How Brands Grow: Part 1—The Double Jeopardy Law Explained
I remember the days as a corporate researcher, working on brands like Hunts tomatoes and PAM cooking spray, where we would sit around a conference table during brand planning season every year, trying to find out where our brand growth would come from. Some would argue for penetration, others for buy-rate or loyalty but often we’d settle on going after brand “switchers” which sounded good to us. While our strategies made logical sense to us, they were often grounded in unproven marketing rules-of-thumb rather than science and facts about how brand growth really occurs.

Byron Sharp, professor of marketing science from the University of South Australia, has changed this need for guesswork-strategy with his seminal work “How Brands Grow, What Marketers Don’t Know.” This book has been widely popular among marketers, but from my experience most of the people I talk to haven’t read it or even heard of it, especially those outside the CPG industry. Because of this, I thought it would be beneficial to lay out some of the key principles of the book over my next few blog posts.  I promise you it will change the way you think about brand growth and marketing strategy.

The Law of Double Jeopardy

Sharp lays out a series of laws in his book that explain certain dynamics about brand growth and consumer buying habits. He calls these “laws” intentionally, because through his and his colleagues’ research, they’ve proven that these principles hold true in all types of businesses (both products and services, B to B and B to C), and across all countries, with few exceptions.

One of the most important laws he describes is the Law of Double Jeopardy.  This law states that brands with less market share have so because they have far fewer buyers (first jeopardy), and these buyers are slightly less brand loyal (second jeopardy). In other words, as market share declines, both penetration and brand loyalty drop together. Furthermore, penetration drops at a much faster rate relative to loyalty. The chart below shows this dynamic. Notice that as market share declines, penetration drops at a much faster rate than purchase frequency.

graphic representation of the double jeopardy law—a standard chart explaining purchase frequency vs penetration for toothpaste brand in china

Here is the same data shown in a different way, where each bubble is a brand, and the bubble size represents the size of the brand’s market share. Notice how little difference there is in the y-axis (purchase frequency/loyalty) versus the change in penetration in the x-axis. Sharp and his colleagues have shown that this relationship is consistent in all categories of products and services – grocery products, industrial brands, services, stores, newspapers, radio stations, etc.

a bubble graph representation of the double jeopardy law—purchase frequency penetration

Data Source: How Brands Grow Part 2, Sharp and Romaniuk

Why is this important? This law holds true as brands both grow and decline. Thus, as a brand grows, it moves along this double jeopardy continuum, which leads to a several critical implications for how brands grow.

Implications of Double Jeopardy

Probably the biggest implication is that brand growth comes primarily from penetration. The double jeopardy pattern, with modest changes in loyalty across brands, shows that you can’t have significant growth by growing loyalty alone. Thus, brand growth strategies need to emphasize penetration over buy rate or loyalty.

Double Jeopardy also implies that improving loyalty is a weak growth driver. In fact, the double jeopardy law shows that it is very difficult to grow loyalty without improving market share because they change together. Thus, loyalty gains are a result of improving market share, not the other way around! This is quite revolutionary, as it flies in the face of everything we’ve learned as marketing professionals – that it is always cheaper and easier to sell one more unit to an existing customer than to find a new one.  It implies that spending money on loyalty building strategies will typically be a poor investment of marketing dollars. We will go into this in more depth in a later blog post.

Why does Double Jeopardy occur?

The Double Jeopardy law is driven not so much by dramatic differences in product performance, positioning, or customer bases, which is what most marketers believe, but rather two key factors that Sharp calls mental and physical availability:

  • Mental availability: the propensity for the brand to be thought of in buying situations
  • Physical availability: how easy the brand is to buy and find

Large brands are higher in both mental and physical availability. They have stronger awareness and are sold in far more places than smaller brands.  Additionally, they have wider assortments and more facings on shelf (for consumer products). These implications impact both penetration and loyalty. As consumers go to buy, they are more likely to see brands that have greater distribution, and the average consumer is more likely to consider brands they’ve heard of.  Thus the larger brands will not only attract more buyers, but they will increase their chances of making it into the consideration set of the buyers which ultimately increases loyalty because they have greater physical availability. Large brands also have an advantage with light buyers because light buyers are less likely to have heard of the smaller brands and are less likely to see them when shopping. The net effect of these dynamics is the double jeopardy law, where both penetration and loyalty move in the same direction.

Sharp maintains that the implications of this law are that marketers should be spending less time and money trying to differentiate the brand and on loyalty programs, and more time trying to build mental and physical availability which are the foundation for growth. I agree but I think he leaves out how necessary good branding is for building mental availability, and that a poor brand strategy makes it an uphill battle. Additionally, he points out that physical availability doesn’t just mean distribution, it also equates to making your products as easy as possible to buy. This means addressing key barriers that your potential customers could have, having varieties that appeal to a broad audience or your target, making the price reasonable even if it means downsizing, and making the buying process as seamless as possible.

I hope this blog helps clarify one of Sharp’s building blocks for brand growth.  In the next two blogs, I will expand on these principles and discuss in more depth the fallacy of loyalty building strategies and the importance of light buyers to growing penetration. If you have any comments or questions, feel free to chime in below.

About the Author

Rob Riester is Founder and Partner of Peel Research Partners, Inc, a market research firm. Rob leads market research engagements to help companies effectively manage risk and make better business decisions. Find out more about Peel Research Partners