Sunday, 13 May 2012

Sharp - How Brands Grow

Very interesting marketing book, Sharp uses all empirical data that are available to him to build marketing laws. Sounds a bit dull, but the resulting laws are surprising, counter-intuitive and fresh.

The basic finding is, that most of the variable traditional marketing tries to influence, are determined by the size of the brand: “This suggests that marketing metrics, including market share, all reflect one thing: popularity. Therefore brands vary in their popularity, and everything flows from that.” (Sharp, 2010, p.215).

This idea doesn’t sound to extreme first, but the implications are: for example, what about the idea, that we should create bran fans, fans that ‘love’ our brands. What about the Pareto law, that 20% of our customers make 80% of our turnover?

These and many marketing myths are not only busted, but replaced with new laws and learning – and there are also some extremely interesting along the way.

“Put another way: loyalty doesn’t vary much.” (Sharp, 2010, p.19). “brands grow primarily by increasing their market penetration.” (Sharp, 2010, p.21). “Among the submission for the Advertising Effectiveness Awards – run by the Institute of Practitioners in Advertising (IPA) – 82% reported large penetration growth, 6% reported both penetration and loyalty growth, and only 2% reported loyalty growth.” (Sharp, 2010, p.22).

“whether marketers should emphasise retention or acquisition. Modern marketing ideology says retention is cheaper than acquisition.” (Sharp, 2010, p.28). “a brand’s defection rate is essentially a function of its market share, and the category it’s in.” (Sharp, 2010, p.30).“How many customers a brand loses in a year depends on how many it has to lose in the first place.” (Sharp, 2010, p.33).

“it isn’t possible to radically alter defection rates without massively shifting market share.” (Sharp, 2010, p.31).“Asking a brand like Honda to halve its defection rate is equivalent to asking it to increase its customer base more than thirtyfold.” (Sharp, 2010, p.33). “A simple explanation for the pattern described above is that customer defection is largely outside of marketer control.” (Sharp, 2010, p.35). (product service etc).
Accordingly growth can only come from winning new buyers.

Light buyers
“If 80% of your buyers delivered only 20% of your annual sales, it would be tempting to ignore the” (Sharp, 2010, p.50). But Sharp’s data show it is in any category 20/60.  “One could argue there is little need to market to these (heavy) buyers at all, especially considering that they are comparatively non-responsive to advertisng.” (Sharp, 2010, p.45). Because they have so much product and service experience.

If one does not only snapshopt research, but uses panel data one sees, that “over time the heavier buyers get lighter, and the non-buyers and light buyers get heavier.” (Sharp, 2010, p.50)  “Put simply, next period your heaviest 20% of customers won’t be so heavy, the light buyers will be heavier.” (Sharp, 2010, p.52).

“And when brands grow or decline there is a lot of change in their category penetration (the size of their buyer base) and little change in their purchase frequency.” (Sharp, 2010, p.53).

“An implication of the skewed distribution of buying rates is that to maintain sales a brand needs to reach out to these masses of buyers. For two reasons: (1) there are so many of them. (2) they buy so infrequently and could easily forget about you.” (Sharp, 2010, p.45). Thus targeting only heavy buyers isn’t useful  - we should always target all buyers of the category – mass marketing in the best sense.

“Attitudes reflect how much a buyer buys the brand, i.e. 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.” (Sharp, 2010, p.66). “The big discovery is that the customer bases of brands in a category are very similar – except in numbers of buyers. (…) there are just ice-cream buyers who sometimes buy vanilla and very occasionally buy strawberry.” (Sharp, 2010, p.71).

“Universal loyalty is not exclusive – buyers purchase more than one brand, and the more purchases an individual makes the more brands he or she buys. Polygamous or divied loyalty is quite the norm.” (Sharp, 2010, p.95).“loyalty is divided and strongly driven by opportunity. This is a more prosaic picture than most marketing texts paint.” (Sharp, 2010, p.98). 

