Byron Sharp: How Brands Grow
Since 2010, Professor Byron Sharp’s book How Brands Grow has become one of marketing’s most influential texts.
It concludes with 11 law-like patterns, discovered by analysing data spanning many decades, countries & categories.
I’ll summarise the laws, along with a supporting quote, here.
Double jeopardy law: Brands with less market share have far fewer buyers, and these buyers are slightly less loyal. “Smaller brands get 'hit twice': their sales are lower because they have fewer buyers who buy the brand less often.”
Retention double jeopardy: Brands lose buyers in proportion to market share. The bigger the brand the lower the defection rate. “It isn't possible to radically alter defection rates without massively shifting market share.”
Pareto law: Slightly under half of sales come from the bottom 80% of a brand’s customers. “The 20% heaviest buyers account for 50% of purchases (…), the 50% lightest buyers account for 20% of purchases, and so the middle 30% of buyers account for 30% of purchases.”
Law of buyer moderation: Over time heavy buyers buy less, light buyers buy more & non-buyers start buying. “It’s easy for a person to go from buying a brand twice in one year to four times in the next, and the other way round, without any change in that person’s loyalties.”
Natural monopoly law: Brands with more market share have a greater proportion of light category buyers in their customer base. “Larger brands tend to have proportionately more light category buyers in their user bases. Light, occasional buyers favour the bigger brands.”
Customer bases seldom vary: Rival brands sell to very similar customer bases. “Your customers are just like your competitors’ customers, and their customers are like yours. This means their buyers are up for grabs. So, target the whole market – all sorts of different people.”
Attitudes reflect behavioural loyalty: Because people think more about brands they use, larger brands score higher on surveys of brand attitudes. “Larger brands tend to score higher on any image question, because they will have more customers among the survey respondents.”
Usage drives attitude: Buyers express similar perceptions about their respective brands. “Attitudes reflect how much a buyer buys the brand, that is, they reflect loyalty. [And] we know that loyalty metrics don't vary a lot between brands.”
Duplication of purchase law: A brand's customer base overlaps rival brands’ customer bases in line with their market share. “All brands, within a category, share their customer base with other brands. (…) Everyone shares a lot with big brands and a little with small brands.”
Relationship between physical availability and market share: 80% or more distribution is necessary, but not sufficient, for high market share. “Brands require broad availability if they are to have a chance of high market share, but again it is not guaranteed.”
NBD-Dirichlet: The NBD is a mathematical model of how buyers’ purchase propensities vary. “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.”
These laws have huge implications for marketing strategy. Yet How Brands Grow covers much more, including mental and physical availability, differentiation and distinctiveness, pricing and promotions
It’s a must read for any serious marketer.
Pick your copy up here.