How Brands Grow: Summary Review
This is a summary review of How Brands Grow containing key details about the book.
What is How Brands Grow About?
This book provides evidence-based answers to the key questions asked by marketers every day. Tackling issues such as how brands grow, how advertising really works, what price promotions really do and how loyalty programs really affect loyalty, How Brands Grow presents decades of research in a style that is written for marketing professionals to grow their brands. It is the first book to present these laws in context and to explore their meaning and application.
Summary Points & Takeaways from How Brands Grow
Some key summary points and takeaways from the book include:
* The book is a guide to the principles of cultural branding, which is a method of building a brand based on its cultural identity and resonance.
* The book suggests that brands can become iconic by tapping into cultural codes and values that are shared by a particular consumer group.
* The book provides insights on how to identify the cultural codes and values that drive consumer behavior and how to use them to create a compelling brand story.
* The book also includes case studies of iconic brands such as Harley-Davidson, Nike, and Red Bull, and how they have become cultural touchstones.
* The book emphasizes the importance of authenticity, consistency, and long-term commitment in building an iconic brand.
* The author provides a framework to understand the cultural drivers of consumer behavior, and how to use that understanding to create a brand that resonates with people.
* The book is written in an engaging and accessible style, making it a valuable resource for marketers, brand managers, and entrepreneurs.
* The book highlights the importance of understanding the cultural context in which a brand operates, and how that context shapes consumer behavior.
* The book emphasizes the importance of creating a brand that speaks to the values and aspirations of a particular consumer group, and how that group can be used to create a brand that is both relevant and differentiated.
Who is the author of How Brands Grow?
Professor Byron Sharp is the Director of the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia. The Institute's fundamental research is used and financially supported by many of the world's leading corporations including Coca-Cola, Kraft, Kellogg's.
How Brands Grow Summary Notes
Rethinking Marketing Strategies: Embracing Evidence-based Marketing Science
One of the main themes in this book is the importance of basing marketing strategies on evidence from marketing science, rather than traditional beliefs. The author uses the example of toothpaste brands Colgate and Crest to illustrate this point. In the past, it was believed that businesses should aim for an equal number of loyal customers and switchers. However, evidence from marketing science, specifically the double jeopardy law, shows that the size of the brand itself is directly related to the purchasing patterns of customers. Smaller brands have fewer customers and less loyalty, while larger brands have more customers and greater loyalty. This means that marketing strategies should take into consideration the relative size of the brand and not be solely focused on trying to increase loyalty among customers.
The author emphasizes the need for marketing practices to be based on empirical evidence rather than traditional beliefs that lack scientific foundation. Just like bloodletting was once believed to be a cure-all in medicine but was later proven to be ineffective, marketing practices should evolve based on evidence from marketing science. By embracing evidence-based marketing, businesses can make more informed decisions about their marketing strategies and achieve better results.
The book highlights the importance of understanding the actual causes and effects of marketing, which can be revealed through marketing science. It challenges the notion of blindly following traditional beliefs and encourages marketers to be critical thinkers and use data-driven insights to shape their strategies. The toothpaste example serves as a reminder that marketing strategies should be tailored to the specific context of the brand and its market share, rather than relying on generic assumptions about customer loyalty.
Acquiring New Customers is Key to Brand Growth
The author challenges the traditional belief that retaining existing customers is more important for brand growth than acquiring new customers. The argument is based on the premise that customer base growth can happen in two ways: by acquiring new customers or by retaining existing ones. However, the author presents evidence that focusing on acquiring new customers is actually more essential for brand growth.
The author uses an example of a misleading business book published in 1990 that claimed that company profits can increase by nearly 100 percent for every 5 percent of customers retained. However, the author points out that this argument was based on a flawed thought experiment and inaccurate evidence. In reality, the decrease in customer defection rate from 10 percent to 5 percent would result in a 50 percent decrease, not 5 percent as claimed in the article. This highlights the importance of critically evaluating marketing beliefs and relying on empirical evidence from marketing science.
The author further supports the idea that acquiring new customers is crucial for brand growth by citing the relationship between market share and customer defection rate. Market leaders tend to have the lowest defection rates, while smaller companies have higher defection rates. This implies that brands have limited control over customer retention, and therefore should focus on acquiring new customers to expand their customer base.
The author provides a study on the defection rate of Australian banks as an example, which shows that the largest bank with the highest market share had a much lower defection rate compared to the smallest bank with a lower market share. This further emphasizes that brands should prioritize efforts on acquiring new customers to grow their customer base, rather than solely focusing on retaining existing customers.
