How Brands Grow

by Byron Sharp

  If a loyalty program only recruits highly loyal buyers (right-hand quadrants) it has little chance of generating any change; first, these people don't need to change their behaviour to win rewards, and second, they can't change anyway as they are already very loyal. It is because of these consumers that a loyalty program can have negative effects: it gives away rewards but gains no change in behaviour in return.

  Consumers that fall into the lower left-hand are the most desirable consumers for a loyalty program to recruit. If a loyalty program reaches consumers who are heavy buyers of a category and who are not 100% loyal to a brand, then it is more likely to extract additional loyalty and sales. These heavy buyers have more loyalty to give; however, their motivation is not necessarily high as they will earn rewards anyway. What motivation they have is also easily countered by competitor loyalty programs and promotions. These heavy buyers are very aware of competitor offerings.

  With this knowledge of the structure of the market, and the nature of loyalty programs, logic suggests that such programs have little chance of generating increased sales and profit. A loyalty program's success depends on recruiting many consumers from the lower left-hand quadrant, which is unlikely. Ideally, from a cost perspective, a program needs to recruit as few consumers as possible who are already loyal to the brand (this, however, is probably impossible). What happens in the real world? As you have probably suspected, loyalty programs are good at recruiting existing buyers of a brand (both heavy and light category buyers) but lousy at recruiting heavy category buyers who are not current buyers of a brand.

  Table 11.3 shows the category buying rate of members and non-members of a loyalty program80. The table clearly shows that loyalty programs fail to attract a disproportionate number of heavier buyers.

  Table 11.3: Buying rates of members and non-members of a loyalty program

  Average purchase frequency

  Consumers who joined the program Consumers who did not join the program

  Supermarkets 27 28

  Retail fuel 13 14

  Department stores 10 9

  Credit cards 10 9

  Telecommunications 26 26

  Petrol 12 13

  Credit cards 9 9

  Average 15 15

  Source: Ehrenberg-Bass Institute.

  In spite of the discussion above, this discovery is a little surprising because heavier category buyers (both regular buyers of a brand and non-buyers) have much more to gain from a loyalty program. It makes sense to expect that loyalty program members would be heavier buyers (of a category).

  What this shows is that mental and physical availability is the dominant driver of recruitment to loyalty programs – ahead of the attractiveness of the rewards. Existing buyers of a brand join; that is, both heavy and light buyers of the category. This suggests that the best way to promote a loyalty program, and recruit members, is to avoid using a brand's own stores, website or mailing list. Ideally, a brand would recruit members in its competitors' stores! Unfortunately, it is extremely difficult to overcome the inherent characteristics of a loyalty program – that it will skew towards existing buyers of the brand. This is why loyalty programs can't have much effect. They essentially reward existing buyers for what they already do.

  Loyalty programs are not good at affecting loyalty. They are more suited to being used to build a database of consumers, creating a new channel to talk to consumers and a way of monitoring their buying in-store. This is a very expensive and difficult endeavour, and has more value to some marketers than others. Most loyalty programs need to collect or utilise this data if they are to recoup their investment. Unfortunately, this data is biased; it comes from more loyal buyers. It doesn’t reveal what shopping they are doing in competitor stores. Loyalty program owners often boast of their large sample sizes, compared to market research panels, but as we all learnt in market research class making a biased sample larger doesn’t fix anything.

  This chapter has shown that loyalty programs have little effect. It has also revealed that knowledge of scientific laws can lead to insight, prediction and understanding. If all brand managers had known of these laws billions of dollars would not have been spent on poor-performing marketing investments like loyalty programs.

  Chapter12:

  Mental and Physical Availability

  Byron Sharp

  The key marketing task is to make a brand always easy to buy for every buyer; this requires building mental and physical availability. Everything else is secondary. Brands largely compete in terms of physical and mental (brand salience) availability. Even product innovation largely works, when it works, through enhancing mental availability and gaining further distribution. Building mental availability requires reach, distinctiveness (clear branding) and consistency. The brand is seen/noticed, recognised and recalled more often. Building physical availability requires breadth and depth of distribution in space and in time. Together, mental and physical availability make a brand easier to buy for more people, in more situations.

  A new theory of competition for sales

  We have a collection of scientific laws of marketing – law-like patterns that hold very widely and under known conditions (see the complete list of marketing laws on pages vii-viii). These laws can be used to predict and explain marketing patterns, but it would also be useful to have a theory that could weave these laws into a memorable, overarching story that can guide our marketing strategy.

