Nearly a decade ago, in a conference ballroom in Beijing, I first heard Professor Byron Sharp present the thinking from his breakthrough book, How Brands Grow.
I’m sure I’m not the only one who left the room feeling 100 times smarter than when I went in – and also a lot more sceptical of some of the everyday nonsense of the marketing industry (‘brand love’, anyone?).
The subject matter was dynamite. The thinking of Sharp, and the Ehrenberg-Bass Institute, is now central to the way many brands operate – think ‘mental and physical availability’ or ‘penetration over loyalty’.
The book is now 10 years old. So to mark the anniversary, we caught up with Professor Sharp to ask him about the impact it has had, and the big questions the industry still needs to solve.
When you were working on How Brands Grow, did you think it would have the sort of impact that it ultimately had?
No. It was written for marketers on our advisory board roster [at the Ehrenberg-Bass Institute]. It was for them to be able to give to their CEOs and explain why they were making changes – so it was for our internal sponsors. That’s why it had to be a hardback, and that's why we had to have a prestigious publisher, Oxford University Press. If you wanted a bestseller you’d never choose Oxford University Press. They sell to universities. They thought it'd be a research book. I think they printed 1000 copies and sold out - I think it was in the first day.
I never thought that people in agencies would buy it. I was surprised how popular it was in the digital community - which shows a lot of imagination. People could read it even though it really was counter to the [thinking] at the time, which was, you know, engage super-loyal users on Facebook.
It’s a media-agnostic book. But people in TV and the big traditional media got immediately excited because they went, “Oh, you have to reach all category buyers,” and they liked that. Then there was a huge pivot very quickly by companies like Facebook and Google. Facebook stopped talking about reaching your fans, and started talking about how Facebook is huge.
Which of the ideas in the book have landed best?
I think probably the one that gets the most attention and would be the one people say they've adopted is that they can't grow without growing the size of the customer base - the ‘go for penetration’ message.
They can understand that in a B2B-type setting, where you go, OK, I've got to send my sales reps out, we've got to win some new customers. People find it harder in packaged goods. When their penetration metric goes up, it's not so much that you're winning new customers - because, with a brand like Coca-Cola, everyone on the planet’s bought it at some time. It's getting their head round [the idea that] most of my buyers don't even buy me every year.
Needless to say the marketing team find that difficult to comprehend – you know, sitting in their offices with fridges a metre away stocked full of Coke. Out there in the real world, there are 7 billion people and they've got a lot of other things to drink. The realization that you drive penetration growth by reaching really ultra-light buyers: that's a nuance that not everyone gets.
Are there any areas where you feel there's still a lot of misunderstanding or there's still work to do?
One of the things that is frustrating is when people say things like “you don't believe in segmentation.”
This is elementary. Segmentation is an analytical exercise in understanding the heterogeneity in your market. And everything I say is that consumers are heterogeneous – you’ve got heavy buyers, light buyers, full buyers, short buyers, those who speak Spanish.
What I was [criticising is the idea that] you have to target; that you have to take people off and treat them as different, or decide that part of the market can never be for your brand. That's what I was talking about.
When we see rival brands of toilet cleaner or cleaning products, they all sell to pretty much the same sort of households, and in most countries that’s everyone. So you might do some segmentation to work out that, you know, some places have bigger houses than others. Some have more people in the house than others. Some households do speak Spanish. That's useful. But the idea that your brand is only for [certain] households - that's just crazy.
It was really common – less so now – for people to define their target market, then you’d crunch the numbers and the people you've defined as your target market make up 17% of your sales. It's an indictment of our discipline because our discipline is supposed to be the one that understands customer heterogeneity, understands that we have all sorts of different customers.
So it’s about a little bit of tailoring – ads in Spanish to people who speak Spanish, maybe – but done in an empirical way, not just assuming more targeting is always better.
There’s a lot of talk now about long-term and short-term. Do you feel that distinction is useful?
There is a useful distinction, but the quality of discussion on it is terrible at the moment. The word ‘activation’ is terrible. So you go “20% off our lawn mower this week” and say that’s an activation. It's not activating anyone if they're not in the market. It's trying to catch your fair share of people who are about to buy a lawn mower. No one who does not want a lawnmower goes, “Oh right, well I better get another one then.” So that’s the misunderstanding.
There is some marketing that we do that catches people when they're up at the shelf. We do something like a price promotion and we stick a sticker on, or we get our Google search algorithms right so when they type in and actually are in the market, we can catch our fair share.
To call it short-term is wrong. It is just catching the people who currently fall, which is something we have to do every single day. So honestly, I do not like that chart that Les Binet uses with the [line] going up and down, up and down – implying that we do an activation, take a deep breath, wait a few months, do another activation [see page 12 of this document]. It does not make sense. Catching people when they fall, like making sure when someone types ‘Australian holiday’ that Barossa Valley Resort pops up, is something we do every single day. And then we do advertising to reach people who are not planning a holiday at the moment – but need to learn where the Barossa Valley is.
How do you feel the theory of mental and physical availability is changing with the rise of e-commerce, with more brands trying to get into subscriptions, and where search is the gateway to a lot of purchasing?
By physical availability, I just mean actually being able to buy it. So Google Search, you know, is not advertising, it is physical availability. It's just like shelf space. It helps you catch your fair share of people who are going to buy the category.
The fact is, people don't look at many brands when they go to buy. In a lot of categories like cars and financial services - people look at two brands on average. So you’ve got about a 50% chance, right? Get really good at that physical availability or that Google search, and you might get 60% - which is nice. But the thing that determines whether you're a big brand or small brand is how many times are you one of the two?
So there's a whole set of work that goes on before you're down to that one or two?
Yes. Someone goes, “Finally, I've got enough money. I'm going to buy a luxury car.” And if they've never heard of Aston Martin, then you’re not in the set. Even when it comes up on the screen, they just don’t know what it is.
Do you feel there's a danger with attribution models, where people are spending far too much time worrying about whether they are at 50% or 60% - and not the thing that's further upstream?
Yes. Actually, that's an interesting point. In marketing, because we wanted to feel businesslike and to prove that we are driving sales, we've been quite happy to use techniques that - as an academic and a scientist - just do not pass muster.
Sales go up, and everyone claims credit. But the CEO knows that your job is affected by a whole lot of other things – you go “it’s my ad”, [but] the R&D people claim that it's the new formulation.
What we should be doing is looking at things that we can control - like how many people's brains did you reach with that ad?
If I can say to the CEO, “Well, we did 5% better than last year,” that’s good. In the same way the factory [people] go “we've had 5% waste”, or something. They don’t try to take credit for the entire business results of a company; they’re just running the factory.
You've written before about how marketers can approach recession - what's your take on the current downturn? Does it fit with the patterns observed in previous recessions?
Recessions come and go. Probably the most important thing is not to panic. Don’t let the recession derail your progress towards more disciplined evidence-based marketing. Yes, it’s OK to trim advertising budgets, because you can probably maintain your share of voice because others have cut their spend too - also there are ways of spending better.
Consumer purchasing of consumer goods (sold in pharmacies, supermarkets, convenience stores, hardware stores) doesn’t change much. Contrary to marketer fears, consumers don’t trade down to cheaper products.
Where do you feel are the big gaps in marketing knowledge now that you and the Institute want to resolve?
Our major research programs are around category growth and marketing investment, physical availability (online and in-store), how to compare and value spots in different media, and of course branding (distinctive assets), buying behaviour, and marketing metrics.
There is so much that isn’t known in marketing.