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Reply to critics

Critics have been few, and rather kind (nothing of substance has been raised).

Now and then a marketing consultant issues a thinly disguised advertisement for their consulting services that tries to have a go at the laws and strategy conclusions in
How Brands Grow. They usually say something like:

“our data confirms that larger market share brands have much higher market penetration BUT our whizz-bang proprietary metric also correlates with market share, and this proves that it drives sales growth, profits, share price, and whether or not you will be promoted to CMO”.

Often some obscure statistical analysis is vaguely mentioned, along with colourful charts, and buzzwords like:
algorithm
machine learning
emotional resonance
neuroscience

And sexy sounding (but meaningless) metrics like:
brand love
growth keys
brand velocity
true commitment
loyalty intensity

All of this should raise warning bells amongst all but the most gullible.

Let me explain the common mistakes….

Ehrenberg-Bass say brands grow only by recruiting new customers.
These critics somehow missed the word “double” in Double Jeopardy. Larger brands have higher penetration, and all their loyalty metrics are a bit higher too, including any attitudinal metrics like satisfaction, trust, bonding, you name it.

Brands with more sales in any time period, are bought by more people in that time period. So if you want to grow you must increase your brand’s penetration. In subscription markets (like home loans, insurance, some medicines) where each buyer has a repertoire of around 1, then penetration growth comes entirely from recruiting new customers to the brand. In repertoire markets penetration growth comes from recruitment and increasing the buying frequency of the many extremely light customers who don’t buy you every period.

The “double” in Double Jeopardy tells us that some of the sales growth also comes from existing, heavier customers becoming a little more frequent, a little more brand loyal. Also their attitudes towards the brand will improve a bit, as attitudes follow behaviour.

Improved mental and physical availability across the whole market are the main causes of the changes in these metrics. The brand has become easier to buy for many of the buyers in the market, it is more regularly in their eyesight to be chosen, and more regularly present in their subconscious, ready to be recalled at the moment of choice.



A focus on penetration ignores emotional decision making.
This is odd logic. A focus on mental and physical availability explicitly realises that consumers are quick emotional decision makers, who make fast largely unthinking decisions to buy , but who if asked will then rationalise their decision afterwards.


Attitudes can predict (some) behaviour change. Light buyers with strong brand attitude were more likely to increase their buying next year. And heavy buses with weak brand attitude were more likely to decrease their buying next year.

The real discovery here is that a snapshot of buying behaviour (even a year) misclassifies quite a few people. Some of the lights are normally heavier but were light that particular year. Some of the heavies were just heavy that year (kids party, friends visited, someone dropped a bottle) and next year revert closer to their normal behaviour. Note: for many product categories just a couple of purchases is needed to move someone into, or out of, the heavy buyer group.

Attitudes tend to reflect any buyer’s longer-term norm. So someone who is oddly heavy in buying this year will tend to be less attitudinally loyal to the brand than ‘regular’ heavies. Someone who is oddly light this year will tend to be more attitudinally loyal to the brand. Next year, odds are, their buying moves closer to their norm and their expressed attitude.

This statistical ‘regression to the mean’ is not real longer-term change in behaviour of the kind marketers try to create. Nor does this show that attitudes cause behaviour – their real influence is very weak, while the effect of behaviour on attitudes is much stronger.


Ehrenberg-Bass analysis is very linear reductionist, whereas we take a quadratic holistic approach.
Really not sure what these critics are talking about, nor perhaps do they. This is pseudo-science.


Ehrenberg-Bass analysis was only cross-sectional.
Actually, we published our first longitudinal analysis way in 2003 (McDonald & Ehrenberg) titled “What happens when brands lose or gain share?”. This showed, unsurprisingly, that brands that grew or lost share mainly experienced large change in their penetration. It also analysed which rival brands these customers were lost to or gained from.

