Alan Mitchell Reinventing marketing: Deny the fundamental law of marketing and you'll fail
A view from Alan Mitchell

Alan Mitchell Reinventing marketing: Deny the fundamental law of marketing and you'll fail

Large sections of the marketing and advertising community are making a huge mistake by not accepting that 'double jeopardy' affects every aspect of their work.

Consider the following two views of how marketing works. Which is closer to your view?

First, marketing is a mysterious, impenetrable art driven by super-humans with clairvoyant powers of insight, who delve deep into the human psyche to discover the hidden wellsprings of human motivation and desire. Using their creative genius, they press the appropriate buttons and pull the appropriate triggers to deliver the desired attitudinal or behavioural change.

Under this scenario, successful marketing boils down to the ineffable powers of insight and creativity residing in individual marketers - the Pied Pipers of the modern world. Thus, for example, in an article for the Financial Times a few years back, Maurice Saatchi compared the work of advertising agencies to the 'startling creativity of the kind practised by great artists, directors, writers, musicians and actors, who know how to touch a chord in humans everywhere'.

The alternative view is that successful marketing is shaped by a few fundamental, immutable marketplace laws beyond the marketer's influence or control, which rule out some goals and strategies as the equivalent of a physical impossibility, and which define how marketing needs to be done.

Marketing mythology tends toward the first view. But to what degree is the reality defined by the second?

In the early-50s, a statistical maestro by the name of Andrew Ehrenberg was looking at a table of brand market shares when he noticed a pattern. Only a died-in-the-wool statistogeek would have been able to recognise this pattern. In the jargon, it's called a 'negative binomial distribution' (more popularly known as 'double jeopardy') and it goes like this: not only are big brands bought by more people, they are also bought more often.

That, it seems, is a law of marketing as immutable and undefiable as the law of gravity. In every country, in every era, in every category, in every situation and circumstance, this law has been found to hold (with apparent exceptions quite easy to explain).

Love it or hate it, it's at work when you do your marketing, whether you like it or not.

Ehrenberg, who died in August, spent his life researching the ramifications of this discovery.

Big sections of the marketing and advertising community are still in denial about what he found. Here are some examples.

Your advertising is working if nothing happens as a result of it

Most advertisers want their advertising to boost sales and market share. So that's how they measure success. The trouble is, every advertiser is doing the same thing, so the only way to grow is to steal market share from someone else.

That's not easy to do on a sustainable basis, as illustrated by recent research by Charles Graham of South Bank University, who tracked 106 brands over four years. While their market shares wobbled around a norm, 100 of them showed no real movement. As Ehrenberg concluded, the real job of most advertising is not to grow the brand, but to stop it being devoured by its competitors. Not losing market share is success. Celebrate it.

Brand loyalty is a myth

Thousands of marketers have spent millions of man hours and billions of pounds chasing a crock of gold at the end of a rainbow: the dream of 100% customer retention.

Ehrenberg's double jeopardy shows that people buy a repertoire of brands. This means they are not 100% loyal, and the chances of changing this are in the category of 'snowball in hell'. What you can do, however, is get more people to buy your brand more often - and that's what successful (big) brands do.

By the way, there is an interesting corollary to this. The same double jeopardy law shows that every brand is always being hit by 'customer defections', and that for big brands, the proportion of customers defecting is always less than for small brands. The smaller your brand, the higher your churn rate. If you want to reduce churn, expand your market share.

Do not focus on your most valuable customers

Ehrenberg's research also showed another immutable pattern. Every brand has a small number of buyers that buy the brand very often, a middling number that buy it relatively often, and a high number that buy it rarely.

The many 'less-valuable' customers always account for a high proportion of the brand's sales volume. If you set out to 'dis-market' these less valuable or 'unprofitable' customers, and focused your attention on your most-valuable customers, then the only thing you would succeed in doing is shrinking your brand: the distribution of heavy, medium and light buyers would remain - there would just be fewer of all of them.

By the way, this also represents a challenge to brand strategies devoted to building a cadre of passionate 'brand advocates'. Ehrenberg's research suggests that you will always find a small percentage of such people and that their influence is what it is: part of the already existing pattern, no more and no less.

The passionate brand advocate mythology does not match the facts. Take the famous case study about fanatical Harley-Davidson fans who tattoo the brand's logo on their bodies, amass for mega-rides and so on. As Byron Sharp reports in his book How Brands Grow, they account for less than 3.5% of the brand's sales, with 50% of business coming from people least likely to agree with the statement 'my bike is everything to me'.

Differentiation is for dummies

'Differentiate or die' is a mantra that is constantly on many marketers' lips. However, repertoire buying suggests that most purchasers buy the generic benefits of the category, not the brand's distinctive characteristics. You'll be extremely lucky to find a brand for which more than 10% of buyers think it is really different from other brands on the market. Moreover, the bigger the brand becomes, the lower this percentage. Highly differentiated brands are small, almost by definition.

For many marketers, Ehrenberg's research is so deeply and disturbingly counter-intuitive that a simple policy suffices: 'If I ignore it, perhaps it will go away.' Nonetheless, 50 years later, it keeps on coming back, surviving wave after wave of 'new' thinking and 'breakthrough' strategies.

Here's my take on it. We do need to treat it like a law of gravity. Any strategy that contradicts or defies this law is doomed to fail, no matter how desirable or intuitively sensible it may seem. Moreover, any strategy that is consistent with it, has a chance of succeeding. Innovation around core category benefits (as distinct from differentiation for differentiation's sake) is consistent with double jeopardy. As is making the brand famous and distinctive (easy to recognise), making it easy to buy the brand (distribution and penetration), and so on. The basics, in other words.

Underneath it, though, there is something deeper. From the brand manager's perspective, the question 'what additional reasons can I give my customers to buy my brand?' easily becomes an all-encompassing obsession.

Perhaps, however, it is not the most important question to ask. Perhaps the most important question is 'what are the obstacles to my customers buying my brand, and how can I remove them?'. Better alignment, in other words.

They may look similar, but they are subtly different. The first question leads you in search of a better Svengali. The second takes you down the road of marketing and brand-building as a customer service. Which path are you on?

Alan Mitchell is a respected author and a founder of Ctrl-Shift and Mydex.