How Brands Grow [Speed Summary]

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How Brands Grow: What Marketers Don’t Know (HBG) is one of those business bestsellers that has fast become an absolute must-read for marketers; it has perhaps done more to shake up the world of brand marketing than anything else created or published in the last decade (see our summary of Sharp’s 2016 followup book How Brands Grow Part 2 here).

Having an opinion on HBG (which essentially comes down to whether you believe marketing is an art or science) is almost a prerequisite to credibility in marketing today.  So if you do nothing else, read the speed summary and watch the TED talk below.

So what does the book actually have to say?

Authored by Byron Sharp and his colleagues at the Ehrenberg-Bass Institute, University of South Australia, and building on the seminal marketing research by Ehrenberg and Goodhart, How Brands Grow is a manifesto for evidence-based marketing, building brands based on what works in scientific practice rather than what should work in marketing theory. In addition to outlining 7 evidence-led rules for unlocking growth through brand marketing, the book busts a number of pernicious and costly marketing myths that are sometimes still peddled today; “esoteric quackery concerned with segmentation, differentiation and how buyers perceive brands (e.g. brand personality)”.

Bin the Brand Onion

For Sharp and his co-authors, marketers have made their lives unnecessarily difficult, handicapping themselves with unfounded theories of branding based on anecdotes and bad metaphors.

For example, there is little evidence to suggest that consumers want ‘relationships’ with brands, or that brands should seek to create ‘meaning’ in consumers’ lives, or that brand commitment and brand loyalty are anything more than just wishful thinking, or that brand positioning (in terms of creating a differentiated ‘brand personality’) is a productive endeavour. When you look at the data, what works in branding is surprisingly simple – making the brand easy to buy – by maximising it’s physically availability and creating an attractive and memorable set of distinctive brand assets; sensory and semantic cues such as colours, packaging, logo, design, taglines and celebrity endorsements that make the brand easy to like, memorise and recall.

Mass Marketing Works

Moreover, when you look at the evidence, there is no reason to complicate your marketing lives with targeting and segmenting customers, whether based on lifestyle, category usage or brand loyalty.  Positioning brands for particular target segments is as futile as brand positioning by creating a differentiated brand ‘personality’. Successful growth brands have universal appeal, and mass marketing with a reach-optimised single simple message, rather than being a mass mistake, is still the most effective way to drive sales.

Want Loyalty? Get a Dog

And there’s one more lesson from scientific analysis of marketing data – you don’t need to complicate your lives with a costly customer retention/loyalty program – because they don’t work and have no impact on growth.  Customer loyalty is largely a myth (customers are at best ‘promiscuous loyals’ – flitting fickle-like between alternative rival brands based on availability – 72% of Coke drinkers also buy Pepsi (UK)). Likewise for brand commitment – people buy brands out of habit, not commitment. The evidence-led path to growth is simple; market penetration by recruiting ever more new brand users in habitual purchase. And forget marketing designed to increase purchase frequency, it doesn’t work (difference in market share can nearly always be explained in terms of differences in market penetration, not purchase frequency) – focus instead the light and occasional users that account for much of your sales and growth (the typical Coca-Cola buyer in the UK buys Coke just once a month).

How Brands Grow

If there is one top insight in HBG it’s this; the secret to growing your brand is to build ‘market-based assets’ and these come in two flavours – maximised distribution (physical availability) – and clear and distinctive branding using sensory cues (colours, logo, design…) that are easy to remember (“distinctive memory structures”) and recall.  The real challenge of marketing is all about availability – available in the mind and in the store.

Seven Rules for Brand Growth

After several bruising rounds of marketing myth-busting, HBG outlines 7 scientifically derived rules for brand growth.