Less than half of a company’s sales come from non-frequent users.
Brands often focus their marketing efforts on retaining heavy buyers, who are responsible for a majority of sales based on the belief that Pareto's Law applies, where 80 percent of sales come from 20 percent of customers. However, research suggests that this ratio is not as extreme as commonly thought, and in fact, approximately 60 percent of sales come from heavy buyers, while light buyers account for the remaining sales. This means that less than half of a company's sales come from non-frequent users, challenging the traditional marketing approach that prioritizes heavy buyers.
Many brands assume that light buyers, who only make occasional purchases, are responsible for a small portion of sales and therefore neglect them in their marketing strategy. However, evidence shows that light buyers can actually account for up to 50 percent of sales. For example, a study on body sprays and deodorant products found that the heaviest buyers, the top 20 percent, were only responsible for between 46 and 53 percent of sales.
This insight challenges the common marketing belief that heavy buyers are the most valuable customers to retain. While it's important to retain and cater to the needs of heavy buyers, brands should not overlook the significant contribution of light buyers to their sales. Neglecting light buyers can result in missed opportunities for growth.
To effectively grow their customer base, brands need to consider the unique characteristics and purchasing behaviors of both heavy and light buyers. This may involve developing tailored marketing strategies for each segment, such as offering promotions or incentives to attract light buyers and retain heavy buyers. Brands should also invest in understanding the needs and preferences of light buyers and creating products or services that cater to their occasional purchasing behavior.
The Myth of Brand Loyalty
One of the main themes in this book is that the attitudinal commitment of purchasers to certain brands is weaker than marketing mythology makes it out to be. Many brands rely on the belief that branding has a huge influence over customer preferences and invest heavily in creating emotional bonds with customers to increase their loyalty. However, evidence suggests that this emotional bond is not as strong as commonly assumed.
A famous study involving a blind taste test of Coca-Cola and Pepsi showed that people's preferences were influenced by the labels on the samples, rather than the actual taste of the soda. This was attributed to the emotional loyalty of Coca-Cola's customer base, which is a result of successful marketing campaigns. However, further research reveals that people's beliefs are inconsistent, with only about 50 percent of them giving the same answer when asked the same question on separate occasions.
Moreover, surveys on customer attitudes towards financial service brands showed that people's agreement with statements about brand loyalty varied significantly between two separate occasions. This suggests that the emotional bond between customers and brands is not as stable as commonly assumed. In fact, most people do not care deeply about the brands they purchase, and loyalty is often driven by the quality of the product rather than the brand itself.
The main takeaway here is that brands should not overestimate the strength of customer loyalty based on branding alone. Marketers should focus on delivering high-quality products or services that meet customer needs, as this is a more reliable driver of customer loyalty than emotional branding efforts. Brands should also be aware of the inconsistency in customer beliefs and preferences, and regularly assess and adapt their marketing strategies based on actual customer behavior rather than assumptions about brand loyalty. By understanding the true nature of customer loyalty, brands can develop more effective marketing strategies that align with consumer behavior and drive business growth.
Marketing Should Focus on Visibility, Not Differentiation
One of the main themes in this book is that marketing should prioritize making brands more noticeable in the marketplace, rather than trying to make them seem different from their competitors. Many marketers focus on creating unique products or features to differentiate their brand from others. However, the reality is that within a particular market sector, brands are often not very different from each other. For example, fast food brands like McDonald's, Pizza Hut, and KFC may sell different food products, but they still compete as fast food brands.
The book argues that instead of trying to differentiate a brand, marketers should focus on making it more visible in the marketplace. This can be achieved through distinctive characteristics such as logos and colors that are easily noticeable and recognizable. For example, Coca-Cola's red background and McDonald's golden arches are distinctive and easily recognizable.
The book also highlights the role of consumer behavior in brand choice. In unfamiliar situations, such as being in an unfamiliar city and looking for a fast food restaurant, consumers are likely to choose the first one they come across. Therefore, a brand's visibility, such as having a noticeable logo or color, can play a significant role in influencing consumer choice.
The Power of Advertising in Targeting Memories and Light Buyers
One of the main themes discussed here is the effectiveness of advertisements in influencing consumer behavior by targeting memories and light buyers. Advertising aims to create lasting memory structures in the minds of consumers, which consist of associations with specific brands. Positive associations are more likely to result in purchase behavior. Brands need to regularly renew these memory structures to stay relevant in the minds of consumers, even for well-established brands. Coca-Cola is cited as an example of a brand that creates nostalgia through its advertisements to trigger happy memories associated with drinking their product.
