Book review: How Brands Grow by Byron Sharp (Oxford, £22.50) and How Brands Grow Part 2 by Jenni Romaniuk and Byron Sharp (Oxford, £22.50)
I love these two books. Over the last decade or so I’ve heard enough to last me a lifetime about how the key to growth is to focus tightly on a precise customer type, eschewing mass marketing and targeting those customers directly to the exclusion of all others. The consultants who propound this idea never seem to notice the irony that they themselves live on Twitter and would sell their own kidneys for a three-inch quote in a low-circulation business mag.
Hurrah and huzzah, therefore, for Byron Sharp and Jenni Romaniuk from the Ehrenberg-Bass Institute at the University of South Australia. They are proper, serious researchers and their findings, published in these two books between 2010 and 2016 should make every public relations practitioner’s heart leap with joy.
They demonstrate compellingly that new business from light buyers drives growth in any given market – not the heaviest existing buyers, who have been courted by orthodox marketers for years but who, the authors show, are likely in future to buy less, not more, from you.
Furthermore, thanks to what the author term “double jeopardy”, new sales in any given market will be taken by brands in proportion to their existing market share – so if you have 30 per cent of the current market, you’re likely to enjoy around 30 per cent of any overall growth in the market too. What is more, if you don’t grow your share then you won’t stand still, you’ll shrink because – whisper it quietly – the customers of smaller brands are less, not more, loyal than those of their larger competitors.
“But new business is a mug’s game, most of my profit comes from doing more business with existing customers,” I hear you cry.
Someone once told us that and we all believed it, probably because it was easier than actually thinking about it. It turns out, though, that the much-parroted 80/20 rule whereby 80 per cent of a company’s revenues come from 20 per cent of its customers has been wildly overstated.
Sharp and Romaniuk prove that in fact the top 20 per cent contribute just over 50 per cent of sales – so if you ignore the bottom 80 per cent of your customers you’re actually turning your back on nearly half your revenue potential.
So, what is a brand to do if it wants to grow? You’ll need to read the books to find out but one of the keys is to improve “physical and mental availability”. That means you need a) to be where customers can easily find you and, b) for them to have heard of you and associate you, unprompted, with the category in which you operate.
The authors are able to show that the rules they have uncovered hold true across all sectors and categories, even luxury and services brands. One of the chapters of the first book is entitled, “Our Buyers are Different”. You guessed it: they aren’t.