How often have you heard that “Existing, loyal, heavy users are more important than light users and brand switchers?”
  
It is common sense.  It makes sense that a heavy user accounts for more sales than a light user then they are more important buyers.  It is also said to be much more expensive to acquire a new customer than to retain an existing customer.  So to grow we should focus our efforts on getting the loyal customers to buy more or buy more often.  This group offer easier pickings for more growth.
  
The problem with this argument is that it is a theory built on anecdotal evidence and hypothesis.  But it is not based on any empirical evidence of how buyers behave and which types of buyers contribute the most to brand growth. 

This post brings some science to analyse this theory.  What science does is to use empirical evidence to discover patterns that repeat themselves.  This validates or contradicts the theory.  Then we understand what actually happens, not our own projection of how it works.  We can develop scientific laws.  It is surprising how little marketers refer to scientific analysis.  But maybe the tide is turning.
 
Andrew Ehrenberg pioneered bringing science into marketing.  He started this as long ago as the 1960’s using scientific research to explore patterns of buyer behaviour.  Read about Ehrenberg here.
 
One discovery he made is that bigger brands always have far more buyers than smaller brands.  Buyers are also a little bit less loyal to the smaller brands.  The difference in brand size is almost entirely explained by the different number of buyers. Bigger brands have higher penetration. Differences in levels of loyalty are small.  

There was further evidence of this truth revealed in an IPA report called “Marketing in the Era of Accountability”.  Les Binet and Peter Field used the IPA Effectiveness Awards dataBANK to identify the marketing practices and metrics that truly increase profitability create growth.  Campaigns that aimed to increase penetration were more than twice as likely to report very large improvements in sales and profitability

                                                Target to increase
                                     Pentration  %            Loyalty %
                         Gold               21                        2
                         Silver              20                        6
                         Bronze            18                       3
                         No Medal         41                      89
 
 
This has important implications for us as marketers.  Focus on loyalty and persuading existing customers to buy more is not the best way to grow a brand.  Customer behaviour and attitudes mean that ‘loyalty’ does not work as might be expected.   
 
This means there is the right and the wrong way to use customer loyalty schemes and other types of ‘relationship management’.  This means we need to assess all marketing programmes based on their ability to attract more buyers and increase market penetration.  To keep it simple.
 
Increasing penetration is the most important objective to get growth
 
But what about creating customer delight so that we keep our customers?  Surely this is important.  Well it is.  We also need to distinguish between buying customer loyalty with promotions and schemes and creating loyalty through customer delight.  Buying loyalty will not contribute much to increasing penetration.  Whereas creating customer delight, builds advocates who recommend our products.  A powerful way to increase penetration is to create word of mouth referrals.  So customer delight is a tool to build penetration and attract more buyers.
 
Despite the evidence, Ehrenberg was often ignored by marketers and sometimes dismissed or criticised for trying to bring the rigours of science into the creative world of marketing.   Fortunately for us all, his great work is now carried on by the Ehrenberg Bass Institute for Marketing Science.
 
If you want to see why understanding the science of customer behaviour is important.  Please watch this video of Byron Sharp explaining his view at a Tedx event.  (it is also good fun to watch)

For us at Differentiate, we want to bring more science into the art of marketing.  Bringing science into marketing is not about supressing creativity.  We know it is important to be creative and have great ideas.  But we believe these ideas will be so much more powerful if they are founded on how customers actually behave and the facts about how brands grow.  We have been using this evidence to design our processes so that we bring a more robust approach to create better strategy.   We find this is more convincing to the business team.  This helps us to help you create new products and services and messages that the whole business will support and get excited about.

We will develop this theme further.   For the moment we leave you with the thought that we should all
 
Bring more science into the art of marketing 

“It is the obvious which is so difficult to see most of the time. People say ‘It’s as plain as the nose on your face.’ But how much of the nose on your face can you see, unless someone holds a mirror up to you?” 
― Isaac Asimov, I, Robot

Great insights can seem obvious to us when we hear them or discover them, but were often so hard to spot before we saw them.  On a number of occasions we have revealed to our clients the most important thing that customers want from their products.  This has been the result of substantial consumer research and management workshop activity and data analysis.  When we explain the conclusions,  the effort and expense in coming up with the finding can seem strange.   the insight just makes perfect sense to everyone, especially with the wisdom of hindsight. 
 
I once received this remark when making the statement that the most important thing about weed killers is that they kill the weeds.
 
“How much did we pay you to come up with that Chris!”
N.B. There was more to this insight, and this was not the differentiator, but that was really proprietary to the client, so not for sharing in a blog post.  However the differentiators were similarly simple and obvious with hindsight.
 
