Marketing wisdom may need a reset. Byron Sharp, a marketing professor, challenges conventional marketing beliefs in “How Brands Grow.” He backs his claims with real-world data, revealing a new set of rules that defy common marketing sense.
Traditional marketing beliefs advise:
- Retain existing customers rather than seeking new ones.
- Tailor marketing to a niche target market.
- Differentiate your brand to stand out from competitors.
Sharp flips the script with these three rules:
- Prioritize attracting new customers continually.
- Market to diverse demographics, aiming for a broad audience.
- Focus on making your brand memorable, not necessarily unique.
In essence, Sharp asserts that mass marketing, delivering basic brand messages to a broad audience, remains the most effective way to grow. This approach challenges the notion that mass marketing is obsolete, as seen in the practices of tech giants like Facebook and Google. They emphasize constantly attracting new customers, acknowledging that the majority of buyers often fall outside their target demographic.
New Marketing Coexists With Traditional Marketing
Contrary to reports of mass marketing’s demise, the data shows its continued relevance. Brands still invest heavily in television advertisements, spending an estimated $64.5 billion in North America in 2021. Mass marketing coexists with newer trends like permission marketing, where brands allow consumers to opt into branded messaging they’re interested in, alongside traditional advertising efforts.
Rule #1: Market to New Customers, Never to Existing Customers
Sharp challenges the belief that it’s cheaper to retain existing customers than to acquire new ones. He argues that marketing to new customers is more profitable. Sharp’s data-driven approach reveals the “fixed pattern of brand growth,” where brands succeed by acquiring new customers rather than trying to make existing ones more loyal.
Acquire New Customers by Serving Existing Customers
While the data supports the importance of acquiring new customers, existing customers can still attract new ones through positive word of mouth. Brands can use customer service as a tool for outreach, drawing in new customers by ensuring their existing customers have exceptional experiences. This approach complements the focus on acquiring new customers, as outlined by Sharp’s research.
Marketing Strategies That Fail
Marketing to existing customers often fails due to ineffective techniques like loyalty programs and promotional discounts, as explained by Sharp.
Why Loyalty Programs Fail: Loyalty programs, aimed at existing customers, often don’t increase sales. Members of loyalty programs tend to make purchases as they normally would, and the programs don’t alter their buying behavior. This makes them a wasteful and unnecessary marketing tool.
What About Subscriptions? While subscriptions appear promising for targeting existing customers, they can suffer from similar downsides as loyalty programs. Customers who would have made purchases without the subscription may end up getting more value for their money, potentially cutting into a brand’s profits.
Why Promotional Discounts Fail: Promotional discounts, although initially boosting sales, have drawbacks. They reduce profit margins, requiring more sales to be profitable. Additionally, they can lead to decreased future sales as customers’ immediate needs are met, reducing the likelihood of repeat purchases.
The Myth of Short-Term Activation: Some marketers see promotional discounts as a short-term “activation” strategy alongside long-term brand-building efforts. However, Sharp contends that activation events like discounts are unnecessary and can have a neutral or slightly negative impact on profits, with true growth driven by brand-building. Activation events merely group together sales that would have occurred naturally.
In summary, marketing to existing customers requires effective strategies, as loyalty programs and promotional discounts often fall short of achieving meaningful results.
Rule #2: Market to Everyone, Never to a Specific Demographic
In Rule #1, we learned that targeting existing customers often isn’t the most profitable strategy. Now, Rule #2 explores how marketers frequently fail to effectively market to new customers. Sharp contends that it’s generally challenging to boost sales by tailoring marketing to specific demographics. Instead, he advises marketers to target a broader audience.
Early Adopters: A Demographic to Target? Seth Godin argues for targeting early adopters, as they are more willing to embrace innovative products and spread the word. However, Sharp believes that true innovation often appeals to a broad audience, not just early adopters. For instance, if Netflix had focused solely on the mainstream movie market, they might not have become the global phenomenon they are today.
Most Market Divisions Don’t Exist Sharp challenges the idea that specific products cater to distinct niches. He argues that many products appeal to a wide range of consumers, making niche marketing ineffective. For example, a company selling healthy frozen meals isn’t just competing with similar products but with all meal alternatives, including instant meals, restaurants, and meal delivery kits. By broadening their marketing, they can capture a larger audience.
Targeted Marketing in the Internet Age Sharp acknowledges that targeted advertising on the internet has advanced, allowing brands to reach specific demographics efficiently. However, he suggests that it may exacerbate the problem of brands operating within the wrong niche. By hyper-targeting, brands might miss potential customers outside their chosen demographic.
Evidence That Most Market Divisions Don’t Exist Data supports Sharp’s claim that most companies compete in mass markets. Many brands assumed to cater to niche markets share a significant percentage of customers with their competitors. This indicates that these niches often don’t exist in reality.
Indifferent Majorities Buy Niche Products The “Stubborn Minority” phenomenon described by Nassim Nicholas Taleb explains how small passionate groups shape consumer preferences, making niche products mainstream. For instance, a significant portion of packaged food is certified kosher in the U.S., even though the majority of the population isn’t Jewish. Kosher brands compete in the mass market because non-kosher consumers also buy their products.
Exceptions: Differences in Function and Price Can Segment a Market Sharp notes that significant functional differences and price ranges can segment a market. For instance, a laptop charger designed for a British power outlet will naturally appeal more to customers in Great Britain. Price ranges can also differentiate consumers, but not as significantly as one might assume. People across various income levels often purchase both budget and luxury items.
In summary, Rule #2 emphasizes that targeting a broader audience can be more effective than narrowing marketing efforts to specific demographics, as many market divisions are not as distinct as they might seem.
How Consumers Choose Which Brand to Buy
In this section, we explore why consumers often choose brands without giving much thought to branding. Sharp emphasizes that consumers generally perceive brands in a particular category as interchangeable, particularly regarding intangible brand features. Their opinions about a brand’s image or personality often change, making brand differentiation challenging.
Consumers Buy Whatever Brand Is Present
Sharp explains that when consumers decide which brand to purchase, they typically focus on a limited number of options that are immediately accessible, both physically and conceptually. This means that the presence of a brand in a consumer’s immediate surroundings and their mental presence is crucial. Consumers are more likely to choose a brand they recognize and have thought about, even briefly, over others they’ve never considered.
Availability Bias Explains Consumer Behavior
The effect of mental and physical presence aligns with the concept of availability bias, where people tend to overvalue things that come to mind more easily. For example, individuals often fear plane crashes more than car accidents, even though the latter is statistically more common. This bias can influence consumer behavior, making them choose the brands they think of most often.
Increase Your Presence With Memorable Branding
Sharp suggests three main strategies to make consumers think about your brand more often:
- Advertise Regularly: Consistent advertising creates brand memories, making consumers more likely to consider your brand when making a purchase decision. Memorable advertisements engage consumers emotionally and make the brand more recognizable.
- Create Recognizable Brand Assets and Keep Them Consistent: Developing recognizable brand symbols, such as logos and color schemes, ensures that potential customers immediately recognize your brand, triggering positive memories.
- Expand Your Brand’s Reach: Selling your product through various channels increases its visibility. When customers notice your product in different places, it triggers memories of your brand and enhances the likelihood of them choosing it.
In conclusion, consumers tend to choose brands they recognize and have thought about. By implementing strategies to increase your brand’s presence, you can improve your brand’s chances of being top-of-mind when consumers make purchasing decisions.