If you feel this way about light buyers, which is completely natural and seemingly logical, you may be overlooking the primary source of brand growth. In this post, drawing on findings from the “How Brands Grow” marketing science book series (Sharp and Romaniuk, Oxford Press, 2010 & 2016), I’ll explain why targeting heavy brand buyers for growth is a fruitless effort, and that it’s actually light and non-brand buyers that are the key to growth.
Heavy Buyers are Too Few
Everyone has heard of the 80/20 Pareto curve but when it comes to sales, Sharp’s research shows that in a one year analysis period, your top 20% of customers typically account for only 50% of sales, not 80%. Thus, your heavy buyers aren’t as important as you might think. Additionally, your bottom 80% of customers are bigger than you think, accounting for half your volume. Most marketers are surprised to find out how light their buyers are. As an example, 50% of Coke buyers in the UK buy only 1 or 2 cans or bottles of Coke per year while the majority of buyers purchase 3 or less units per year (Source: TNS Impulse Panel). The brand’s average is 12 per year, but that is magnified by an exceedingly small percentage of ultra-heavy drinkers.
Trying to generate growth from the heavy buyers is mathematically difficult considering their small numbers. If you define your heavy buyers as 20% of your customers, who are responsible for 50% of sales, and you’re able to increase their purchases of your brand by 10%, this equates to only 5% overall growth. Not bad for canned goods, but falls short for most of our ambitions.
Heavy Buyers are Reluctant to Buy More
It sounds like it would be easy to increase purchasing of your heavy brand buyers, but the research shows this is not the case. First of all, your heavy brand buyers are likely to be heavy category buyers, which are already heavily committed to the category and unlikely to buy more of it. Secondly, they are already loyal to your brand so there is little room for them to allocate more of their purchases to it.
How about targeting heavy category buyers that are loyal to your competing brands? This sounds reasonable, but the research shows that this is not a reliable growth strategy. Not only is this group small, like your heavy brand buyers, but they also are already loyal to other brands so to get them to switch requires a significant change in their behavior.
Brands Can’t Grow without Significantly Increasing Light Buyers
Sharp and Romaniuk have studied thousands of brands across different product and service categories and regions of the world to help understand how brands grow. Their research shows that when a brand grows, there is a big increase one-time purchasers and only a small increase in the number of customers that buy it multiple times. Thus, the growth of the brand is heavily dependent on gaining many additional light buyers.
Below is a perfect example, which shows a toothpaste brand in China that grew 1.5 percentage points from year to year. Notice that the biggest change happened among those buying the brand only once. These one-time buyers accounted for 65% of the total growth for this brand.
Sharp and Romaniuk show that this effect is repeatable and predictable across businesses of all kinds. In a nutshell, the reason why this happens is that light buyers are so numerous and have so much more room to grow their purchasing, so they become a primary source of growth.
This effect is also key in explaining the “double jeopardy” law, which I summarized in an earlier post. This law states that brands with less market share are smaller because they have far fewer buyers and these buyers are slightly less loyal. The dramatic difference in penetration between the large and small brands is driven primarily by light buyers.
Implications to Marketers and Market Researchers
To achieve growth, marketers should seek to expand their customer base by opening their marketing strategies to include light and non-buyers of their brands. In addition, marketers should use simpler messages with broad-reach, low-cost media that emphasizes reach over frequency and focuses on penetration over buy-rate. Keep in mind that this does not mean you have to ignore your heavy buyers, but be aware that marketing targeted toward light buyers will inevitably also reach heavy buyers due to their strong engagement with your brand and the category.
Market researchers need to ensure that their studies are not solely focused on heavy buyers, which is a common practice. Marketers are often reluctant to include light buyers in their studies so be ready for some push-back. In addition, include a light/medium vs. heavy buyers investigation in your analysis. Look for differences that could help you learn more about the light buyers – who they are, what their needs are, and what drives their purchase decisions.
Hopefully, this new post gives you a stronger appreciation for the importance of light buyers and a deeper understanding of how brands grow. If you have comments or questions, please do not hesitate to reach out.
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