Double Jeopardy - breaking the laws of marketing
Statistics and marketing go together like – well, like fishes and bicycles, really. Marketers are generally really uncomfortable with statistics. Especially when they highlight our failures.
One person who successfully combined statistics and marketing (although often to the exasperation of fellow marketers) was an academic named Andrew Ehrenberg. His death last year at the age of 84 has prompted a renewed interest in some of the theories which he developed.
One of those theories makes particularly difficult reading for marketers. He recognised that consumer purchasing behaviour can be described with a statistical analysis called ‘negative binomial distribution’. More popularly it is described as ‘double jeopardy’ – and it has a number of interesting ramifications.
With apologies to Professor Ehrenberg’s ghost, one can dramatically summarise and paraphrase to say that he demonstrated (among other things) that advertising does not work. It generally fails to attract new buyers to a product or service – although it can help to keep existing purchasers ‘loyal’.
Short-term promotions (such as ‘buy one, get one free’) have only a short-term impact and do not affect a brand’s subsequent sales. The apparent new sales generated by the promotion are almost entirely to people who would have brought the product anyway.
Ehrenberg also demonstrated that brand loyalty is pretty rare – arguably so rare that it is not worth pursuing as a marketing strategy. People may be loyal to a ‘category’ (eg, chocolate) but they will buy several brands within the category.
There is an appearance of brand loyalty because big brands are bought more often by more people and the number of consumers defecting to other brands is proportionately smaller for big brands than for small ones. The statistics suggest that the only way to increase brand loyalty is to create a bigger brand – you cannot create a bigger brand by increasing brand loyalty.
A strategy loved by marketers just as much as ‘developing brand loyalty’ is ‘brand differentiation’. I know – I’ve preached this many times myself.
The idea is that if you want more people to buy your brand, you have to make it different from everything else on the market. You have to give people a reason to buy your product or service rather than another.
The statistics, though, show that this may not actually be a smart move. If consumers are loyal to the category, rather than to the brand, the further you move your brand out of the ‘category mainstream’, the fewer potential customers you may have.
The highly differentiated, quirky, almost unique brands are almost always small players in their markets. They are often profitable in their little niches but they rarely move to become category leading brands. There are some rare exceptions where the differentiation has given a real consumer benefit and the brand has grown because of that (at least until competitors have copied the innovation and done it more cheaply) but the odds are highly stacked against it.
Removing the barriers to purchase
The most successful strategy does not seem to be one of giving people reasons to buy your brand. Instead, success comes by avoiding giving reasons not to buy it. Competitive pricing, efficient distribution, good customer service, easy-to-use packaging, not offending people’s sensibilities about environmental impacts or child labour – you need to do whatever is appropriate to your particular product or service category that removes barriers to purchase.
This is how the big brands remain big in the face of intense competition from ‘young upstarts’. They can use their size and financial muscle to deal with these issues in a way that smaller brands cannot.
Ehrenberg’s work suggests that there are some laws at work in marketing that are as immutable as the laws of nature. Forget marketing breakthroughs. The route to success lies in getting the basics right.
In an article for Brand Strategy magazine he wrote: “Many goals set in marketing are unrealistic. They are therefore doomed to failure from the start.
“Such romantic marketing dreams include sustained growth, brand differentiation, persuasive advertising, profit maximisation, and knowledge management. When marketers fail to reach any of these unreachable goals, it gives marketing a bad name.”
So take a sceptical view when your marketing department or advertising agency presents you with next year’s marketing plan predicting massive volume growth based on increasing brand loyalty and an advertising campaign to take market share from your competitors. Ask them how they are defeating Ehrenberg’s double jeopardy principle.
If they truly have the creativity needed to do just that, maybe you should turn their talents to designing a perpetual motion machine. The laws of physics described by Newton and others should be no more difficult to break than the laws of marketing which Ehrenberg described!