  1. Continuously reach all buyers of the category (communication and distribution) – avoid being silent
  2. Ensure the brand is easy to buy (communicate how the brand fits with the users life)
  3. Get noticed (grab attention and focus on brand salience to prime the users mind)
  4. Refresh and build memory structures (respect existing associations that make the brand easy to notice and easy to buy)
  5. Create and use distinctive brand assets (use sensory cues to get noticed and stay top of mind)
  6. Be consistent (avoid unnecessary changes, whilst keeping the brands fresh and interesting)
  7. Stay competitive (keep the brand easy to buy and avoid giving excuses not to buy (i.e. by targeting a particular group)

Implications for Innovation

The implications of HBG for innovation are clear; once you’ve spotted a market opportunity, and a product solution, innovation should continue with building a set of distinctive brand assets; the sensory and semantic cues such as colours, logo, packaging, design, tag-lines and celebrity endorsements that will make the brand easy to memorise and recall.  The key to brand innovation is to achieve brand distinctiveness with sensory brand assets (and not conceptual brand differentiation).

The second major implication for brand innovation is that brands should focus as much on innovative distribution solutions as product innovation – the secret to innovation success is to get your distinctive innovation in front of as many eyes as possible.  So how can you innovate to maximise distribution (think Nespresso, Apple Retail, American Apparel).  Ultimately, Brand Genesis is all about innovating availability – mental availability in terms of creating brand assets that can become memory structures based and physical availability, maximising distribution or owing a distribution channel.  In contrast, any time spent on market segmentation or targeting on anything other than needs is time wasted, and efforts to construct a brand ‘personality’ or attempts to make meaning with customers is futile (most memorable quote in the book “Rather than striving for meaningful, perceived differentiation, marketers should seek meaningless distinctiveness”).

The Brand Genetics Take

Like many others, we think How Brands Grow: What Marketers Don’t Know is a crucial book for brand marketers.  Whilst we’ll not be drinking the radical empiricist KoolAid it champions (we’re firm believers that there’s nothing so practical as good theory – good theory inspires, guides and motivates), Sharp’s scientific rigour cuts a deadly swathe through much marketing nonsense.  It’s a reality-check to realise that consumers perceive very weak differentiation between rival brands, and buy more out of habit and availability rather than commitment and loyalty. And it’s a useful reminder that successful branding (and innovation) should concern itself with creating and managing a set of sensory brand assets. The implication that brand innovation should be as much about distribution innovation as product innovation is also particularly useful.

Apart from epistemological quibbles (limits of inductivism and naive empiricism) and psychological nuances (brand choice as risk mitigation), where we do differ from HBG is in our conviction that the ultimate answer to how brands grow is innovation, rather than managing mental and physical availability.  Sure, innovation always has a negative short-term impact on your brand (your ability to extract margin), since it requires investment, but brands exist in competitive and changing environments where opportunities change. As Kapferer concludes in Strategic Brand Management: Brands are rejuvenated by new products matching new needs, not by advertising. Would it have been smarter of Coke to invest in increased availability rather than buy VitaminWater for $4.1bn? Or Budweiser to have invested in more availability than innovating with Bud Light. We think not.  Moreover, unlike the dry and scientific management of availability, innovation has the capacity to energise and motivate a brand.

We’re also not convinced about the futility of ‘brand personality’, particularly as a tool for creating the consistent and distinctive brand assets that HBG recommends.  Consumers may not want to bond or have relationships with trademarked packaged goods, but personification can be a useful creative tool, especially if you are co-creating with consumers. We are social creatures with an evolved social mind – and that means we tend to personify everything from pets to objects – we personify the world around us as it helps us understand that world.  Personification can be a useful creative tool in brand development, since it allows marketers to carve brands at the mind’s evolved joints and make brands more memorable and communicable.

That said, HBG has some important lessons for brand marketing – and yes, we will be burning that brand onion.

