How often have you heard that “Existing, loyal, heavy users are more important than light users and brand switchers?”
  
It is common sense.  It makes sense that a heavy user accounts for more sales than a light user then they are more important buyers.  It is also said to be much more expensive to acquire a new customer than to retain an existing customer.  So to grow we should focus our efforts on getting the loyal customers to buy more or buy more often.  This group offer easier pickings for more growth.
  
The problem with this argument is that it is a theory built on anecdotal evidence and hypothesis.  But it is not based on any empirical evidence of how buyers behave and which types of buyers contribute the most to brand growth. 

This post brings some science to analyse this theory.  What science does is to use empirical evidence to discover patterns that repeat themselves.  This validates or contradicts the theory.  Then we understand what actually happens, not our own projection of how it works.  We can develop scientific laws.  It is surprising how little marketers refer to scientific analysis.  But maybe the tide is turning.
 
Andrew Ehrenberg pioneered bringing science into marketing.  He started this as long ago as the 1960’s using scientific research to explore patterns of buyer behaviour.  Read about Ehrenberg here.
 
One discovery he made is that bigger brands always have far more buyers than smaller brands.  Buyers are also a little bit less loyal to the smaller brands.  The difference in brand size is almost entirely explained by the different number of buyers. Bigger brands have higher penetration. Differences in levels of loyalty are small.  

There was further evidence of this truth revealed in an IPA report called “Marketing in the Era of Accountability”.  Les Binet and Peter Field used the IPA Effectiveness Awards dataBANK to identify the marketing practices and metrics that truly increase profitability create growth.  Campaigns that aimed to increase penetration were more than twice as likely to report very large improvements in sales and profitability

                                                Target to increase
                                     Pentration  %            Loyalty %
                         Gold               21                        2
                         Silver              20                        6
                         Bronze            18                       3
                         No Medal         41                      89
 
 
This has important implications for us as marketers.  Focus on loyalty and persuading existing customers to buy more is not the best way to grow a brand.  Customer behaviour and attitudes mean that ‘loyalty’ does not work as might be expected.   
 
This means there is the right and the wrong way to use customer loyalty schemes and other types of ‘relationship management’.  This means we need to assess all marketing programmes based on their ability to attract more buyers and increase market penetration.  To keep it simple.
 
Increasing penetration is the most important objective to get growth
 
But what about creating customer delight so that we keep our customers?  Surely this is important.  Well it is.  We also need to distinguish between buying customer loyalty with promotions and schemes and creating loyalty through customer delight.  Buying loyalty will not contribute much to increasing penetration.  Whereas creating customer delight, builds advocates who recommend our products.  A powerful way to increase penetration is to create word of mouth referrals.  So customer delight is a tool to build penetration and attract more buyers.
 
Despite the evidence, Ehrenberg was often ignored by marketers and sometimes dismissed or criticised for trying to bring the rigours of science into the creative world of marketing.   Fortunately for us all, his great work is now carried on by the Ehrenberg Bass Institute for Marketing Science.
 
If you want to see why understanding the science of customer behaviour is important.  Please watch this video of Byron Sharp explaining his view at a Tedx event.  (it is also good fun to watch)

For us at Differentiate, we want to bring more science into the art of marketing.  Bringing science into marketing is not about supressing creativity.  We know it is important to be creative and have great ideas.  But we believe these ideas will be so much more powerful if they are founded on how customers actually behave and the facts about how brands grow.  We have been using this evidence to design our processes so that we bring a more robust approach to create better strategy.   We find this is more convincing to the business team.  This helps us to help you create new products and services and messages that the whole business will support and get excited about.

We will develop this theme further.   For the moment we leave you with the thought that we should all
 
Bring more science into the art of marketing 

This is now the title of our ezines.  We have also included this phrase in our logo because we believe it more accurately describes the best work we do for our clients.  This thought came about when I was reading a book by Richard Rumelt called Good Strategy/Bad Strategy - The difference and why it matters.  He really brought home some simple truths about strategy and helped us focus on why the search for competitive advantage is pivotal to creating successful strategy.  If you haven't read it.  Just click on the image to go straight to Amazon and order the book or the Kindle version.

Reading this book reminded me that for us strategy is not about visions, goals and aspirations.  Some strategy work can get confused with the company mission and goal setting.  For us better strategy is about creating a plan of action (which is designed to achieve specific goals).  So we included the definition in the blue circle below as an image on our new website as a valuable reminder to us.
 
We have also updated our short paper to describe how you can discover your competitive advantage and develop A Plan of Action that is designed to achieve your goals.  This is called The Growth Game.  We use a metaphor of seeking competitive advantage in sport and show how this translates into business decision making on growth strategy.  If you have not had a chance to read it, you can download it by signing up here