How Brands Grow Book Summary – Byron Sharp

How Brands Grow Book Summary:

As Mark Twain wrote in his notebook in 1898: “Education consists mainly of what we have unlearned”.

How Brands Grow is a great marketing book that attempts to help you unlearn the common myths and perceptions of how brands are built. It aims to address key marketing concepts and show you why they may be misguided. In doing so it provides you greater awareness on the actual levers of brand growth.

A must read for entrepreneurs and marketers alike!

 

Where does Brand Growth actually come from?

Growth in market share comes by increasing popularity; that is, by gaining many more buyers (of all types), most of whom are light customers buying the brand only very occasionally.

If brands grow they will always steal from the other brands in the same product category.

Brand competition and growth is largely about building two market-based assets: physical availability and mental availability. Brands that are easier to buy – for more people, in more situations – have more market share.

Related to mindshare – Marketers need to research what their distinctive brand assets are (colours, logos, tone, fonts, etc.); they need to use and protect these.

 

Loyalty and Brand ‘Defection’:

There is another related discovery: when you look at brands of markedly different sizes you typically see that their penetration metrics differ a lot, while their average purchase rate varies little. Put another way: loyalty doesn’t vary much.

Research examining the reasons for customer defection (Bogomolova & Romaniuk 2005, 2009; Lees, Garland & Wright 2007; Bogomolova 2010, East et al 2012) has shown that much defection occurs for reasons entirely beyond the firm’s control (e.g. moving house, no longer needing the service, being directed by head office, etc.).

The serious academic studies report the same finding: loyalty programs generate small or no shifts in market share. Price promotions, in contrast, do increase sales, but they are also skewed towards heavier buyers.

 

Light Buyers Vs Heavy Buyers:

All brands have many lighter buyers. While these people are only occasional buyers of a brand, there are so many of them that they collectively contribute substantially to sales volume.

The way the lightest buyers became heavier and the heaviest buyers became lighter is a ‘regression to the mean’ phenomenon.

This means that for maintenance or growth, a brand’s marketing has to somehow, at least over time, reach all the buyers in a category.

 

The argument Against Niches:

Sales growth for Colgate, or any brand, won’t come from relentlessly targeting a particular segment of a brand’s or the category’s buyers. Yet this targeting fantasy continues to appear in marketing plans.

Being niche isn’t necessarily a good thing. Rather than thinking of niche brands as having excess loyalty more are best thought of as having less penetration (and market share) than we’d expect given their loyalty levels. This penetration deficit is usually due to some lack of availability, such as being missing from a particular distribution channel

When marketing succeeds in increasing a brand’s market share, then buying propensities change across the board. This tells us that marketing has the best chance of being successful when it has as much reach as possible. Marketing is particularly successful when it reaches light and non-buyers of a brand.

 

2 Rules for Brand Growth:

1. Acquisition is vital for growth and maintenance. 

2. Reaching all buyers is vital, especially light, occasional buyers of the brand.

 

Opinions come after purchase:

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.

 

Competition is wider than marketers believe:

Marketers 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).

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.

Marketers often fall into the trap of underestimating how broadly their brand really competes. Segmentation studies overstate very small differences, and it’s assumed that brands with different features (e.g. price levels) must sell to very different people, or for very different buying situations.

The first two patterns reflect what is known as the duplication of purchase law. This law says that all brands, within a category, share their customer base with other brands in line with the size of those other brands. In other words, everyone shares a lot with big brands and a little with small brands.

 

Try not to define your product narrowly:

There are also more sub-markets then meets the eye! For example, the chocolate market can be divided into dozens of sub-markets – block, bars, pieces, individually wrapped, candy coated, chocolate coated candy, and so on.

Product-based category definitions can blind managers to their true competitors and prevent them from understanding how customers actually buy.

Narrow category definitions lull brand managers into a false sense of security and can result in unduly conservative growth targets. Brand managers prefer category definitions that make their brand appear to have a substantial market share – no one like to be ranked seventeenth. Therefore, narrow category definitions are commonly adopted.

Partitions exist in markets; premium quality/price partitions are particularly common. But it is sensible to think of these divisions as sub-markets (partitions) rather than as entirely separate markets.

 

What causes market ‘partitions’:

Duplication of purchase analyses have shown that market partitions are generally due to substantial functional differences and similarities between brands, factors like where or when they are physically available, rather than their brand images.

 

Brand Loyalty:

Brand loyalty is part of every market, even in so called commodity categories. Rather than thinking of loyalty as a market imperfection, it is more appropriately considered to be a sensible buyer strategy, one of many developed by human beings in order to balance risk and avoid wasting the precious commodity of time.

Notice that categories that are purchased less frequently have higher levels of 100% loyalty.

Loyalty certainly exists, but it is tempered by opportunity.

This marketing orthodoxy means that it is derogatory to suggest to a brand manager that the loyalty his or her brand enjoys is due to habit, availability, and/or lack of caring on behalf of buyers.

The implication of lack of loyalty for marketing strategy is that to grow a brand needs to recruit more light category buyers. Targeting the heaviest buyers of the category (‘super consumers’) is a bit like saying “let’s be a small brand”.

