Since 2010, Byron Sharp's book "How Brands Grow" has become a key reference in marketing.
The book presents 11 patterns, almost law-like in nature, found from extensive data analysis spanning decades, markets & categories.
Here’s a short summary of each of the laws:
Double Jeopardy Law: This concept is derived from the observation that brands with smaller market shares not only have fewer customers but also have lower brand loyalty. The Double Jeopardy Law states that smaller brands face a double disadvantage: they attract fewer buyers (penetration) and those they do attract are less loyal (frequency of purchase). This phenomenon is widely observed across different product categories and markets. It reinforces that efforts and investment to increase market share are necessary for growth. As a brand grows, it naturally gains in both customer numbers and loyalty.
Retention Double Jeopardy: This is closely related to the Double Jeopardy Law but focuses specifically on customer retention. Smaller brands not only struggle to attract a large customer base, but they also find it more challenging to retain their existing customers. This is partly because smaller brands usually have less visibility, fewer resources for brand, marketing, and customer experience, and potentially perceived less premium or reliable compared to larger, more established brands. This makes their customers more prone to switching to other brands, leading to higher switching rates. In contrast, larger brands, with their broader customer base, often benefit from stronger brand loyalty and therefore, better retention rates.
Pareto Law (80/20 Rule): Nearly half of a brand’s sales are made by the least frequent 80% of its customers. Specifically, the top 20% of buyers make 50% of the purchases, and the bottom 50% of buyers contribute only 20% of sales, and the remaining 30% of mid-level buyers account for 30% of purchases.
Law of Buyer Moderation: Over time, customer purchasing behaviour tends to normalise. It means that heavy buyers might reduce their consumption while light buyers might increase theirs, leading to a more balanced purchasing pattern in the long term. This is a reminder of the importance of continuously attracting new customers to maintain and grow market share.
Natural Monopoly Law: Larger brands typically have a higher number of light buyers in their customer base. Essentially, the largest brands in a market attract more customers who make purchases occasionally or infrequently. “Brands with larger market shares are more likely to be chosen by light, occasional buyers of the category.”
Customer Bases Seldom Vary: In competitive markets, the profile of customers across different brands is often quite similar. This challenges the notion that brands have distinctly different types of buyers and emphasises the importance of focusing on the whole market, all different types of people.
Attitudes Reflect Behavioural Loyalty: People are more inclined to think frequently about brands that they regularly use, leading to higher brand attitude scores for larger brands. This is because larger brands are more likely to have a greater number of customers within the group of survey respondents, therefore receiving higher scores on questions related to brand image.
Usage Drives Attitude: A buyer’s attitude often shows how frequently they buy from a particular brand. In other words, a buyer’s attitude towards a brand is a reflection of their loyalty to it. It’s important to note that loyalty metrics, which measure this brand commitment, generally show little variation across different brands.
Duplication of Purchase Law: A brand’s customers often buys from its competitors, and this overlap is generally in line with their market share. In other words, every brand in a category shares its customers with other brands. Brands with larger market shares have a wider overlap with many customers, while those with smaller market shares share fewer customers.
Relationship Between Physical Availability and Market Share: To achieve a high market share, having products available in 80% or more of potential distribution points is necessary, but not a guaranteed way to success. Wide availability is a key requirement for a brand to attain a large market share, but it doesn’t automatically ensure it.
NBD-Dirichlet Model: A mathematical model that explains the differences in customers’ likelihood to make purchases. It shows that all brands have numerous infrequent buyers. Although these customers buy a brand’s products only occasionally, their large numbers mean that together, they significantly contribute to the brand’s overall sales.
Each of these principles or laws provides insights into consumer behaviour and market dynamics, helping with strategy development and decision-making.
You can pick up the book here.