The one-sentence summary
Much of what marketers believe to be true is wrong, but clear laws do exist to help.
- There is a lot that marketers don’t know, and here are the laws that are vital:
Double jeopardy law: brands with less market share have so because they have far fewer buyers, and they are less loyal (so the brand is hit twice)
Retention double jeopardy: all brands lose some buyers and the loss is proportionate to their market share (big brands lose more but it’s a smaller proportion of their base)
Pareto law, 60/20: a bit more than half a brand’s sales come from the top 20% – the rest come from the bottom 80% (so it’s not 80/20)
Law of buyer moderation: heavy buyers buy less in the period after they were classified as such and the converse may be true of light buyers (there is regression to the mean even when there is no real change in behaviour)
Natural monopoly law: brands with more market share attract a greater proportion of light category buyers
User bases seldom vary: rival brands sell to very similar customer bases
Attitudes and brand beliefs reflect behavioural loyalty: consumers know and say more about brands they use more often, so big brands always have higher survey scores
Usage drives attitude: attitudes and perceptions are very similar across brands
Law of prototypicality: image attributes that describe the category score higher – distinctiveness is more important than differentiation
Duplication of purchase law: a brand’s customer base overlaps with that of others in line with their market share
WHAT’S GOOD ABOUT IT
- It’s fun to read a calm, academic destruction of some of the marketing greats. Those who get it in the neck for peddling ‘esoteric quackery’ include:
Fred Reichheld (inventor of the Net Promoter Score): customer retention is not the key to improved profits, the author says.
Philip Kotler: target marketing and segmentation don’t work.
Kevin Roberts: Lovemarks are humorous twaddle invented after too much wine.
Al Ries: wrongly predicted that the iPhone would only be a niche product.
WHAT YOU HAVE TO WATCH
- The NBD-Dirichlet is effectively impenetrable to the layperson. It refers to a Negative Binomial Distribution, and is named after Johan Dirichlet. It remains pretty much unexplained, and further research at marketingscience.info sheds little further light on the matter.
- The author is Director of the Ehrenberg-Bass Institute for Marketing Science, so most of the material comes from there.