The Route to Brand Growth – a dissenting view
Brand Growth: loyalty vs. recruitment, in between positioning and brand equity
The basic conundrum of Brand Growth is to simply balance recruitment vs. loyalty. In other words, how much sales we want the brand and its product portfolio to generate from new customers or from returning customers. The brands promotional and media plan are a by-product of that strategic balancing act, and so are derivative of that decision and also the long term brand positioning and brand equity efforts.
The traditional view is that loyalty is an important aspect of building a franchise and that the positioning should be as differentiating as possible with bold and emotional brand associations. If you are interested in getting some help for this then take a look at Jobholler.com, this website offers you the chance to get some help when promoting your brand. You can decide whether or not this is the right thing for you in your own time. However, I would like you to be able to consider all options that would best suit yourself. I found a paper, from Prof. John G. Dawes of the Ehrenberg-Bass Institute at the University of South Australia which dissents from the mainstream view on Brand Growth. And while I do not necessarily support all of the conclusions, I think there is a lot of merit to this study and I believe that there are strong reasons for looking at this nonconforming opinion
What data suggests on Brand Growth
There are three main conclusions put forward by Dawes. First and foremost that brands should focus on recruiting as many customers as possible, as loyalty is a by-product of the larger customer base. In addition to that, in consumer markets, brands lacking strong differentiating factors can still be very successful in the marketplace and therefore it is concluded that positioning should not really be an obsession of marketers.
Finally, because volume comes from large customer base and not loyal consumers and because emotional brand associations tend to be strong but focused on a niche, brands should pursue in their equity building more functional attributes which are by default, appealing to a broader audience.
1) Recruitment vs. Loyalty
While this is a controversial issue, I have also empirical evidence that this is true. Dealing with Brand Growth in consumer industries means coping with the notion that a very small percentage of consumers repeat a purchase within the 12 month period of observation. The percentage of consumers repeating several times the purchase within the same period is even smaller. As a matter of fact, I remember that, at the beginning of my career in P&G, we clearly avoided use of the word loyalty because we did not believe consumers could be loyal enough. We identified brands with a higher frequency of re-purchase, not a higher loyalty.
The bottom-line is that focusing on recruitment is what drives better sales in consumer goods. In addition to that, recruiting also increases re-purchases in absolute (not relative) terms: therefore a lift in the total customer base not only recruits one-timers, but also more frequent re-purchasers.
2) Positioning: Shared Attributes because of Repertoire Purchases
The notion that consumers purchase within a repertoire of brands is not a recent formulation. It is also not a recent discovery that brands belonging to the same repertoire tend to share associations with other brands within the repertoire. The new conclusion from Dawes is that only a small percentage of the consumer base recognizes uniqueness in a brand, and an even smaller percentage of that consumer base act on it.
In other words, striving for uniqueness, which creates a distance from the average repertoire attributes, might actually cause a detriment to the volumes by trading off smaller, unique-driven volumes with larger undifferentiated repertoire-focused ones. In a nutshell, the gravitational pull of differentiated and unique positioning has smaller traction than shared, undifferentiated repertoire-based attributes.
The conclusion, which I believe is brilliant, is based on empirical evidence and data. But I also think that the conclusion is not as absolute as it sounds. First and foremost, it assumes that a category and its repertoire associations are static which they are not ass market leaders redefine categories, even blurring them through convergence by launching new and innovative products.
The toothpaste industry was completely redefined by Colgate at the end of the 90s as was the laundry detergent marketplace when liquid and then tablets and then liquid-tablets were introduced. In other words, leaders, with their uniqueness, shape the direction of the industry and the attributes of the repertoire.
In a Schumpeterian way, innovation leaders re-create a marketplace and followers copy them by adopting the new standards. In this sense a unique positioning, could be the by-product of a strategic innovation effort, which is not bearing results just yet.
Because consumers in the long run tend to reveal multi-brand buying, there is evidence that consumers have “split-brand loyalty” over time by changing their repertoire. This also means that consumers tend to not retain – in the long term – a consideration set, which is the set of brands from which they – mostly – build their repertoire. This weakness in time of the consideration set, coupled with the notion that the stronger an equity association, the smaller the group that feel the association makes the author of the paper conclude that it is far more important to have an equity for masses which are ignorant of the brand attributes than a smaller group of truly dedicated brand lovers.
This conclusion is clearly a derivative of the other two. Larger masses mean better recruitment hence brand in larger number of consideration sets, therefore more repertoire buying. Unfortunately, the study does not take into consideration the relevance of an industry from a consumer standpoint and how the relevance changes with time.
For many young adults, laundry is a chore and there is literally no difference between a good laundry output and a bad laundry output however this view dramatically changes over-time, especially when people settle and have kids. Likewise, our consideration set for the purchase of a car drastically evolves with our life stage where different dimensions play a role in what is relevant to us (ever heard of a mid-life crisis?!?).
In conclusion – Brand Growth
While there are several conclusions that we might want to disagree with, there is a lot of value in the reasoning behind the paper and it’s always a good idea to listen to the dissenters when they explain complicated notions, through a simple and efficient language.
And also: focus on the recruitment…..