  Table 12.1: The new consumer behavior model

  Consumer Behavior

  Past World View Attitude Drives Behavior Brand

  Loyals Brand

  Switchers Deeply Committed Buyers Involvement Rational Involved Viewers

  New World View Behavior

  Drives Attitude Loyal

  Switchers Loyal

  Switchers Uncaring Cognitive Misers Heuristics Emotional Distracted Viewers

  Table 12.2: The new brand performance model

  Brand Performance

  Past World View Growth Through Targeting

  Brand Loyals Unpredictable Confusing Brand Metrics Price Promotions

  Win New Customers Target Marketing We Compete

  on Positioning Differentiation

  New World View Growth

  Through Penetration Predictable Meaningful Brand Metrics Price Promotions Existing Loyal Customers Sophisticated Mass Marketing Heuristics Distinctiveness

  Table 12.3: The new advertising model

  Advertising

  Past World View Positioning Message Comprehension Unique Selling Propositions Persuasion Teaching Campaign Bursts

  New World View Salience Getting Noticed, Emotional Response Relevant Associations Refreshing & Building Memory Structures Reaching Continuos Presence

  This theory has to be a new replacement for the twentieth century Kotlerian view of marketing. According to Kotler, competition for sales is about creating differentiated brands that carve off sections of market share by addressing the heterogeneity between consumers. Thus, competing brands sell to different types of consumers; brands have substantially different images; and brand loyalty varies considerably. This view also holds that many brands are niche brands; and that considerable growth is possible by becoming even more niche and selling more to a brand's most loyal customers.

  This worldview was partly responsible for the very large (and low return) investments in loyalty programs and customer relationship management (CRM) that occurred towards the end of the twentieth century. 81 On a less visible level, this worldview was also responsible for millions of misguided and productivity-sapping marketing plans. Some marketers got lucky and succeeded in spite of their plan 82, through implementation 'mistakes' or from competitors getting it even more wrong. But many misplaced plans did their bit to erode their brand's customer franchise.

  However, this twentieth century view of marketing is not completely wrong. It just describes a limited part of the competition for sales. It more aptly describes the competition between product categorie
s than the competition between brands within a category (yet, even in this case it is often an exaggeration). The Kotlerian view doesn't fit the facts of branded competition; it fails the most basic test of scientific theories: it does not lead to empirical laws. In some cases, it even clashes with these empirical laws (i.e. it predicts different patterns). For example, strong differentiation and differences in brand user profiles would destroy the laws of double jeopardy and duplication of purchase. Yet in the real world we find only minor deviations from these laws. The Kotlerian worldview is not the opposite of reality, but it is a very poor representation of it. It's similar to the view that the world is flat – it isn't, though there are flat-ish parts (much of Australia, for instance).

  To understand the new theory of branded competition for sales we need to consider the hectic complicated world of real consumers.

  Busy buyers

  As discussed in Chapter 4, most customers are very light, occasional buyers of a brand. A brand is a very small part of its customers' lives; people don't think much about brands, even the ones they buy – after all there are so many brands. This is largely why brands advertise, to ensure that customers don't forget to buy them.

  Yet it is difficult to talk to buyers because they are so busy with their lives. Machines used to be referred to as 'labour-saving devices' because it was thought that they would lead to more leisure time. Instead, new technology has squeezed even more into our already busy lives. For example, the global impact of the mobile phone has been dramatic. We used to spend a lot of time waiting for other people. Now, meetings can be replaced with an immediate phone call; waiting for others to arrive is replaced by a call or text message to see where they are; agendas and locations can be changed in minutes. Time is precious, we all only have one life, and it is a human trait to try to do more with the time we have.

  For marketers, this makes the task of getting attention very difficult. On top of this, when people aren't working they have many more interesting things to think about than brands! I'm not just referring to the really important things in life like family, friends, politics, hobbies, sport and saving the planet. Yahoo US reported that the top search terms for 2008 were:

  1 Britney Spears

  2 WWE (wrestling)

  3 Barack Obama

  4 Miley Cyrus

  5 RuneScape

  6 Jessica Alba

  7 Naruto

  8 Lindsay Lohan

  9 Angelina Jolie

  10 American Idol

  This is what people really think about! Also, six out of the top ten were the same as the previous year. Over much of the past ten years, Britney Spears has been an incredibly popular search term; she has been the most popular for seven out of eight years last decade (part of Google's genius was the early work they did to identify all the potential misspellings of search terms like “Britney Spears” so that Google users found what they were looking for83). No wonder brands employ celebrities and try to piggy-back on their ability to get attention.

  In 2013 Bing reported that most searched for person was Beyoncé followed by Kim Kardasian (Barack Obama came tenth) - plus ça change, plus c'est la meme chose.

  A cluttered world

  One of the things we are cramming into our lives is more commercial media, and hence more advertising. There are plenty of uninformed reports of massive declines in television viewing, but this just isn't happening. In general, people are not replacing television viewing with web browsing, YouTube or Social Media – they have simply added new media. People are consuming more media than ever before. In 2005, Ball State University's Centre for Media Design undertook a large observational study of US consumers and found that (commercial and non-commercial) media consumption (listening, viewing and reading) covered about 30% of people's waking day, with television still, by far, the most dominant media in terms of both penetration and hours of exposure (in line with the double jeopardy law).

