Book Summary of How Brands Grow by Byron Sharp

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.

Business brand scribbled on a notepad

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.

Book Summary of Positioning by Al Ries

Al Ries and Jack Trout’s book, ‘Positioning: The Battle for Your Mind,’ offers marketing tips based on their over 20 years of experience. The book, published in 1981, is the first of many collaborations between the authors, who are experts on marketing strategy. We’ll explore their definition of positioning and techniques, and discuss how it can be applied to career development.

What Is Positioning?

Ries and Trout define “positioning” as shaping customer perceptions of your product in comparison to competitors. A product’s “position” is its unique identity in consumers’ minds. For example, a Ferrari is a luxury sports car, while a Corvette is an iconic sports car that’s more affordable than a Ferrari. These mental associations represent each product’s “position.”

What Does Positioning Look Like?

Positioning is primarily achieved through advertising, which serves as a means of communication according to Ries and Trout. To shape perceptions of your product, you must convey a message that affects how people view it relative to other products.

However, the authors acknowledge that advertising can be intrusive since we are inundated with countless ads from various sources, leading us to tune most of them out.

Guidelines for Positioning-Based Advertising

Ries and Trout offer three recommendations for crafting effective ads that can break through the mental filter and shape customer perception.

  1. Firstly, simplify the message, as our brains can only store and process a limited amount of information.
  2. Secondly, align your message with your customer’s existing understanding of reality, as people are more likely to accept messages that confirm their beliefs.
  3. Lastly, maintain a consistent message over time, as people are resistant to changing their minds, while updating your ads to keep them current.

Preliminary Positioning Strategy

Ries and Trout emphasize the importance of three factors to successfully position your product:

  1. Firstly, comprehending your present position.
  2. Secondly, identifying a feasible and desired position.
  3. Lastly, selecting a name that aligns with the desired position.
  4. Comprehending Your Present Position

Ries and Trout caution that it is crucial to understand how your potential customers perceive your business and how your competitors compare. They also advise investing in research, such as surveys, to gain clarity and make informed decisions.

2- Identifying A Feasible and Desired Position

Ries and Trout advise having a realistic and clear vision of the position you desire for your product. Ideally, positioning as a market leader is recommended as it offers various benefits like brand loyalty, ease of attracting good employees, and higher stock prices. Being a leading product/company helps in creating self-perpetuating success.

Ries and Trout suggest that market leaders have significant advantages and become entrenched, making it difficult for competitors to supplant them with a better product. Instead, they recommend becoming the first to occupy the leading position by finding or creating a niche where you can make a credible claim of market leadership. This often involves sacrificing your product’s general appeal to target a niche where you can be the first to claim leadership.

Find Your Niche

By changing various facets of your product or advertising to stand out, Ries and Trout offer the following strategies for finding an open niche:

  • Product Size: Offer a miniature version if the industry trend is towards large products, or vice versa.
  • Price: Create premium or economy versions of a product to offer profitable niche opportunities.
  • Demographics: Tailor your product and advertising to appeal to an untapped gender or age group.
  • Setting: Target your product for use in a particular place, climate, season, or time of day.
  • Distribution: Consider novel approaches to enhance your customers’ shopping experiences, such creative packaging.
  1. Selecting A Name That Aligns with The Desired Position

Ries and Trout stress the significance of a product’s name for positioning, as it’s what consumers use to mentally position it in the market. The name should be unique, memorable, and representative of the positioning strategy.

Additionally, they advise that a company name should accurately reflect the company’s role and that an outdated or non-representative name can hinder growth.

Consider Your Abbreviations

Ries and Trout caution against using awkward acronyms and recommend creating phonetic ones, such as NASA, for better memorability. However, acronyms should align with your positioning strategy and avoid sounding contradictory to your message, as in the case of using “FAT” for a fitness program.

Additional Naming Pitfalls

Ries and Trout warn that unclear names hinder product positioning. Customers struggle to mentally place them in the market landscape, making it vital to choose a name that reflects the product’s market position. For example, “W Magazine” can be misleading as it covers art and fashion, not finances or women’s issues.

  • Ries and Trout warn that names can become outdated as cultures and businesses evolve. Even if a product or company remains the same, changes in language or culture can make a name obsolete and less effective in resonating with prospective customers.
  • Ries and Trout suggest changing technical product names developed by engineers before bringing them to the market, as such names are often meaningless to outsiders.
  • Ries and Trout suggest that having a name too similar to a competitor’s name can make it challenging to establish your own distinct position in the market.

Positioning Strategy

Once you’ve assessed your current position, envisioned a realistic goal, and confirmed your name aligns with it, how can you solidify your position as the market leader? Ries and Trout offer various strategies depending on whether you’re already the leader or striving to become one.

Strategy for an Established Market Leader

To maintain market leadership, reinforcing your position may suffice. But, Ries and Trout suggest that advertising your product as the best won’t persuade customers. They recommend promoting yourself as the original and genuine article. As leaders usually occupy their positions first, this claim is credible and suggests competing products are imitations, giving people a reason to buy from you.

Strategy for an Aspiring Market Leader

If you’ve found a valuable, unexplored niche, you can become a market leader by creating a product that meets demand, choosing a fitting name, and launching a successful ad campaign, according to Ries and Trout. However, they emphasize the importance of meeting customer expectations and repositioning the competition in this scenario.

Appeal to Expectations

To effectively communicate a message, it’s best to align with people’s expectations. Ries and Trout suggest that if you introduce a new product, it’s essential to compare it to something familiar to consumers. They use the example of marketing early cars as “horseless carriages.”

Reposition the Competition

To gain a market advantage, Ries and Trout advise discrediting competitors by repositioning their product. Merely claiming superiority is ineffective. Instead, expose a deficiency in the current leading product to create an opening for a new niche leader. Ries and Trout note that bad news about a competitor is more effective than good news about your product. For example, a pharmaceutical company can highlight side effects of gender-neutral vaccines on women’s health to promote a new flu vaccine.

Strategy for an Established Leader Entering a New Market

If you’re a market leader with one product and want to launch a new one in a different sector, Ries and Trout advise creating a new brand for the new product. This avoids the pitfalls of line extensions, which we’ll discuss next.

The Pitfalls of Line Extensions

“Line extension” is a term used by Ries and Trout to describe adding new products to an existing line under the same name. Products are distinguished with descriptions or other qualifiers. While line extensions provide instant brand recognition and save on marketing costs, Ries and Trout advise against them due to brand dilution and internal competition.

Brand Dilution

Ries and Trout argue that line extensions weaken a brand’s position by diluting its collective essence. A brand associated with diverse products and market positions becomes harder for customers to identify, and thus weaker. For example, if Ferrari started selling economical cars, it would dilute its high-end sports car brand and lose its meaning.

Professional Positioning for Career Success

Ries and Trout believe that the principles of positioning can be applied to advance one’s career. The strategy they recommend includes understanding your current position, identifying your desired position, selecting a suitable name, and charting a course to your desired position.

Understanding your current position involves being aware of how others perceive your strengths and weaknesses. To identify your desired position, you need to realistically determine what professional positioning you want, and this might involve finding an open niche.

Your name is also an important element of how people perceive you, and Ries and Trout recommend avoiding initials and using a name that supports your desired positioning.

Charting a course involves finding a good fit between your values and goals and your company’s vision and goals. In applying for new positions, you should emphasize how your strengths match the company’s strengths.

Ries and Trout stress the need for persistence in positioning as it is a long-term endeavor.