Appendix: The New Laws of Marketing

HBG also posits a number new scientific inviable marketing laws (insights)

The Double Jeopardy Law: Brands with smaller market shares have fewer buyers, who are also less loyal (loyalty declines with market share)

Law of Buyer Moderation: Regression to the mean of purchase behaviour over time; heavier users become lighter, lighter users become heavier buyers, and non-buyers begin to buy the brand

Duplication of Purchases Law: All brands, within a category, share their customer base with other brands in line with the size of those other brands

AUTHOR

Paul Marsden

All stories by: Paul Marsden
18 comments
  • Henry Coates
    REPLY

    Good that you have reviewed this book. I am not so sure that Sharp and Co would disagree with you that innovation is critical to brand development. Do they say that (I grant they don’t talk about it much)?
    It would also be interesting to get your view on on HBG vs Reichheld and his theory about loyalty. Those two don’t agree. What do you think about their relative positions?

    • Kain Vodic
      REPLY

      In answer to your question re: Reichheld, they don’t think highly of his theories, as per when I studied my Masters of Marketing at UniSA (Ehrenberg-Bass).

      The thrust of E-B’s work is that to grow brands you want to acquire more new customers who may be light users of the category. Whereas, my understanding of Reicheld’s work is that he advocated growing your brand through the relatively low cost (compared with advertising) of driving more repeat sales from existing customers.

      Much of E-B’s work is in FMCG and low involvement purchase decisions – eg toothpaste. Their argument is that there is only so much toothpaste you can use, so why not get more people buying your product to grow sales.

      Our agency does a lot work with automotive dealerships and so some of the E-B rules or insights don’t translate as well for high involvement purchase decisions – eg for people buying cars. The experience of our automotive clients is that going back to the database of previous customers can deliver significant ROI as customers have given their trust over at least once and that it’s easier for the customer to give their trust a second time, than it was the first time.

      Hope that helps! Have a great day 🙂
      KV

      • Henry coates
        REPLY

        Kain,
        When you say Ehrenberg’s rules don’t apply so much in automotive, their work on defections from car brands follows DJ pretty well. That’s not to say talking to previous customers has no value, on the contrary, you know them and they know you but defection does happen for reasons within and outside our control, so sales volume maintenance has to include gaining new customers just to counter defections, then we have to add more to build.
        As a business of course the customer database is a big and good resource but it only covers past customers and that will only be a few of those for whom your brand will be acceptable.

        Cheers

        Henry

  • Mike
    REPLY

    One of my biggest disagreements with HBG is the notion that its a waste of time to target. While I know empirically that there’s less incremental sales to be had, on average, with heavy brand buyers who are also heavy category buyers, it ultimately depends on the brand and category. Some brands’ still only have a small share of wallet (10-20%) with their heaviest buyers and there’s plenty of headroom to grow there. That same person might be 10x of greater value than a light brand buyer who almost never buys the category, and should not be ignored. Budget permitting, its ideal to cast a wide net as efficiently as you can, then double down on those buyers of highest worth and share of wallet opportunity.

    • Henry
      REPLY

      Hi Mike,
      Thats a fair challenge to Sharp et al. as you say, much depends on the situation of the category, brand etc and your heavier users should certainly not be ignored, though I guess if you want a bigger share of your users requirements from the category, they will need a reason to up-weight. Often that is provide by distribution build or more brand communication – advertising and publicity. Price promotion is a means to do this as well but its expensive.
      As I understand it, the main reasons they say that targeting heavy users is less valuable is that whatever their level of loyalty, they are probably near the top of what they can or are willing to give to the brand, ie you’ve got them, they know the brand and are happy, which is why they are heavy users; they also cycle and become less heavy in due course (c.50% of heavies are no longer so next year). The lighter users have more switching space (if only 5% of their cat requirements are your brand, it won’t need much of a change for that large group to become more valuable). Net, as you say, the brand will benefit via all users by building mental and physical availability. If there are distribution or innovation opportunities that may serve the heavier user, that double-down may be very productive with the added benefit of recruiting and potentially upweighting some lighter users too.
      I don’t this you are that far apart.

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