How Brands Grow

Do brands grow by retaining loyal customers or by capturing new ones? Byron Sharp's "How Brands Grow" challenges traditional beliefs and offers evidence-based strategies for marketing success.

1. Evidence Over Tradition: The Key to Effective Marketing

Companies often cling to outdated marketing methods rather than adapting to scientifically proven strategies. Relying on myth-laden practices can lead to inefficient marketing spends.

For example, many marketers believe a brand must have an equal number of loyal customers and occasional brand switchers. This belief has long underpinned decision-making in marketing departments. Yet, research shows this balance is not only unnecessary but unrealistic. The "double jeopardy law" demonstrates that smaller brands naturally have fewer—and less loyal—customers, while larger brands enjoy stronger loyalty due to their market share.

A case study on Colgate and Crest revealed this phenomenon. In 1989, Colgate’s consumers comprised 21% loyal buyers and 68% switchers, while Crest had 38% loyal buyers and 46% switchers. Colgate's marketers wrongly saw this disparity as a weakness in their strategy, while in reality, it reflected the science of market size dynamics.

Examples

• Double jeopardy law explains smaller brands like Adelaide Bank in Australia face higher customer defection.
• Colgate and Crest’s loyalty figures correlated directly to their respective market shares.
• Brands failing to adapt to marketing science risk overspending on loyalty campaigns with poor returns.

2. Growing Means Gaining New Customers

Contrary to conventional wisdom, retaining existing customers does little to expand a brand. Acquiring new customers drives growth more effectively.

Research debunked a popular idea from the 1990s that improving retention by 5% could double profits. This claim stemmed from flawed and misleading calculations. Real-world data underscores that focusing on retention limits influence over growth since customer loyalty often corresponds to brand size rather than marketing efforts.

For instance, an analysis of Australian banks showed larger banks like CBA retained customers at lower defection rates (3.4%) compared to smaller competitors like Adelaide Bank (8%). Smaller brands face inherent challenges in loyalty, making customer acquisition a more impactful strategy.

Examples

• Australian banks illustrate that larger brands can naturally retain more customers.
• Retention-focused campaigns overlook the challenges of limited control over loyalty rates.
• Expanding the customer base ensures steady and scalable growth for brands.

3. Light Customers Matter More Than You Think

Light buyers, who shop less frequently, contribute almost as much to total sales as heavy buyers. Most brands operate under the false assumption that heavy customers account for nearly all their revenue.

Using Pareto’s principle, marketers often believe 80% of sales come from 20% of buyers. However, real-world research in categories like deodorants and body sprays shows heavy buyers only account for 46-53% of sales. Overemphasizing heavy users misses the impact of light buyers, who collectively account for a significant share of purchases.

Brands can grow by targeting and re-engaging infrequent buyers, rather than only maintaining heavy customer habits.

Examples

• Studies by Dove, Nivea, and Adidas show light buyers contribute about 50% of sales.
• Heavy buyers consistently make up less of the total purchase pie than assumed.
• Focusing solely on heavy buyers overlooks lighter purchasing patterns in key categories.

4. Emotional Loyalty to Brands Is Overrated

While marketers talk a lot about creating emotional attachments to brands, evidence shows that loyalty is not as strong as it's believed to be.

For instance, brand preferences often appear inconsistent. A survey of Australian financial services revealed that just 53% of respondents gave consistent answers about loyalty to the same brand over two surveys. People don’t buy brands because of undying loyalty—they simply like the product and find buying it convenient.

Even in the famous Coke vs. Pepsi taste test, participants preferred the labeled drink over the unnamed one, but this reflected branding effects rather than deep emotional commitment.

Examples

• Australian financial services survey showed fickle loyalty in customer sentiment.
• Blind Coke vs. Pepsi taste tests revealed branding created bias, not attachment.
• Consumers buy repeat products based on ease, not always brand love.

5. Make Your Brand Stand Out, Not Different

Trying to make a product "unique" isn’t always effective. Instead, marketers should focus on making the brand visible and easy to recognize.

Fast-food giants, for instance, don’t just compete by food type (like burgers at McDonald’s or pizza at Pizza Hut). Instead, these brands compete in the broader fast-food market. A golden arch at McDonald’s or Coca-Cola’s red design stands out to all passers-by, creating distinctive brand recognition.

This focus on visibility explains why choosing a fast-food chain often depends more on immediate recognition than a craving for a specific item.

Examples

• McDonald’s golden arches symbolize fast food across the world.
• Coca-Cola’s iconic red background cements its mental real estate in consumers’ minds.
• Starbucks ensures customers notice its cafes even when visiting unfamiliar cities.

6. Advertising Keeps You Relevant and Remembered

Advertising builds and renews “memory structures,” which are associations consumers have with brands. It doesn't just create loyalty but helps brands stay relevant in today’s fast-changing markets.

Coca-Cola’s advertising evolved from associating its drinks with youthful summer outings in the 1960s to targeting celebratory moments like holidays or nights out with friends today. Effective memory reinforcement ensures a brand stays front-of-mind during purchase decisions.

Notably, light buyers, who frequently change choices, are most influenced by advertising.

Examples

• Coca-Cola’s holiday ads boost consumer associations with celebration.
• Advertising renews emotional triggers, keeping brands from fading over time.
• Light buyers need advertising reminders, unlike loyal heavy users.

7. Sales Don’t Always Equal Profits in Promotions

Discounts cause a short-term sales spike, but they may harm profitability. Frequent promotions reduce consumer expectations for higher prices later.

For example, a sweater sold at a 10% discount needs a 50% rise in volume to equal previous profit margins. Beyond immediate losses, prolonged discounts “train” buyers to expect those lower prices, damaging the perceived value of the brand.

Examples

• Stores implementing long-term discount strategies often damage their profit margins.
• Buyers expect lower prices after repeated sales, setting problematic expectations.
• Costs of production often force brands out of prolonged promotional strategies.

8. Physical and Mental Accessibility Drive Purchases

Easier-to-buy brands outperform competitors. They achieve this by being more physically and mentally “available” to customers.

Starbucks excels at this by placing its stores everywhere. Customers rarely have to seek alternatives when needing coffee. Mentally, simple, easy-to-remember branding ensures Starbucks frequently springs to customers’ minds.

Examples

• Starbucks dominates by opening stores in high-traffic areas worldwide.
• Large brands remain mentally accessible through universal recognition.
• Apple’s iconic logo and clean stores marry physical with mental availability.

9. Media Saturation Means Strategy Is Essential

Consumers face an overwhelming number of advertisements daily. Brands must fight harder to stand out in a crowded marketplace.

The growth of media platforms has multiplied messages, whether they come from TV, online content, or social media. This means brands must focus even more on accessible positioning to ensure they aren’t drowned out by the noise.

Examples

• On average, people consumed media for 30% of their day in 2005—and likely more today.
• Hundreds of advertisements per day dilute the impact of each message.
• Notable companies focus more on accessibility rather than vanity advertising.

Takeaways

1. Make sure your brand is recognizable and everywhere. Build distinct logos, colors, and locations to ensure physical and mental availability.
2. Focus marketing resources on light and new buyers. They’re the real drivers of market expansion, not just loyal customers.
3. Avoid persistent price promotions—they can harm a brand’s long-term value and decrease profit margins.