How brands grow

Scientific laws about buying and marketing performance

Scientific laws about buying and marketing performance

Marketers tend to work based on long held conventional beliefs, rather than marketing science based on empirical evidence.

The Ehrenberg-Bass institute in South Australia is gaining global acclaim for bringing the scientific method to marketing.

The Ehrenberg-Bass institute in South Australia is gaining global acclaim for bringing the scientific method to marketing. The institute is led by Byron Sharp, Professor of Marketing Science. Read 5 important findings below:


  1. Double Jeopadry Law Brands with smaller market share have fewer customers and their customers are less loyal.

    The myth is that it is 6 times cheaper to keep a customer, rather than get a new one. However, the science shows that if you are a small brand that you have relatively lower control over your retention. So you should focus your advertising on acquiring new customers.

  2. Pareto who? The Pareto principle states that 80% of your money will come from 20% of your customer base – so marketers can often focus loads of attention of their most favored customers.

    However, the science reveals it’s closer to 55:45.

    This means that you must be very conscious of any “light” customers – these make up 45% of the volume and they are the most likely to switch brands. The science proves marketing efforts are most effective when you target positive memory structures that ‘switching’ customers have with brands.

  3. Differentiation is less important than being noticable That’s right… Get noticed!

    The science proves that being noticeable and growing distinctive brand assets are the most effective means to grow your brand – far more important than finding a product feature that’s unique or gives you a point of difference.

  4. Price promo is a weak strategy Deducting your prices to gain sales results has a long term effect on the profitability of the brand – you only attract non-frequent buyers.

    In addition to this, you set a low benchmark for the value of your product, which has the effect of turning off these light buyers from buying when at full price.

    Just consider if you normally make 30% margin, and you offer your product at 10% off – then you need to sell twice as much to get the same profits.

  5. We all suffice Suffice means that people go for the purchase that’s easiest… We are bombarded with so much info that we make decisions that involve the least hassle, rather than the taking the energy to intellectualize the decision.

    The science shows you need to be easy to buy from, so a – we need to advise our clients that they need:

    • Mental Availability: by being “always on” for your marketing efforts (campaigning tends to fail)
    • Physical Availability: by being easy to find/ buy
    Think of Starbucks – you may fancy one of their coffees, but if there isn’t a store nearby you’ll certainly settle for something else. Hence why there’s a store on every corner!

THE ARGUMENT AGAINST

The Institute produce all their findings from data and interviews – they use the scientific method of hypothesis, experiment, control, peer review. However, there are some doubters that point out:

  • The recommendations don’t consider start ups, where it isn’t possible to be ‘always on’ in their marketing efforts
  • The data comes mainly from consumer goods companies and therefore may not be so applicable to service industries
  • The data comes from established companies and therefore cannot be considered bullet proof for brands launching in the digital age

WHAT TO TAKE FROM IT

  • Focus client’s advertising strategy on acquisition of new customers
  • Focus on light buyers and persuading them
  • Build recognizable brand assets whenever possible
  • An everyday low price is most profitable
  • Consumers satisfice – so get distribution and maker sure your marketing efforts are “always on”

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