“Consumers are busy people. They have hundreds of thousands of brands vying for their attention. (…) Therefore, the choice of brands is trivial compared to the decision of whether or not to purchase from the category. (…) Brands are necessary evil: they add a layer of complexity t the buying decision, but they also allow for routines.” (Sharp, 2010, p.101).

 “If on the first survey, 30% of people agreed with the statement, ‘Hertz rents attractive cars’, then on any subsequent survey the figure is also usually very close to 30%. This (misleadingly) suggests a great stability of beliefs. (…) Typically only about half the people who on the first survey agreed with the statement do so again on the second survey.” (Sharp, 2010, p.103).“This instability in response does not mean that those who agreed on the first interview but not the second have  fundamentally changed their minds about the brand. It’s just that they sometimes think this, so on some interviews you catch them sying, and some you don’t. This phenomenon applies to all brands, and to all image beliefs, attitudes, purchase intentions and awareness measures.” (Sharp, 2010, p.104).

“Since brands aren’t very important to us, brand buying tends to have a strong effect on our rather weak attitudes.” (Sharp, 2010, p.110).“So perhaps our attitudes merely reflect our buying. Our behaviour has a strong affect on our attitudes.” (Sharp, 2010, p.105).

“All the markets we have examined, whether using our own or others’ data, follow a similar pattern: an average of 10% of any brands’ users think their brand is different.” (Sharp, 2010, p.124).“Buyers don’t need to see differentiation to buy a brand or keep buying it.” (Sharp, 2010, p.125). “If buyers of a brand don’t often think their brand is different or unique, then presumably this is not the main reason why they buy it.” (Sharp, 2010, p.126).
 “Rather than striving for meaningful perceived differentiation, marketers should seek meaningless distinctiveness. Branding lasts, differentiation doesn’t.” (Sharp, 2010, p.112).

“the reduced emphasis on meaningful differentiation makes branding even more important. Loyalty is underpinned by salience not love/hate. To encourage brand loyalty a brand must stand out so that buyers can easily, and without confusion, identify it.” (Sharp, 2010, p.129).  “

“There are two reasons why advertising’s sales effects are hard to see in weekly and monthly sales figures (i.e. sales neither jump when advertising starts or increases, nor collape when it is reduced).” (Sharp, 2010, p.137).“Consequently, statistical models of changes in advertising spend and changes in overall sales report a weak association. But if we look below the surface and divide the customers who were exposed to the advertising from those who are not, then we can see sales effects that were previously masked.” (Sharp, 2010, p.138).

 “The sales of a brand re like the height at which an airplane flies. Advertising spend is like its engines: while the engines are running everything is fine, but when the engines stop, the descent eventually starts.” (Sharp, 2010, p.140).“Consider what happens to the buying behaviour of a person who drinks Coke several times a day after seeing a Coca-Cola ad – nothing changes. So who is Coke’s advertising aimed at? It’s aimed at the millions of people who occasionally buy Coca-Cola, who scarcely ever think of Coke nd who seldom buy it. These consumers could easily forget about it and not make their semi-annual purchases.” (Sharp, 2010, p.140).

“The key marketing task s to make a brand easy to buy; this requires building mental and physical availability.” (Sharp, 2010, p.180). “building mental availability requires distinctiveness and clear branding. Building physical availability requires breadth and depth of distribution in space and time.” (Sharp, 2010, p.180). “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.” (Sharp, 2010, p.183). “we buy the same few brands over and over again and simplify buying decisions by only noticing our few regular brands. (…) We seldom ever want a large selection from which to choose as it’s too difficult.” (Sharp, 2010, p.186). “Yet the most important part of any buyer’s purchasing process (…). This part of the process occurs before buyers consciously evaluate which brands to choose: buyers, in effect, ‘decide’ not to consider the vast majority of brands on the market.” (Sharp, 2010, p.186).

