You are on page 1of 26

What makes small brands small,

and large brands large?


The answer lies in:

CUSTOMER LOYALTY MARKET PENETRATION


the average purchase rate per customer the size of a brand’s buyer market
“Larger brands have slightly higher
customer loyalty and much greater
penetration than do smaller ones.”

— Byron Sharp, How Brands Grow


So smaller brands have far
fewer buyers who are less
loyal, helping explain their
smaller size.
The“Double Jeopardy” Law

SMALL BRANDS LARGE BRANDS

LOYALTY slightly lower slightly higher

PENETRATION much lower much higher


This phenomenon is known as
the “double jeopardy” law.
Let’s see what the double
jeopardy law looks like in
action, using the 2005 UK
shampoo market.
The Impact of the “Double Jeopardy” Law
Shampoo Market, UK 2005

Market share Annual market penetration Purchase frequency (average)

16%

12%

8%

4%

Head & Shoulders Pantene Herbal Essences L'Oreal Elvive Dove Sunsilk Vosene
Brands

Source: TNS.
The graph tells us two major things
1. Loyalty doesn’t vary dramatically between brands
But it is higher for those with greater market share.

2. Annual market penetration varies with market share


Larger brands have far larger penetration than smaller ones.
Consumers can be split up into non-buyers and light,
medium, and heavy buyers.
Buyer Groups
Sample of leading brand of tomato sauce in the US

9%

44 %
Don’t buy at all
25% 44% Non-buyers
Light buyers
Moderate buyers
Heavy buyers

22%

Source: How Brands Grow, Byron Sharp


What does this chart tell us?
Most buyers are light buyers.
In many cases, almost 80% of a brand’s buyers can be light buyers.
Now, an example of this
in action.
Let’s look at Coca-Cola’s
customer base.
Their average buy rate is 12
Coca-Colas per year, but
most people buy only one
or two per year.
They do have some heavy
buyers, or people buying
three Coca-Colas a day
(1,000 per year), but there
are far fewer of these.
Buying Frequencies
% of UK cola buyers purchasing Coke x times, 2005

60

54

48

42

36

30
%

24

18

12

0
0 1 2 3 . . . . . 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Number of purchases in a year

Source: TNS.
This graph tells us two things.
In the 2005 UK cola market…

1. Only a very small percentage of consumers were heavy buyers.


They purchased a Coca-Cola 50 or more times a year.

2. The bulk of customers were non or light buyers.


They got just a couple Coca-Colas a year.
“Though Coca-Cola’s light buyers may
be purchasing only one or two drinks a
year, collectively they add up.”

— Byron Sharp, How Brands Grow


LIGHT  BUYERS  MATTER  FOR  BRAND  GROWTH  
Percentage  of  Coke  buyers  buying  Coke  X  =mes  in  the  U.S.  
20  
 
16  
 
Light  Buyers’  
12   impact  on  sales  
 
8  
 
4  
 
0  
1    2    3    4      .          .        .    .        .        .      .    .      .        .      .        .      .      .      .        .      .        .        .      .      .        .        .      .      .      .          50    

Number  of  purchases  


Source:  Nielsen  USA  from  Karen  Nelson-­‐Field  “Viral  Marke=ng  –  The  Science  Of  Sharing”  
THIS  IS  PROVEN  ACROSS  CATEGORIES    

Percentage  
  of  Kellogg’s  Special  K  buyers  buying  Kellogg’s  Special  K  X  =mes  in  the  U.K.  
 
50  
 
38  
 
25   Light  Buyers’  
  impact  on  sales  
13  
 
0  
1    2    3    4    5    6    .        .        .        .          .    12    .      .        .      .        .      .      .      .        .      .    .  

Number  of  purchases  


Source:  Kantar  WorldPanel  UK  from  Karen  Nelson-­‐Field  “Viral  Marke=ng  –  The  Science  Of  Sharing”  
EVEN  FOR  HAIR  CARE  

Number  (millions)  of  Pantene  buyers  buying  Pantene  X  =mes  in  the  U.S.  

12.500  
 
9.375  
 
6.250   Light  Buyers’  
impact  on  sales  
 
3.125  
 
0   -­‐  -­‐   -­‐  -­‐   -­‐  -­‐  
1      2      3      4      5      6    7  8    9  

Number  of  purchases  


Source:  John  Dawes  Panel  Data  provided  by  Mar=n  Weigel  Canalside    
THIS  IS  DONE  THROUGH  STRONG  INCREASES    
IN  PENETRATION,  NOT  LOYALTY  
Purchase  frequency  does  not  vary  much  between  the  top  and  boiom  
brand.  But  penetra=on  does,  which  is  what  drives  market  share!  

Detergent  Brands   Market  Share  %   Annual  Market   Purchase  


Penetra9on  %   Frequency  (Avg.)  
Persil   22   41   3.9  
Ariel   14   26   3.9  
Bold   10   19   3.8  
Daz   9   17   3.7  
Surf   8   17   3.4  
Average   3.7  

Penetra=on  varies  a  lot   Purchase  frequency  doesn’t  vary  much  


Source:  Byron  Sharp  “How  Brands  Grow”,  TNS  UK  
AS  SEEN  ACROSS  CATEGORIES    
I.E.  SHAMPOO  U.S.  
Purchase  frequency  does  not  vary  much  between  the  top  and  boiom  
brand.  But  penetra=on  does,  which  is  what  drives  market  share!  

Shampoo  Brands   Market  Share  %   Annual  Market   Purchase  


Penetra9on  %   Frequency  (Avg)  
Suave  Naturals   12   19   2.0  
Pantene  Pro-­‐V   10   16   1.9  
Alberto  VO5   6   11   1.6  
Garnier  Fruc=s   5   9   1.7  
Dove   4   8   1.5  
Finesse   1   2   1.4  
Average   1.7  

Penetra=on  varies  a  lot   Purchase  frequency  doesn’t  vary  much  


Source:  Byron  Sharp  “How  Brands  Grow”,  TNS  UK,  Nielsen  USA  
…AND  COUNTRIES  :  I.E.  SHAMPOO  U.K.  
Purchase  frequency  does  not  vary  much  between  the  top  and  boiom  
brand.  But  penetra=on  does,  which  is  what  drives  market  share!  

Shampoo  Brands   Market  Share  %   Annual  Market   Purchase  


Penetra9on  %   Frequency  (Avg)  
Head  &  Shoulders   11   13   2.3  
Pantene   9   11   2.3  
Herbal  Essences   5   8   1.8  
L’Oreal  Elvive   5   8   1.9  
Dove   5   9   1.6  
Sunsilk   5   8   1.7  
Vosene   2   3   1.7  
Average   1.9  

Penetra=on  varies  a  lot   Purchase  frequency  doesn’t  vary  much  

Source:  Byron  Sharp  “How  Brands  Grow”,  TNS  UK,  Nielsen  USA  
BOTTOM  LINE:  
 
YOUR  BRAND’S  HEALTH  DEPENDS  ON  

LOTS  OF  PEOPLE    


WHO  DON’T  KNOW  YOU  WELL,    
DON’T  THINK  OF  YOU  MUCH  
AND  DON’T  BUY  YOU  OFTEN,    
IF  AT  ALL.  
Mar6n  Weigel