In 2012 we undertook probably the largest longitudinal analysis ever of buying behaviour, examining more than six years of changes in individual-level buying that accompanied brand growth and decline. This highlighted the sales importance of extremely light buyers.

In 2014 we published a landmark article in the
Journal of Business Research showing that sales and profit growth/decline was largely due to over or under performance in customer acquisition not performance in retaining customers. Earlier we had explained that US car manufacturers did not experience a collapse in their customer retention when Japanese brands arrived, they each suffered a collapse in their customer acquisition rates.


Ehrenberg-Bass say there is no loyalty.
On page 92 of “How Brands Grow” we write:
“Brand loyalty - a natural part of buying behaviour. Brand loyalty is part of every market”.

On page 38 of our textbook “Marketing: theory, evidence, practice” we write:
“Loyalty is everywhere. We observe loyal behaviour in all categories” followed by extensive discussion of this natural behaviour.

In FMCG categories, buyers are regularly and measurably loyal – but to a repertoire of brands, not to a single brand. And they are more loyal to the brands they see a bit more regularly, and buy a bit more regularly.

All brands enjoy loyalty, bigger brands enjoy a little bit more.


I have a super large, super special data set.
Please put the data in the public domain, or at least show the world some easy-to-understand tables of data. If you want us to consider your claims seriously then you need to stop hiding behind obscure statistics and jargon.


I have data that shows Ehrenberg-Bass are wrong, but can’t show it.
MRDA.


Why does it matter anyway? Can’t we just build loyalty AND penetration?

Yes, that’s what Double Jeopardy says will happen if you grow.

Loyalty and penetration metrics are intrinsically linked. They reflect the buying propensities of people in the market – propensities that follow the NBD-Dirichlet distribution and Ehrenberg’s law of buying frequencies. Growth comes from nudging everyone’s propensity up just a little bit. Because the vast majority of buyers in the market are very light buyers of your brand this nudge in propensities is seen largely amongst this group – a lot go from buying you zero times in the period to buying you once, so your penetration metric moves upwards (as do all other metrics, including attitudes).

For a typical brand hitting even modest sales/share targets requires doubling or tripling quarterly penetration, while only lifting average purchase rate by a fraction of one purchase occasion. That tells us that we need to seriously reach out beyond ‘loyalists’, indeed beyond current customers, if we are to grow.

When budgets are limited (i.e. always) it’s tempting to think small and go for low reach, but this isn’t a recipe for growth, or even maintenance.


But if we can change attitudes then surely that will unlock growth?

It’s rare that it’s a perceptual problem holding a brand back. Hardly buyers reject any particular brand (and even most of these can be converted without changing their minds first). The big impediment to growth is usually that most buyers hardly ever notice or think of our brand, and that our physical presence is limited.

For more on “Marketing’s Attitude Problem” see chapter 2 of “Marketing: theory, evidence, practice” (Oxford University Press, 2013.

At last, How Brands Grow part 2

The follow-up book, instructively titled 'How Brands Grow part 2' has been released, and after selling out (thanks to Oxford University Press and their conservative print runs) is now available from Amazon.

Associate Professor Jenni Romaniuk is my co-author, and we've been helped out by our colleagues in the Ehrenberg-Bass Institute.

The new book answers the questions people have asked about B2B and industrial markets, durables and services marketing, emerging markets, and luxury marketing. unknown

Critics and Misconceptions

The original version of How Brands Grow was published five years ago. Over that period critics have been very kind, it's been lovely to read so many glowing reviews. To be honest I've been surprised at the lack of criticism because the book doesn't pull its punches, it doesn't go out of its way to avoid making enemies. The sub-title "what marketers don't know" is deliberately provocative, and faults are exposed in market theories and marketing theorists (both academic and consultant).