  A typical viewer of television – who watches only an hour and a half of television a day84 – is exposed to more than 60 ads. If a typical viewer also reads one magazine or newspaper he or she will be exposed to anywhere from a few dozen to a few hundred more ads. Radio and the internet are also cluttered with advertising, and then there is the general background of advertising seen while walking the streets.85 Therefore, realistically, a person may be exposed to a few hundred advertising messages per day. This is far lower than the level of exposure disseminated by popular mythology, but this level of realistic exposure is still high considering that people don't live to consume advertising. Attentively consuming all these ads would take three hours out of a person's waking day!

  So each ad has to fight for a tiny piece of attention. How many ads can you recall that you saw or heard this morning? Much advertising receives no active attention whatsoever, or not enough for the receiver to take in which brand is being advertised. Remember the television study mentioned in Chapter 1: a mere 16% of viewers noticed the average commercial and correctly named the advertised brand.

  How consumers cope

  The typical supermarket stocks around 30,000 products (brands and their variants). It seems incredible that consumers can enter a supermarket and leave with their shopping before closing time. How do they find and select brands? Shoppers do it by adopting a number of useful strategies (e.g. heuristics). A very important strategy is that we 'satisfice' rather than optimise.86 Rather than working hard to find the best product for us, we settle for something that we consider good or satisfactory. Some economists rightly point out that such behaviour is optimal, considering the full cost of gaining the necessary information to make a better buy. 87

  Brand loyalty is a natural behaviour that is based on this satisficing strategy. For many different reasons – many of which could be called 'habit' or 'convenience' – we buy the same few brands over and over again and simplify buying decisions by only noticing our few regular brands. Often we don't want to make choices; we are pressed for time, or tired, or really just don't care. We seldom ever want a large selection from which to choose as it's too difficult. So we restrict our consideration set down to a few favoured brands. Contrary to some popular books (and TED seminars) we are actually very good at coping with lots of choice, we simply screen most of it out (see Scheibehenne 2010).

  Marketing theory pays insufficient attention to this coping behaviour. Instead, theories about buyer behaviour are obsessed with brand evaluation. Obsession is a strong word, and yet it is justified because marketing texts instruct their readers to deliver products and services that fulfil customer needs better than other brands; consultants advise brand managers to make buyers emotionally committed to their brand; and market research (from choice modelling to focus groups) is largely concerned with whether or not customers think a brand's features are the best.

  Yet the most important part of any buyer's purchasing process (i.e. the part that marketers should be the most interested in) occurs almost entirely without being noticed. This part of the process occurs before buyers consciously evaluate which brand to choose: buyers, in effect, 'decide' not to consider the vast majority of brands on the market. Instead they notice a few and quite often, only one – this underpins their loyalty.

  Most brands are effectively ignored, and sometimes no evaluation between brands takes place; for example, if we want a mortgage, we get one from our bank; if we want legal advice, we ring our lawyer; if we want toothpaste, we look for our preferred brand on the shelf. This lack of evaluation and consideration of alternatives can occur even when a consumer is standing in front of a supermarket shelf that is filled with choices.

  Screening out is a natural behaviour,88 people do it all the time; for example, screening out other people talking in the room, screening out advice from parents, etc. Buyers don't care that there are many brands they do not consider, because the ones they do consider perform well enough. However, it matters enormously to marketers – our brands need to be noticed and considered. Being noticed and consid
ered is often the biggest factor in why a brand is bought or not. Given how small buyers' consideration sets are, a brand has more than a 'sporting chance' of being bought if it is noticed and considered. So, a brand's sales are primarily determined by how many consideration sets it failed to enter.

  Similarly, in dealing with the vast volume of marketing communication people adopt incredibly capable filtering mechanisms that mean they don't have to process most advertising. That's why we can watch an ad over and over and still get the brand name wrong.

  Evaluation is less important than we think

  We don't notice ourselves not noticing things – it's a subconscious process. This is perhaps why marketers and academics themselves largely ignore this aspect of buyer behaviour.

  Both academic and commercial marketing researchers work from an evaluation-centred view of buyer behaviour. Billions of dollars are spent on researching brand features and perceptions because these are considered to be the dominant reasons why customers buy or not. This belief is undermined by the following facts:

  •What buyers remember about brands (and which brands they remember) varies across buying occasions. Memories are imperfect and variable, as buyers are busy and have limited time to devote to any single purchase (or single market research question).

  •A buyer only considers a tiny subset of the brands they know; they do not evaluate most of the different feature-bundles on the market. Even for high involvement products like financial services and cars (see Dawes et al 2009; Lambert-Pandraud 2005). Consumers typically know a little bit about some brands and almost nothing about most brands. Customers rarely think about (the features of) these less familiar brands, let alone buy them.