Penetration is the better bet for growth

If you are placing a bet on where your brand's growth will come from, penetration is the better bet. Growing brands usually win more buyers. Higher purchase frequency among the buyers you already have plays a part too, but it is usually the smaller change.

The evidence for this is strong. Research from the Ehrenberg-Bass Institute looked at more than a thousand rises and falls in brand share across dozens of UK packaged goods categories. When brands grew, their penetration usually changed much more than their loyalty, for big and small brands alike.

Part of the reason is the pattern known as Double Jeopardy, which Andrew Ehrenberg's research made famous. Brands in the same category tend to have similar levels of loyalty, and smaller brands have fewer buyers who also buy them a little less often. So the odds are against a plan that relies on loyalty well above the category norm. If the average buyer in your category buys their favourite brand 12 times a year, you might get yours to 14. Getting them to 24 is a long shot. Your category's loyalty figures will show you where the ceiling probably sits.

Campaigns point the same way. When Les Binet and Peter Field analysed the IPA Effectiveness Awards cases, campaigns with a penetration objective reported very large business effects more often than campaigns with a loyalty objective. Loyalty campaigns that did work mostly worked by bringing in new customers. Their report is Marketing in the Era of Accountability, sold by the IPA. Peter Field describes every brand as a leaky bucket. Customers keep leaving, mostly to competitors and sometimes for ordinary reasons like moving house, however well you treat them. So the bucket has to be refilled all the time.

The odds shift in some places. Some brands do hold more loyalty than their size would predict, and in the UK research these were mostly market leaders and supermarket own brands. The IPA cases also suggest a loyalty objective may be more worth trying for big brands, for cheaper brands, and in categories where people buy on emotion. The buying studies here come from packaged goods. The IPA cases found the same pattern in other categories, but if you sell something else, test it against your own data before you bet on it.

So what can you do with it? Set a penetration goal alongside any loyalty goal. Track penetration every year, because a market share figure on its own won't tell you whether you grew through more buyers or more frequent buying. Plan for reach, so your marketing gets to people who don't buy you yet as well as the ones who do. And if you are a big brand, a loyalty objective may be worth a test.

Charlie