Sharp’s “How Brands Grow” challenges common marketing myths and proposes new empirical rules. He advocates for mass marketing to attract new customers and focuses on making brands memorable rather than unique. Sharp asserts that mass marketing is still the most effective way to grow.
Rule #1: Market to New Customers, Never to Existing Customers
Sharp challenges the common belief that retaining existing customers is cheaper than acquiring new ones. He argues that data suggests marketing to new customers can be more profitable than to existing ones.
Focus on Value Over Retention or Acquisition
Sharp’s view on customer retention versus acquisition is challenged by some who suggest that an effective marketing strategy should focus on retaining or acquiring the most valuable customers, identified by their customer lifetime value (CLV).
Tim Ferriss used this approach to increase profits by identifying and nurturing his top five most valuable clients, who generated 95% of his profits. By adopting a CLV-oriented approach, marketers can prioritize the retention and acquisition of the most valuable customers, regardless of the initial cost, as they have the potential to drive a significant portion of sales.
The Fixed Pattern of Brand Growth
Sharp argues that brand growth primarily comes from acquiring new customers, not from retaining existing ones or increasing their purchase frequency.
He discovered this through analyzing financial data from multiple brands, which showed a “fixed pattern of brand growth” where market penetration increases dramatically with market share, while customer retention and purchase frequency only increase slightly. Based on this data, Sharp suggests that brands should focus on acquiring new customers to achieve growth.
Marketing Strategies That Fail
Sharp advises against loyalty programs and promotional discounts for existing customers, which he believes are ineffective for brand growth.
However, existing customers still play a role in attracting new customers through word-of-mouth. Blanchard and Bowles offer tips on using customer service as an outreach tool to acquire new customers, such as collecting and acting on feedback, keeping employees happy, and setting realistic expectations.
Why Loyalty Programs Fail
Marketing to existing buyers is generally a waste of money as they tend to make purchases without intervention. Loyalty programs aim to incentivize existing customers to buy more often, but data shows that members don’t buy any more frequently than non-members.
This is because people generally only buy when they need something, and their purchase schedules are fixed. Sharp argues that marketing to new customers is more effective, as it waits for consumers to need a product and then influences them to choose your brand over competitors.
Why Promotional Discounts Fail
Sharp suggests that promotional discounts are not a profitable way to increase sales to existing customers. While discounts may seem like an effective way to encourage repeat purchases, they can ultimately decrease profit margins and reduce future sales.
Rule #2: Market to Everyone, Never to a Specific Demographic
In Rule #1, we learned that marketers profit more from getting new customers rather than focusing on customer loyalty. Rule #2 shows how marketers often fail to market to new customers effectively. Sharp believes that targeting a specific demographic may not increase sales, and instead recommends marketing to as many demographics as possible.
Most Market Divisions Don’t Exist
Sharp suggests that targeting specific demographics is often ineffective since markets are less segmented than believed. Competing brands often share similar customer bases, and consumers purchase a range of products depending on their mood.
Marketers who assume a narrow market risk missing out on potential customers and setting low sales goals. Therefore, marketers should aim for a broader audience to attract more customers.
Evidence That Most Market Divisions Don’t Exist
Sharp provides evidence to support his claim that most companies operate in mass markets. He suggests analyzing the overlap between the customer bases of two brands to determine their competition.
According to Sharp, specialized brands assumed to serve niche markets have the same percentage of buyers with their niche competitors as generic brands, indicating they are competing in the mass market. Therefore, most market niches do not exist.
Rule #3: Market to Be Memorable, Not Unique
How can marketers surpass their competitors when traditional marketing methods fail? By understanding consumer decision-making and using it to influence brand preference.
How Consumers Choose Which Brand to Buy
Consumers don’t prioritize branding in their purchasing decisions, making targeted marketing ineffective. Even if a brand is perceived as “trendy” or “wholesome,” opinions often change. Most consumers don’t compare brands and instead buy without much thought.
People have adapted to the brand-filled world by filtering out branded messaging. Crafting a compelling value proposition may not be enough to break through their mental filters.
Consumers Buy Whatever Brand Is Present
Sharp suggests that consumers don’t evaluate many options when deciding which brand to buy. Instead, they choose from a few immediate options, either physically or conceptually present.
Brand recognition and frequency of thinking about a brand matter more than consumer perception. If a customer recognizes a brand and briefly considers buying it, they’re more likely to purchase it over a competitor’s brand they don’t recognize.
Increase Your Presence With Memorable Branding
Sharp suggests that to market your brand effectively, you should increase the likelihood that consumers will think about it. This can be achieved by advertising regularly to create brand memories, using recognizable brand assets consistently, and expanding your brand’s reach to increase its visibility.
Strategy #1: Advertise Regularly
Sharp suggests that regular advertising can create brand memories, increasing the likelihood that consumers will consider your brand in the future.
Memorable ads that grab the audience’s attention and emotionally engage them work best, even if they’re not logically persuasive. However, the ad must prominently connect to the brand in a memorable way, or the audience may not remember the brand when it’s time to choose which one to buy.
Strategy #2: Create Recognizable Brand Assets and Keep Them Consistent
Sharp suggests creating recognizable brand assets such as a logo, color scheme, and memorable brand name. When potential customers recognize these assets, they’ll recall positive memories of your brand and be more likely to buy.
To maintain this connection, it’s crucial to keep these assets consistent throughout your brand’s lifespan. Changing them increases the likelihood of your audience ignoring your brand entirely, as the link to past experiences is removed.
Strategy #3: Expand Your Brand’s Reach
To increase brand visibility, Sharp suggests expanding through various channels and making it easier for consumers to notice your product. This includes using recognizable signs, appearing on search engines, and being readily available in stores. The more often consumers see your brand, the more likely they are to recall it and make a purchase.