Yet criticism has been muted. Most is along the lines of "yes I agree with a lot of what he says" – with the implication…. "but not all of it". Yet very few have been willing to say which bits they dispute. I suspect this is from fear of embarrassment because they don't have evidence to support their belief, it just feels wrong. Fair enough, many of the findings in 'How Brands Grow' are confronting, counter to current beliefs, counter to what was learned at university. Those feelings of scepticism are perfectly healthy, so long as they encourage further thinking and data gathering. If you don't believe me please try to prove me wrong – only good can come of it.

I expected people involved in the direct marketing industry to be upset as they had been highly enamoured with myths of loyalty, targeting and customer engagement, yet they largely seem to have accepted the evidence and embraced the need for broad reach and evidence-based results. The same for those working in online media, while there are still plenty of people preaching the need to build deep customer relationships those who have read How Brands Grow seem perfectly happy to switch towards building physical and mental availability in big heterogeneous mass markets.

What little criticism there has been 'How Brands Grow' has come from marketing consultants, mainly those selling market research products. Of course, there are financial reasons, 'How Brands Grow' exposes that some of the things they say are essential to measure aren't very important. In some cases it exposes that their special proprietary metrics are equivalent to snake oil cures. There is also loss of pride, several have come out with critiques that are more along the lines of "it's not right, but if it is then I knew it all long ago".

Here are a couple of the things that have been said that are worth refuting:

Double Jeopardy says that brands can't grow – wrong. Actually, the whole book is about brand growth. The fact that brand metrics follow the DJ law tells us what will happen when a brand grows (i.e. how those metrics will change), it does not say that brands can't grow.

Double Jeopardy means there is no loyalty – wrong. Double Jeopardy clearly shows that loyalty metrics are predictable. In doing so it also shows that all brands get loyalty, that loyalty is everywhere. It just isn't the 'brand love' style loyalty that so many consultants love. Consumers are polygamously loyal.

New iBooks version

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Branding and Mental Availability - the distinction

A brand needs to build relevant memory structures that make it easier to notice, recognise, recall and hence.... of course...buy. This is the brand’s mental availability.

Branding helps build mental availability, it’s like a coat-hanger on which memories can hang.  It’s like a Dewey decimal number which tells the brain’s librarian which memories to access and/or refresh.

The branding in itself rarely communicates anything else, nor does it need to. McDonald's scottish name is a brand, it communicates nothing about usage situations, food types etc - no haggis served at McDonalds.

Branding is branding - full stop.

So what memory structures does a brand need? This is a useful question to ask when launching a new brand (and this example is a good reminder for existing brands too).  

Launching new brands is very risky, it's very easy for things to go wrong.  The question a marketer needs to ask is "what are the CRUCIAL memory structures that I need to get into as many heads as possible?".  In other words,
what memories, if they were missing would massively reduce the chance of purchase?  These usually turn out to be rather prosaic (and hence easily missed by those marketers who don't tend to be the most down-to-earth people)... things like…. what does the brand do (e.g. it is a car), what does the pack look like, where is it likely to be found, where will it be used/bought, who will buy it and so on.

If this sounds too simple then how come so many marketing campaigns seem to neglect this?

Share of wallet is not the key to growth - a loyalty myth

I was surprised and disappointed to see that the authors of the book “Loyalty Myths”, TIm Keiningham et al, themselves promote an old loyalty myth in the latest Harvard Business Review (Oct 2011).

The article reports a "discovery" of a relationship between verbal attitude reports and Share of Wallet/Purchases (measured in a period of panel data).  This is re-discovered every so often, indeed Jan Hofmeyr even won an award for it a few years ago.  This re-discovering (and misinterpretation) over and over says a lot about the sad state of our discipline given that the relationship was very well documented in the 1960s by Bird, Channon, and Ehrenberg (see references below).

Like Hofmeyr & colleagues (2008) the HBR team have done a rank order correlation which, in this case, guarantees high correlations of around 0.9.  Correlation is not a good way of assessing predictive ability (which I
illustrate here). Yet they report that their analysis is “to our knowledge the largest and most rigorous of its kind”.