Moreover, not all consumers are equally influenced by advertisements. Heavy buyers, who are loyal to a particular brand, are less likely to be swayed by advertisements as compared to light buyers. Light buyers, who tend to switch between different brands, are more susceptible to the influence of advertisements in their purchasing decisions. Advertisers need to target the memories of light buyers to ensure that the brand remains top of mind for them.
The book emphasizes that advertisers should focus on making brands more noticeable in the marketplace and creating distinctive characteristics, such as logos and colors, to stand out from competitors. Unique products alone do not necessarily differentiate a brand, but visible and recognizable brand elements can play a crucial role in influencing consumer choices, especially in unfamiliar situations where consumers may choose the first option they notice.
Marketers should be cautious when it comes to using price promotions as a marketing strategy.
Price promotions, such as sales and discounts, are commonly used by marketers as a strategy to boost sales in the short term. However, this approach may not always result in higher profits for the brand. While price promotions may attract non-frequent buyers and lead to a temporary spike in sales, the effect is usually short-lived as sales tend to return to their regular level once the promotion ends. Additionally, lowering the price of a product also decreases its profit margin, and brands need to carefully calculate the impact on their contribution margin, which refers to the revenue generated by a product to cover its production cost, in order to determine if the promotion is profitable.
Another issue with price promotions is that they can have a negative impact on the perceived value of a product. Customers have a reference price in mind, which is their expectation of what a product's price should be. If a product is consistently sold at a discounted price for a long period of time, it can lower the reference price in the minds of customers. This means that customers may become accustomed to the discounted price and be unwilling to purchase the product at its regular price, potentially leading to decreased profits for the brand in the long run.
It's important for marketers to carefully consider the implications of price promotions and weigh the short-term sales boost against the potential negative effects on profit margins and customer perception of the product's value. Brands should be cautious when using price promotions as a marketing strategy and ensure that they are aligning with their long-term profitability goals. Finding the right balance between short-term sales and long-term profitability is crucial for sustainable growth and success in the competitive marketplace.
Sales Depend on Making Products Easier to Buy
In today's media-saturated world, getting noticed by potential customers can be challenging for brands. Consumers are exposed to hundreds of advertisements every day, and they tend to settle for products that are considered satisfactory rather than spending more time and effort searching for the perfect product. In order to increase their customer base and ultimately drive sales, brands need to focus on making their products easier to buy.
There are two key factors that come into play when it comes to making products easier to buy: mental availability and physical availability. Mental availability refers to the likelihood that a customer will think of a particular brand when they are considering a purchase. Brands with a larger market share are more likely to come to mind in such situations. For example, Starbucks is often the first brand that comes to mind when people think about getting coffee.
The second factor, physical availability, is equally important. It's not enough for a brand to be top of mind for potential customers; the product also needs to be physically available for purchase when and where the customer wants it. For instance, if Starbucks is the brand that comes to mind, but there is no Starbucks outlet in the area, customers may settle for a different coffee shop that is available nearby.
Brands need to ensure that they are both mentally and physically available to potential customers in order to drive sales. This may involve increasing their market share through effective marketing strategies, as well as ensuring that their products are physically available in the right locations. By making their products easier to buy, brands can increase their customer base and ultimately boost their sales.
Book Details
- Print length: 246 pages
- Genre: Business, Nonfiction
How Brands Grow Chapters
Chapter 1 :How Brands Grow
Chapter 2:Target the (Whole) Market
Chapter 3:Where New Customers Come From
Chapter 4:Building Mental Availability
Chapter 5:Leveraging Distinctive Assets
Chapter 6:Achieving Reach
Chapter 7:Word-of-Mouth Facts Worth Talking About
Chapter 8:Building Physical Availability
Chapter 9:Online Shopping ... Is It Different?
Chapter 10:New Brands and Acquiring New Buyers
Chapter 11:And Finally, a Bit of Luxury
What do critics say?
Here's what one of the prominent reviewers had to say about the book: "How Brands Grow is a wonderful stimulant, a fascinating corrective to our tendency to follow fashion and let received wisdom go unchallenged." — MarketingWeek
* The editor of this summary review made every effort to maintain information accuracy, including any published quotes, chapters, or takeaways. If you're interested in enhancing your personal growth, I suggest checking out my list of favorite self-development books. These books have been instrumental in my own personal development and I'm confident they can help you too.
Chief Editor
Tal Gur is an author, founder, and impact-driven entrepreneur at heart. After trading his daily grind for a life of his own daring design, he spent a decade pursuing 100 major life goals around the globe. His journey and most recent book, The Art of Fully Living, has led him to found Elevate Society.
