small vs. large brands: how to become a market leader

Small vs. Large Brands: How to Become a Market Leader

Marketing requires creativity and thoughtfulness, but it also requires certain standards.

In systemizing these standards, marketers can achieve greater creativity and further reach, while crafting more impactful marketing.

You can’t achieve this systemization without understanding the science behind marketing.

Check out our blog post here.

We’ll use data to explain what it takes to grow your brand.

Let’s begin.

BRAND SIZE

What makes small brands small, and large brands large?

the size of a brand’s buyer marketCUSTOMER LOYALTY MARKET PENETRATION

The answer lies in:

the average purchase rate per customer

“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.

SMALL BRANDS LARGE BRANDS

LOYALTY slightly lower slightly higher

PENETRATION much lower much higher

The“Double Jeopardy” Law

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.

4%

8%

12%

16%

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

Market share Annual market penetration Purchase frequency (average)

The Impact of the “Double Jeopardy” LawShampoo Market, UK 2005

Source: TNS.

The graph tells us two major things1. 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.

CUSTOMER LOYALTY

Let’s take a closer look at customer loyalty.

Are customers more loyal to some brands over others?

Yes and no.

Customers do adopt a certain level of loyalty behavior in that they don’t switch between all brands available.

But some degree of brand switching will always occur across all kinds of market categories, consumers, and brands.

Analytical time frame mattersConsumer loyalty also starts to look different when assessed over a shorter time frame versus a longer-term one.

Marketers tend to focus on short-term engagement metrics, rather than longer-term ones.

This has important implications for customer loyalty.

Customer Loyalty Over TimeWeekly Analytics Yearly Analytics

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The graph tells us two major things1. A one-week time frame will show little customer disloyalty Customers usually don’t have the time or need to buy multiple brands in just one week.

2. A year-long time frame will show far greater disloyalty. Customers have the time and need to buy a product multiple times, making it very likely they bought from a couple different brands.

“So how loyal a customer appears is largely an analytical misattribution, unrelated to ‘true’ loyalty.”

— Byron Sharp, How Brands Grow

THE WRAP-UP

What have we learned?1. Smaller brands have far fewer buyers who are less loyal

Brand growth lies in increasing market penetration, or buyer market

What have we learned?1. Smaller brands have far fewer buyers who are less loyal

Brand growth lies in increasing market penetration, or buyer market

2. Customer loyalty is largely out of your control: it will always occur Most loyalty measures are skewed by the time frame, resulting in analytical misattributions

You can read the full story on how to grow your brand on the Percolate blog: Small vs. Large Brands: How to Become a Market Leader

Percolate is The System of Record for Marketing. Our technology helps the world's largest and fastest-growing

brands at every step of the marketing process.

Want to learn more?

Contact learn@percolate.com for more information

or request a demo today at percolate.com/request-demo

Kat Gebert Kat Gebert is on the Product Marketing team

at Percolate.