The article goes on to imply that great financial returns can be gained from improving loyalty of existing customers.  They recommend that managers move from a focus on the drivers of satisfaction to focus on share of wallet rank. This takes a leaf out of Reichheld’s book, when he said forget about satisfaction and focus on willingness to recommend (Net Promoter Score). In this case it’s true that larger market share brands do have higher share of wallet rank. What they fail to mention is that such loyalty metrics move only a little, and do so when a brand's penetration increases dramatically –
the Double Jeopardy law.  

In effect they rely on an old “wouldn’t it be great” argument that goes along the lines of “if those customers who give us very little of their spending became near 100% loyal, then we'd earn X more money”. It’s like saying “if you win the lottery then you’ll be richer”, all logically/analytically/theoretically true but it’s easy to make theoretical statements that clash with the empirical world, as this does.  It's all beautifully academic, but not scientific nor practical. It’s not how brands grow.

Note how costs are also conveniently ignored. In the same way that Reichheld ignored them when promoting his
retention and profitability myth.

The authors recommend finding out the motivational reasons why people give only a small amount of their spending to your brand and lots to others. But this ignores the weak link between claimed motivations and behaviour.

In the article they present a grocery store as an (fictional, hypothetical) example - why they didn’t (couldn’t?) show a real case is rather telling.  In their hypothetical example the store drops prices on staple items to encourage low share of wallet customers to give them more of their supermarket shopping trips. Now supermarket repertoires have what is called high "1st store loyalty", in that the top store in anyone's repertoire tends to dominate, with the remainder of their repertoire being divided amongst several others.  From the store's perspective then, it has a large group of customers who are very loyal in the sense that they do most of their grocery shopping there.  And then another group of customers who largely do their shopping at another store.  The former group tend to live close by, the latter further away (a fact that is ignored in the article).

So TIm Keiningham & co are on sound ground in recommending a focus on the people with low SCR - sales growth does indeed largely come from the latter group (since obviously it's hard to get more out of people who already give you nearly all their custom).  But the real story for growth is, target your light and non-customers.  Go for reach.  Increase your mental and physical availability (e.g. open longer hours, open another store, make it easier for people to shop and shop faster...).

That's a very different story than the old-fashioned loyalty one (re)presented in the HBR article.  And the promise of riches to be gained from a share of wallet focus…..that’s a chimera.

Professor Byron Sharp
October 2011


BIRD, M. & EHRENBERG, A. 1966. Non-Awareness and Non-Usage. Journal of Advertising Research, 6, 4-8.
BIRD, M. & EHRENBERG, A. 1966. Intentions-to-Buy and Claimed Brand Usage. Operational Research Quarterly, 17, 27-46.
BIRD, M. & EHRENBERG, A. 1970. Consumer Attitudes and Brand Usage. Journal of the Market Research Society, 12, 233-247.
BIRD, M., CHANNON, C. & EHRENBERG, A. S. C. 1970. Brand image and brand usage. Journal of Marketing Research, 7, 307-314.
BIRD, M. & CHANNON, C. 1969. Brand Usage, Brand Image, and Advertising Policy - Part I. Admap, 6, 27-46.
BIRD, M. & EHRENBERG, A. 1972. Consumer Attitudes and Brand Usage - Some Confirmations. Journal of the Market Research Society, 14, 57.

HOFMEYR, J., GOODALL, V., BONGERS, M. & HOLTZMAN, P. 2008. A new measure of brand attitudinal equity based on the Zipf distribution. International Journal of Market Research, 50, 181-202.

Millward Brown replication - successful brands have low perceived differentiation

Almost all successful brands have very low perceived differentiation, yet they have loyal customers, they earn profits, and many of them have done so for many decades.
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Is digital media the new price promotion

Is digital media the new price promotion ?
I just heard a marketing mix modeller say that every project he has done in recent years has resulted in the conclusion that the advertiser should move some money out of TV and into digital (i.e. banner ads, social media).
Now marketing mix modellers have been telling clients similar (brand damaging) things for a long while about price promotions, i.e. take money out of TV and spend it in-store. Is this another chapter?