“Brands that are easier to buy, for more people in more occasions, get bought more often. Brands that have greater market share are better known (and more noticed) by more people and are more widely available.” (Sharp, 2010, p.189).

 “One thing that makes established brands so valuable is that mental and physical availabitlity takes a long time to build and a long time to fade.” (Sharp, 2010, p.196). “To marketers, these market-based assets provide security – next year’s sales will be not too dissimilar to this year’s. This is very valuable, though it also creates problems in evaluating marketing actions.” (Sharp, 2010, p.198). “We see this in price elasticities where larger brands have lower elasticities.” (Sharp, 2010, p.198). Mc CafĂ©: “Nothing Mcdonald’s did was innovative; it was completely a ‘me too’ catch up exercize.” (Sharp, 2010, p.199). “Mc Donald’s didn’t do anything radical; it just got competitive again. But thanks to its existing mental and physical availability it can sell a lot of coffee and toasted sandwiches. Essentially, McDonald’s took away a ‘reason not to buy’, which was undermining its market based assets.” (Sharp, 2010, p.199).

Friday, 4 May 2012

Homer – The Odyssey

I can’t believe it took me more than 30 years to read this. For me, the most interesting theme is that of hospitality – the quality of men is revealed in how they treat stranges. Great men welcome even complete strangers welcomed with gifts. And the preciousness of the gifts shows the status of the host. This is very reminiscent of Mauss’ gift theory.

“This stranger, whoever he may be – setting forth from the East, it may be, or from the West – has come in his wanderings to my house. He asks for help to return home and implores us to ensure him this. Let us hasten, then to prepare his voyage, just as in times past, for no one who once has come to my house lingers here long, fretting for convoy home.” (Homer, 1980, p.85).

“Sir, I beg you to reverence the gods. We are suppliants, and Zeus himself is the champion of suppliants and of guests; ‘god of guests’ is a name of his.” (Homer, 1980, p.105).

“I gathered much wealth among the men of Egypt, because they all made me gifts.” (Homer, 1980, p.171).

“if a man is gracious in thought and gracious in deed, his guests carry good report of him far and wide over the world, and he finds many to call him noble.” (Homer, 1980, p.235).

And people who aren’t visited are not very high regarded “whose land have I come to now? Are the people barbarous, arrogant and lawless, or are they hospitable and godfearing?” (Homer, 1980, p.158).  “Merciless one, who of all men in all the world will choose to visit you after this?” (Homer, 1980, p.107).

But this gift giving is not as innocent as Mauss describes it: “But now let us give him also, each man of us, a massive tripod and a cauldron; later we will repay ourselvesby gathering from among the people, because all giving and no receiving would bear very hard on us man by man.” (Homer, 1980, p.154).

The second interesting theme is that of phrases: I think there are plenty of very colourful phrases. Such as:

“Leaving the lovely lake of Ocean, the sun leapt upwards into the brazen sky, bringing the light of the Deathless Ones, bringing it to for mortal men who live on the earth that gives them grain.” (Homer, 1980, p.23).

“Dawn comes early, with rosy fingers.” (Homer, 1980, p.32).

“There is nothing more devoid of shame than the accursed belly; it thrusts itself upon a man’s mind in spite of his afflictions, in spite of his inward grief. That is true of me; my heart is sad, but my belly keeps urging me to have food and drink, tries to blot out all the past from me; it says imperiously: “Eat and be filled.”” (Homer, 1980, p.81).

“Then the sun sank, and light thickened on every pathway.” (Homer, 1980, p.188).

“let him sleep warm till he sees before him the golden robes of Dawn.” (Homer, 1980, p.235).

“spear tipped with keen bronze.” (Homer, 1980, p.246).

“O Father Zeus, no god is ruthless as you are ruthless. You bring men into the world yourself, yet you have no more compassion for them than to plunge them into suffering and bitter tribulations.” (Homer, 1980, p.248).