The Loyalty Effect: Friend or Foe? The Radical Marketing Strategy You Need to Rethink Growth!

This week, we'll dive into a data-driven approach that could shatter conventional marketing wisdom and propel your brand to become a dominant force in your industry.??????

I invite you to get ready to re-think retention and unlock the secrets to explosive brand growth in this Monday morning read!

Just before I carry on, let's be clear, the call-to-action here is to: Re-Think Retention, and not to abandon or replace it, there is definitely a place for it in the Marketing Strategy toolkit, the arguement below is that it is not enough to rapidly power your brand's growth to be a market leader in your category or industry. Let's therefore unpack this different perspective with open minds!

How many times have you been told a 5% customer retention improvement can skyrocket profits by 25%-95%? Millions of business leaders swear by the 'Loyalty Effect.' But what if there's another side to the story, backed by data, that could unlock explosive brand growth? Before you decide to stop reading at this point, I implore you to pause, re-read, give it some thought, and read on, it could just be the insight your organisation needs at this very moment!

In the marketing world, a mantra has been preached for years: "Loyal customers are the key to growth." We've been conditioned to believe that showering existing customers with loyalty programs and incentives is the golden ticket to success. But what if there's another way? Enter #Byron Sharp, a marketing thought leader who challenges this conventional wisdom with a data-driven approach focused on brand awareness and mental availability.

Rethinking Brand Growth with Science

For decades, marketing has been dominated by a focus on building deep customer loyalty. This idea, made prominent by the research work of #Frederick Reichheld, focusses on cultivating a passionate fanbase who consistently choose your brand over competitors. But what if the path to brand growth lies not in clinging to existing customers, but in attracting a wider audience altogether? This is the central proposition put forth by Byron Sharp, a prominent marketing scholar and author of the influential book "How Brands Grow."

Sharp, alongside colleagues at the Ehrenberg-Bass Institute for Marketing Science, challenges traditional marketing assumptions through extensive data analysis. Their research paints a surprising picture: in most categories, a brand's core customer base is not a group of highly loyal advocates, but rather a vast pool of light buyers.

As an example, consider for a moment brands like Starbucks & Coca Cola, while they might have daily buyers of their products, a significant portion of their sales comes from occasional buyers. These are consumers who occasionally purchase the brand's products alongside competitors', often influenced by factors like mental availability and brand salience at the point of purchase.

Byron Sharp's brand growth strategy, focused on mental availability and acquiring new customers (penetration) through brand awareness, can be beneficial at various stages of growth, but it tends to be most impactful for brands in the following stages:

• Early Stage Growth : Building a foundation - For new brands or those with low market penetration, Sharp's theory offers a clear path to build brand awareness and become readily recalled by consumers at the point of purchase. This is crucial for attracting new customers and establishing a foothold in the market.
• Stagnant Growth & Market Share Plateau: Reinvigorating Brand Perception - If a brand's growth has stagnated, Sharp's approach can help refresh brand perception and reach a wider audience. By focusing on mental availability and creating stronger brand salience, the brand can reconnect with potential customers who might have overlooked it previously.
• Growth Focused Brands: Scaling Efficiently: Sharp's emphasis on cost-effective acquisition through brand awareness can be especially valuable for brands prioritizing rapid growth. By attracting new customers efficiently, they can achieve significant market share increases.

So exactly what is Sharp saying?

• Focus on Market Penetration: Sharp argues that for most brands, acquiring new customers (penetration) is more crucial for growth than squeezing a few extra purchases from existing customers (retention). The vast majority of a brand's sales come from light buyers who occasionally choose your brand. Increasing that pool of light buyers through brand awareness campaigns has a much bigger impact on overall sales than trying to convert those occasional buyers into superfans.
• Loyalty is a Result, not a Cause: Sharp suggests that high brand loyalty is often a consequence of a large market share, not the other way around. As a brand grows, it naturally attracts more repeat buyers, I tend to agree with this, I have seen this effect with most of the brands that I have been involved with.
• Loyalty has its limitations: Customers are not as loyal to brands as most marketers & other business leaders might think. They often switch between brands based on availability and other factors.
• Limited Impact of Loyalty Programs: Sharp questions the effectiveness of loyalty programs in significantly boosting retention. He argues they might reward existing loyal customers who would have repurchased anyway, while neglecting efforts to reach new customers. The cost of these programs can be significant, and the return on investment (ROI) might be questionable.