Marketing is not an applied discipline

Calling marketing science an applied discipline is just sloppy logic. Read More...

Loyalty/Engagement scores do not predict sales growth

I took the full list of Brand Keys 2011 Engagement Award ranks and correlated them again sales gains. What a surprise! A correlation of 0.4 but not in the direction that the people selling this claim, the data says the better the Band Keys rank the less the sales gain ! Read More...

Brands and logos don't have meaning

Consumers rarely stop to think about whether the logo looks nice, trustworthy, or conveys any other connotation.  Read More...

How to measure mental availability

Dr Jenni Romaniuk and I developed the concept we originally called Brand Salience as "the propensity of the brand to be noticed or come to mind in buying situations".

So how do we think this construct should be measured ?
Read More...

People don't like changing their beliefs

I like this quote (we all know some poor academics and consultants who rely on this phenomenon):

"It is more comfortable to have one’s existing beliefs and skills reinforced.......students give high ratings to outside speakers who tell them to rely on their gut instincts because techniques taught in school are of no value in the real world"


From J.Scott Armstrong (1998) “Are Student Ratings of Instruction Useful?” American Psychologist, vol. 53, p.1223-1224

Mental Availability is not awareness

A brand's mental availability refers to the probability that a buyer will notice, recognize and/or think of a brand in buying situations.  It depends on the quality and quantity of memory structures related to the brand.  See chapter 12 of "How Brands Grow". Read More...

Unlearning textbook myths

Watch the YouTube video here. It’s the trailer for my talk at BrandWorks University, May 23-25, 2011. Madison, Wisconson, USA. Read More...

How Brands Grow in Brasil

Some press coverage of How Brands Grow in Brazil. I’m not sure what it says. Read More...

ADNews - Sharp Gets to the Point

AdNews article “Sharp Gets To The Point”, Feb 2011. Read More...

Tedx talk at the Royal Institute Aus - before marketing there was no science

Byron talks to a room full of scientists about marketing. Hopefully this is more interesting than it sounds. Watch the video... Read More...

Apple's drive for penetration

It’s easy to forget just how much Apple has expanded its customer base Read More...

Sainsbury's exploits physical availability (using salt)

UK supermarket chain Sainsbury’s (a sponsor of the Ehrenberg-Bass Institute) has been doing rather well. And over Christmas they astounded financial analysts with their performance compared to other retailers. Like-for-like sales over the Christmas 2010 quarter were up 3.5%, and they overtook Asda to become the 2nd largest supermarket.
How did they do it?
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Innovation to avoid differentiation

The mantra within marketing and R&D departments is that innovation is for delivering differentiation.  But the reality is that much of the purpose of innovation is to avoid differentiation.  It's largely about keeping the brand competitive and where it is. Read More...

Emotional versus Rational Advertising

On page 134, table 9.1 of "How Brands Grow" I write that rather than saying thinking is emotional OR rational we should realise that most thinking is emotional And rational.

I question the value of the emotional rational dichotomy.  It's based on an out-dated view of emotions, and thinking.
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Provocateur

Rupert Murdoch’s The Australian newspaper interviews Byron about the book “How Brands Grow”. Read More...

Kraft tries to discourage its marketers from swimming upstream

A Kraft study confirmed one of the laws of growth presented in How Brands Grow, while the majority of Kraft brand plans run counter to the law Read More...

Back in Stock

My book is back in stock in the UK, selling in a number of places including Amazon UK. Still sold out in the USA, but stocks are arriving soon.
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Customisation, is not the ultimate form of target marketing

Brands compete largely as mass marketers, textbooks are being dumb when they cite examples of customisation as “the ultimate form of target marketing”. Read More...

Sold Out

How Brands Grow sold out, but Oxford University Press have printed more. Read More...