Marketing myths are numerous. They are like religious beliefs, they spread and converts repeat them without trying to question their relevance. Once in a while, a business book appears which changes your perception of things forever. Such business books are inspirational (Crossing the chasm in 1992 for instance), some are critical (such as Scott Berkun’s myths of innovation) and some just take you back to basics. This is the case with Byron Sharp’s “how brands grow” (Oxford – 2010), an opus which unfortunately didn’t get enough attention and is even sometimes wrongfully dismissed as scientific claptrap. I must admit that I enjoyed the book thoroughly, even though some of its conclusions did puzzle me a bit. I suppose that these will lead to more investigations since some of the evidence presented in the book and some of the conclusions based on such evidence (mostly in chapter 7) are very counterintuitive. Here is what I learned and would like to share with you regarding this book.
Marketers are used to believing their own stories but often fail to check the facts. This is what Byron Sharp and his Ehrenberg Institute have done and their conclusions can be summarised as follows:
- myth number one: only loyalty matters, acquisition is less important
How often do we hear that it is more worthwhile to retain existing clients rather than acquire new ones? Well… as far as I am concerned, almost on a daily basis. Sharp shows that this is wrong, that churn depends – mostly – on the size of your customer base and that customer acquisition is of paramount importance. This is what is known as the double jeopardy law: “sales are lower because they have fewer buyers who buy the brand less often”. That law, besides, applies to all sectors, and all countries. As a consequence of the double jeopardy law, it is not cheaper to retain an existing customer than acquire new ones. Acquisition, CRM pundits must be eating their hats now, is not an option, it must even be a priority for brands.
- myth number two: heavy buyers matter, light buyers don’t
That is false too. A customer base is like a long tail, with few repeat buyers and a vast majority of light or very light buyers; but the sheer mass of the latter makes their category very important in fact. These people are those which brands must convince over and over again if they want to succeed.
- myth number three: targeting works
That one is really puzzling I must admit. Sharp points out that despite marketers’ efforts in trying to “differentiate” through targeting, brands end up sharing “normal-looking” customer bases and those customer bases are supposed to be interchangeable. This is – once again – said to apply across all categories and countries. Yet, luxury products, for instance, cannot be afforded by all. Sharp’s point is that segmentation within a subcategory doesn’t exist. It may exist between subcategories, however. This item would, however, in my mind, require further investigation.
- myth number four: cannibalisation is a bad thing
According to Sharp’s findings, it’s not! What matters here, is not whether brands are differentiated, but whether they are “distinctive” (that is to say easy to recognise from others).
- myth number five: consumers by preferred brands
Sharp contends that is just the other way round. One tends to favour one’s own choices; some sort of post justification of one’s own purchases in fact (I bought this, therefore I like it; or, I’m used to buying this etc.) That point he adds also applies to iconic brands like Apple and Harley-Davidson. Basically, he means that Apple customers aren’t in any way, more loyal than PC clients for instance. This chapter is probably the most difficult to sell. There is so much hype about Apple products that things do get very irrational. Sharp may well be right, but the evidence he uses to show that this is the case is rather outdated. Besides, Apple’s overwhelming success has, recently, put so many companies in such a bad position (Nokia, Sony Ericsson to name a few, not to name hp which withdrew from the Pocket PC (then Smartphone) market which it hugely dominated only a few years before). The evidence given here is a bit outdated on the one hand and debatable on the other. This chapter requires, therefore, more investigation, even though mine Sharp may well be onto something (for other myth-busting regarding Apple on this blog click here). Byron Sharp’s blog is available at http://marketinglawsofgrowth.com/
- myth number six : the 80/20 rule always applies
This isn’t a myth per se, but the numbers don’t quite add up. Sharp, on the basis of numbered evidence once again, shows that Pareto’s Law does apply but real numbers based on observation are closer to 50% for most brands and never reach 80%. This reinforces the need to acquire more customers.
- myth number seven: advertising doesn’t sell
Sharp shows on the contrary that advertising has a clear (but mostly long-term) impact on sales… Provided your product is distinctive enough and that your campaigns follow a few simple principles amongst which:
– reaching all by categories
– no lapses
– clear brand links
– easily noticed and remembered
- myth number eight: price promotions increase sales in the long term
That one is far less counterintuitive I find. Price promotions are quite effective in boosting sales. Evidence produced by Byron Sharp shows that promotion has no or little effect on long-term sales. Sharp sees a minute rationale for maintaining price promotions over time apart from maintaining a relationship with retailers.
- myth number nine: loyalty programs are effective
In fact, loyalty programs work a little, but their impact on loyalty is minimal and in some cases, brands won’t even feel the true effect at all for many external reasons. My friend and colleague Prof Christophe Benavent from the Paris University has been a long-time contender that loyalty programs don’t work. He’s actually quoted in Byron Sharp’s book as well. One may have the vague feeling that conclusions might be different whether one looks at airlines for instance or a company like AMEX which has built its distinctiveness upon its loyalty program (I even chose to get an AMEX card a few years back which is coupled with my airline frequent flyer program and I have transferred the entirety of my purchases to AMEX) but some evidence is required before one makes any rash conclusion.
Overall, I really enjoyed Sharp’s approach which is based on fact rather than fiction, even though some of the most counterintuitive conclusions would benefit from a serious data update. I definitely recommend you buy this book and place it on your bookshelf.