 

Most marketing advice given is vague:

Here are the common vague recommendations for marketing managers to: 

“facilitate passion-driven behaviors…e.g. Scion cars encourage owners to choose…wheels, sports mufflers and so on” 

“build brands that facilitate self-brand integration” 

“create positive emotional connections”.

 

The Truth about Brands:

Brands are a necessary evil: they add a layer of complexity to the buying decision, but they also allow for routines (“Ah, there’s my brand” or, “Oh yes, I’ve heard of that one”); such habits make buying easier – automatic even.

A key discovery is that most of what we think about brands is not absolute. If asked what we think about a brand at different times in our life we will give different answers.

Indeed, most of what we think about brands is so trivial, so barely thought through, that we will happily change our mind in a second

 

Brands and ‘Fans’:

Any brand can have a few fans, but, it does not show that some brands are special or that these fans are of any financial or strategic consequence to marketers. These make for an entertaining story and that’s all. Advertising agencies, who in general know very little about buyer behaviour, seem to love these stories.

Brands like Harley-Davidson and Apple are the poster children for emotion-based brand loyalty. They are regularly cited as having passionate, highly loyal customer bases – though few writers provide evidence to back up such claims.

The truth is, we try to bring our attitudes in line with our behaviour. Since individual brands aren’t very important to us, brand buying tends to have a strong effect on our rather weak attitudes – we like what we buy.

 

The Differentiation Myth:

This leads to the conclusion that perceived differentiation plays little part in the success of brands. It is certainly not a case of ‘differentiate or die’; if it were, most of the brands we buy would be gone.

Paradoxically, the reduced emphasis on meaningful differentiation makes branding even more important. Loyalty is largely underpinned by mental and physical availability not love/hate. To encourage brand loyalty a brand must stand out so that buyers can easily, and without confusion, identify it.

 

Be Distinctive and consistent instead:

A distinctive asset is anything that shows people what brand is being offered for sale. These can be used on packaging and in advertising, in-store displays and sponsorships – they can be used in any marketing activity where the marketer wants the consumer to be able to identify the brand.

The purpose of building strong, distinctive assets is to increase the number of stimuli that can act as identification triggers for a brand.

The strong recognition that the Nike swoosh has today is because of the consistent investment over many decades. A brand can’t be distinctive unless it is consistent.

To build strong, distinctive elements the brand must be consistently communicated to consumers across all media and over time. The importance of consistency has been emphasised by many branding commentators, and particularly by the proponents of integrated marketing communications.

 

The Role of Advertising:

Advertising works largely by refreshing, and occasionally building, memory structures (and less by convincing rational minds or winning emotional hearts).

Advertising works best when it tells us things we already believe.  It’s strongest at refreshing existing memory structures, not building new, non-obvious ones.

The difference in each product’s marketing mix is limited to the difference that exists between each product variant. The role of advertising is largely to “bring to public notice” that different products exist and are available.

Sophisticated mass marketers cleverly react to this heterogeneity (e.g. by marketing multiple brands and variants, by using multiple media and distribution channels). Rather than trying to hem their brands into niches, they are always looking for avenues to broad reach.

There can be many months between exposure to an ad and when the viewer is in a shopping situation with a relevant opportunity to recall brand memories (which are possibly influenced by the ad). To influence behaviour, advertising must work with people’s memories.

Memory structures that relate to a brand include what the brand does, what it looks like, where it is available, when and where it is consumed, by who and with whom. Memories are associations with cues that can bring a brand to mind.

As discussed, there are two main ways that advertising works: persuasion (changing opinions) and mental availability (refreshing and building memories). There are other mechanisms, but these are more subtle and are often secondary to salience and/or persuasion. These other mechanisms include bond, status signals and priming,

 

A simple (but not easy) recipe for effective advertising is:

• Reach all the category buyers
• Don’t have lapses in advertising 
• Get noticed, not screened out, by consumers 
• Use clear brand links – a brand’s distinctive assets indirectly brand advertising; mentioning (verbally and/or visually) the brand name is crucial; showing the product and showing the product in use is important

 

Pricing Promotions:

So in any particular market, there are consumers who habitually buy a range of brands and pay a range of prices. It is therefore hard to successfully target an exclusively ‘low price buyer’ segment with price promotions, because such a segment doesn’t usually exist.

Price promotions deliver these results, but they also lead to next year’s volume targets that require more price discounting. Price promotions can become a way of life for organisations because winding them back would result in failing to hit sales targets. Therefore, such promotions are highly addictive for marketers.

In summary, what price promotions do (for established brands) is to jolt the short-term buying propensities of mainly infrequent buyers who take the opportunity to buy the brand cheaply and then resume their normal purchase behaviour afterwards

In terms of deal spotting, approximately 50% of the time shoppers appear to be able to spot a ‘good deal’ for a particular brand based on being shown a (discounted) price for. The conclusion is that while consumers’ knowledge about prices is hazy, an appreciable proportion of consumers has a fair idea about price within a zone of the actual price.

 

The short-term profitability of a price promotion depends on these three factors: 

• The contribution margin of the brand at normal price 
• The depth of the price cut  
• The price elasticity of the brand.