R&D Initiative director Byron Sharp had a number of Perth’s top marketing executives analysing their brand building strategies last week when he told a meeting that many commonplace marketing theories were really myths.
The first of these, he told a forum organised by The Brand Agency, was that loyalty varies little between brands. Instead, he said, advertising should centre on the cost-effective reach of a large audience.
Using the car markets in the UK and France from 1986-1989 as an example, Dr Sharp explained that those with large market share experienced similar customer defection rates as smaller brands.
Ford, for example, has 27 per cent of the market in the UK and has a defection rate of 31 per cent. In France it has 7 per cent of the market and a defection rate of 49 per cent. Peugeot has 5 per cent of the UK market and a customer defection rate of 57 per cent. In France it accounts for 22 per cent of the market but has a defection rate of 45 per cent.
“These same patterns apply for soup and soap, soap operas, fuel consumers and fuel contracts, aviation, telecommunications, pharmaceuticals, concrete, women’s fashion, comic books etc,” Dr Sharp said.
Marketing experts in Perth suggest Dr Sharp’s research is plausible for low involvement purchases but stress that it can be dangerous to generalise.
Market Equity chief executive Brent Stewart said most empirical evidence and literature suggested brand loyalty was linked to brand equity.
He said while loyalty might vary little in Dr Sharp’s study of fast-moving consumables, there were examples of high customer retention rates based on brands.
“You only have to look at Porche from a brand equity point of view. They are the most popular brand in the world and if you look at its repeat sales rates relative to others it is incredibly high because the brand commands an incredible amount of loyalty,” Mr Stewart said.
Dr Sharp also said the common marketing theory that 80 per cent of revenue was derived from 20 per cent of customers was a fallacy, and direct marketing strategies needed a rethink.
Dr Sharp said smaller groups of customers accounted for larger volumes per customer, but any small group still accounted for only a small amount of total volume.
“If your aim is to lift buyer concentration with fewer but better customers, then you are aiming to be a smaller brand,” he said.
The Marketing Centre managing director Michael Smith said the 80:20 rule was important for high-involvement purchases.
“The 80:20 rule is still current and while it might not be true for confectionary it’s certainly true for the financial service industry. It’s important not to generalise across categories.”
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