Byron Sharp: penetration beats loyalty

A marketing scientist and his colleagues spent decades analysing the actual purchasing data of hundreds of brands across many categories and countries, looking for what really drives growth. The popular belief was that brands grow by deepening loyalty, getting existing customers to buy more and stay devoted. The data told a different story. Growth came overwhelmingly from increasing penetration, reaching more buyers, especially the light buyers and non-buyers who rarely or never purchased the brand, and turning some of them into occasional customers. The heavy loyalists, the people marketing usually obsesses over, were a small and relatively fixed group. Loyalty did rise as brands grew, but as a byproduct of reaching more people, not as a lever that could be pulled on its own. The brands that grew were the ones that became easier to buy for more people, not the ones that tried hardest to reward the customers they already had.

Growth comes mostly from reaching people who do not yet buy from you, not from extracting more from the loyal few, even though the loyal few are the ones who feel most valuable and are easiest to talk to. Most loyalty spending rewards customers who would have bought anyway, while the real growth, the light and non-buyers, are the people not yet thinking about you at all. This reframes where effort should go. The instinct to focus on your best existing customers feels right and is largely a comfortable trap. Being easy to find and easy to buy for a wide range of people, including those who barely know you, is what actually grows the thing. On how to split spend between the immediate and the slow-building, see the 60/40 rule.

How Brands Grow

Byron Sharp, 2010

The evidence that reach, not loyalty, drives growth, and why most marketing believes the opposite.