer profile data is, it seems odd that this discovery is a surprise to many marketers33. Perhaps it is due to us expecting to see differences. Marketing textbooks tell us that brands have been differentiated and targeted to specific segments. Therefore we expect them to sell to different sorts of customers. Also, many marketing directors find that they have a large portfolio of brands, many inherited in historic company acquisitions. They look for a reason why they have all these very similar brands and conclude that each must appeal to different sorts of buyers, whereas in reality they appeal to different buyers, but not different types of buyers (i.e. they appeal to the particular buyers that know them).
Competition
The very good news is that there is nothing structural standing in the way of your brand growing; your competitor's customers could be yours. The only problem is that you have competitors who are trying to do the same as you. Therefore, brands need capable marketing departments to defend them.
What then do these marketing laws mean for competition? Does a brand compete with all other brands in its category? How does a brand identify its nearest competitors? This is the topic of the next chapter.
Chapter 6:
Who Do You Really Compete With?
Byron Sharp
In Chapter 4 I suggested that textbooks have condemned mass marketing to a premature grave. This is what Professor Philip Kotler and colleagues (1998) have written about mass marketing and how brands compete with one another:
Marketing has passed through three stages:
1) Mass marketing. [Here] the seller mass produces, mass distributes and mass promotes one product to all buyers. At one time, Coca-Cola produced only one drink for the whole market, hoping it would appeal to everyone. The argument for mass marketing is that it should lead to the lowest costs and prices and create the largest potential market.
2) Product-variety marketing. Here, the seller produces two or more products that have different features, styles, quality, sizes and so on. Later, Coca-Cola produced several soft drinks packaged in different sizes and containers. They were designed to offer variety to buyers rather than to appeal to different segments. The argument for product-variety marketing is that consumers have different tastes that change over time. Consumers seek variety and change.
3) Target marketing. Here, the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to each. For example, Coca-Cola now produces soft drinks for the sugared-cola segment, the diet segment, the no-caffeine segment and the non-cola segment.
Sellers can develop the right product for each target market and adjust their prices, distribution channels and advertising to reach the target market efficiently. Instead of scattering their marketing efforts (the 'shotgun' approach), they can focus on the buyers who have greater purchase interest (the 'rifle' approach).
According to Kotler and colleagues (1998), brands are supposed to target segments of the market, which would severely limit the number of other brands they compete with.
While this may sound logical and straightforward, there are a number of problems with this theory. It's difficult to think of a real-world example of mass marketing that fits the extreme definition: few, if any, firms have only one product, with one price. It is also unclear how the examples of target marketing differ from the less sophisticated 'product-variety marketing'. Yes, Coca-Cola now markets many brands of soft drink, but is this to satisfy the distinct needs of particular groups of buyers, or to satisfy individual demand for variety, or a bit of both? Oddly, according to Kotler, offering containers of different sizes caters for variety seeking, but different flavours cater for different people!
Simply naming a segment does not make it exist. We could similarly create 'segment' names to match Kotler's product-variety strategy (e.g. the high quality seeking segment, the large pack economy oriented segment, and so on). However, for this to have any meaning there would need to be empirical evidence that each of Coca-Cola's brands really does sell to different people. Kotler presents no data to substantiate his claims.
Table 6.1 shows that various soft drink brands share their customer base with Coca-Cola; that is, the table shows what proportion of each soft drink brand's customers also bought Coca-Cola during the analysis period. The data is from the Kantar Impulse Panel, which I have specifically chosen b
ecause it covers individual consumers buying for their personal use. Therefore, the repertoire of brand buying shown in the table is not due to different brands being bought by different people in the same household.
Table 6.1: Sharing of customers
Buyers of X during the analysis period Percentage of X buyers who also bought (regular) Coca-Cola during the period
Diet Coke 65
Fanta 70
Lift 67
Pepsi 72
Average 69
Source: Kantar Impulse Worldpanel.
As you can see, a high proportion of each brand's buyers also bought Coca-Cola, and this proportion varies little between the different brands – it's always about two-thirds of their customer base34. This empirical evidence counters Kotler's idea that individual brands sell to distinctly different segments of buyers – brands share customers. Several of the brands are even marketed by the Coca-Cola company; these brands share their customers with Coca-Cola as much as rival company's brands do.
Customer-sharing data gives insight into who competes against whom. If brands are close rivals, then they should be in the repertoires of the same people, that is, they share customers 35. Logically, brands that are direct competitors within a product category should show higher levels of sharing, and brands that target different segments should share fewer customers.
Duplication of purchase analysis
The extraordinary fact about the sharing analysis is not that Pepsi buyers also buy Coca-Cola (although this surprises some people), but that each brand shares a near identical proportion of its customer base with Coca-Cola.
The exact degree of sharing depends on the period of analysis. If it is long enough, then nearly all of a brand's customers will have also bought Coca-Cola, whereas over a very short time period a smaller proportion of a brand's customers will have also bought Coca-Cola. However, the length of time affects all brands equally, so it doesn't affect inter-brand comparisons. Irrespective of the time period, each brand of soft drink shares a similar proportion of its consumers with Coca-Cola.