So, how can brands succesfully craft and execute Sharp's strategy?

Here's how you can craft and execute a brand growth strategy based on Byron Sharp's theory:

1. Prioritize Market Penetration:

• Shift Marketing Focus: Instead of solely targeting existing customers, allocate resources towards reaching new audiences and expanding brand awareness. This could involve diversifying marketing channels, exploring new demographics, and creating campaigns that resonate with a broader audience.
• Data-Driven Targeting: Utilize market research and consumer insights to identify untapped customer segments with high potential. Focus marketing efforts on reaching these new groups efficiently.

2. Build Mental Availability:

• Increase Brand Salience: Employ strategies to make your brand more noticeable and easily recalled at the point of purchase. This could involve high-frequency advertising campaigns, consistent brand messaging across channels, and influencer marketing to reach a wider audience.
• Distinctive Brand Assets: Develop strong visual and sensory elements that make your brand instantly recognizable. Think logos, color schemes, slogans, jingles, or mascots that create a lasting impression.

3. Ensure Physical Availability:

• Distribution Channels: Expand your distribution network to ensure your product is readily available conveniently to your customers. This might involve negotiating with new retailers to place your product in their stores or increasing online presence through e-commerce platforms.
• Promotional Strategies: Consider offering temporary price promotions or discounts to incentivize trial purchases from new customers and increase product visibility.

4. Maintain Consistency with Freshness:

• Brand Messaging: Maintain consistent brand messaging and core values across all marketing materials and customer interactions. This builds trust and reinforces brand identity.
• Creative Evolution: While maintaining consistency, incorporate creative refreshes into your campaigns to keep the brand feeling fresh and avoid stagnation.

Execution Tips:

• Metrics and Measurement: Track key metrics aligned with Sharp's theory, such as market penetration rate, mental availability scores (through surveys), and brand awareness metrics.
• Long-Term Strategy: Building brand awareness and mental availability takes time. Be patient and focus on consistent execution of your strategy over the long term.
• Integration: Integrate Sharp's principles with other marketing strategies that might be relevant to your brand, such as social media engagement or customer experience initiatives.

Are there any exceptions?

The question that often arises when Sharp's theory is discussed is whether there are instances or cases where this strategy might not be the best fit and the answer is yes. Consider the two situations below.

• Market Leader with High Penetration: For brands with a dominant market share, Sharp's focus on acquisition might be less crucial. They might prioritize customer retention strategies alongside maintaining brand awareness to solidify their leadership position.
• Niche Markets with Strong Brand Loyalty: For brands in highly specialized niches with established customer loyalty, Sharp's approach might need to be adjusted. While maintaining mental availability is still important, customer experience and nurturing existing relationships might play a more significant role.

Action point!

• Why not start this week by reviewing your customer database activity for the past year or even two to see the impact of the occasional / infrequent users of your brand on the sales and revenues. It would be great to get your feedback on this so please do let me know!

Conclusion: Rethinking Growth - A Symphony, Not a Solo!

Byron Sharp's theory throws a wrench into the traditional marketing playbook, urging us to prioritize brand awareness and market penetration for explosive growth. It's a refreshing perspective, forcing us to re-evaluate the relentless pursuit of ever-increasing customer loyalty.

However, here's the key takeaway: Sharp's approach isn't a rejection of retention, but rather a call for a balanced orchestra.

• The First Act: Building Brand Awareness : Sharp compels us to focus on becoming the top-of-mind choice through effective brand awareness campaigns. This isn't about flashy gimmicks, but about building strong mental availability that positions your brand for selection at the point of purchase.
• The Second Act: Attracting New Customers : With a wider audience noticing your brand, you create the opportunity to attract a larger pool of light buyers. These occasional customers, influenced by your newfound brand salience, become the fuel for significant market penetration.
• The Encore: Nurturing Relationships : While Sharp prioritizes acquisition, customer retention still plays a vital role. Once light buyers experience your brand, positive experiences can convert them into loyal advocates who sing your praises and come back for more.

The key is to ensure your marketing strategy isn't a one-note wonder. Embrace Sharp's insights on brand awareness and penetration, but don't neglect the importance of fostering positive customer experiences that nurture loyalty in the long run. By conducting this harmonious marketing symphony, you can unlock both explosive growth and enduring customer relationships.

#bryonsharp #frederickreichheld #marketpenetration #loyalty #brand #growth #beyondthebuzz #cocacola #starbucks