Another example is something that we discovered about estate agents.  It is easy to think that since the estate agent is paid a % of the house sale as commission, they are motivated to get the best price for their clients to maximise their income.  Seems obvious and true, but do the analysis, look at the real motivations and talk to estate agents and you discover this is not true.  In reality they are most concerned that the sale goes through so that they get some commission.  The bigger risk for them is the sale falling through and the longer it takes to complete the transaction the more likely the sale will fall through.  So actually they are focused on the speed of the transaction.  What this means if you have a service to help estate agents, then supporting transaction speed is critical. We found this out in a client study.   Freakonomics also reported on how this works for estate agent clients and used an empirical approach to get it right.  They explain in this video.  or you can read in this post

Many insights about what drives purchasing have an element of the blindingly obvious about them.  The best insights are easy to understand.  However they are often not so easy to spot if your vision is clouded by some existing conventional wisdom or common sense about the market.  In fact it often takes uncommon sense to discover them.
 
Once we have simple clear insights, we can use these to develop products that will work and the whole business will understand that they will work.  As we all know, insights and ideas seem hard to come by.  But discovering these insights is still easy compared to engaging the business to implement the resulting plan.
 
Simplicity and clarity are valuable tools to engage the business.

I was reminded of some important insights about the reputation of marketers and how to get the business to be customer led whilst attending a recent marketing society event.

The event was to launch a campaign to boost the reputation of the marketing function amongst the financial community in “The City”.  The society has asked Nicola Horlick to spearhead this campaign for free.

She is clearly enthused about the idea that marketing drives growth and is fundamental to profitable success.  It was fascinating to hear this from a successful fund manager.  What was particularly interesting though was to learn from 24 CMO’s and senior marketers at the event how they saw the current reputation of marketers and what could be done to improve it.

You can read a summary of this on the Marketing Society blog.
click here>>>>>>>>>>>>>>>>>>>>>

Please feel free to contact me to find out what was discussed.

Things do seem to have moved forward a bit. The CMO’s reported situations from quite a broad spectrum.  Some reported investors and financial directors having too much faith in marketing!  (When we did our research, we found patient tolerance of marketing was about the best that could be expected) .

Some CMO’s described a more balanced situation, where marketing is recognised as necessary but not always appreciated.  There also remain financial directors who struggle to see the justification for many marketing activities.   Where marketing is well regarded it often has broader responsibilities including influence over product development and profit accountability.  Where marketing is more marginalised, it can be confined to marketing communications.

But it seems our original insights remain true.

1. Marketers are highly regarded for their ideas and creativity, but can lack strategic and commercial credibility.  Marketers can be seen as spending too much time talking with themselves and their agencies and not enough time learning from and convincing the business.
2. Successful and influential marketers make a disproportionate effort to communicate with the whole of the business.  They do it more frequently.  They use business language not marketing speak.
3. Many of the most highly regarded marketers are not marketing specialists, but business leaders and entrepreneurs with a full commercial approach. e.g. Stelios, Steve Jobs, Richard Branson,
4. At the heart of these successful leaders is powerful customer insight, often not drawn from market research but by talking with people.
5. Marketers must work at creating quantifiable measures to assess effectiveness.  These measures must be accepted by the business.

There was one thought that came up time and time again.
“Successful marketing teams talk with the wider business team more often than less successful marketing teams”
This is because these discussions develop marketers credibility and help them learn more about the customer and the business capabilities as a result.

We have more detail on our original research, the Marketing Society lessons and other published research   Contact us to get some reports

Complimentary workshop
We have a Marketing Influence programme to help your marketing team to understand this and adapt their behaviour.  Contact us to discuss a complimentary session with you and your team.

This is now the title of our ezines.  We have also included this phrase in our logo because we believe it more accurately describes the best work we do for our clients.  This thought came about when I was reading a book by Richard Rumelt called Good Strategy/Bad Strategy – The difference and why it matters.  He really brought home some simple truths about strategy and helped us focus on why the search for competitive advantage is pivotal to creating successful strategy.  If you haven’t read it.  Just click on the image to go straight to Amazon and order the book or the Kindle version.

Reading this book reminded me that for us strategy is not about visions, goals and aspirations.  Some strategy work can get confused with the company mission and goal setting.  For us better strategy is about creating a plan of action (which is designed to achieve specific goals).  So we included the definition in the blue circle below as an image on our new website as a valuable reminder to us.
 
We have also updated our short paper to describe how you can discover your competitive advantage and develop A Plan of Action that is designed to achieve your goals.  This is called The Growth Game.  We use a metaphor of seeking competitive advantage in sport and show how this translates into business decision making on growth strategy.  If you have not had a chance to read it, you can download it by signing up here