7 Rules of Marketing that Get Results

by Temel Aksoy

  The reality is, it’s not possible to prevent customer loss. However, if brands grow by winning over new customers, they’ll experience two positive effects simultaneously:

  First, they’ll to some extent increase their customer loyalty percentages as predicted by the Double Jeopardy Law (Law 1).

  Second, the overall percentage of customers (consumers) they lose will decline.

  Naturally, every brand must invest in improving its products and services to retain its existing customer base. No one could object to this. But in real life, no company has ever been able to protect its current customer base and grow by generating larger revenues from it. Brands grow by acquiring new customers (consumers).

  28.

  20% of Customers Account for 60% of Revenues (Law 3)

  In an article he published in 1896, the Italian statistician Vilfredo Pareto wrote that the richest 20% of Italian families owned 80% of the land in Italy. Since then, research conducted in different countries by different statisticians has found similar results.

  This distribution came to be known as the Pareto Rule. Numerous studies have been conducted showing that it applies not just to land ownership but to many different fields as well. It’s claimed that 20% of athletes win 80% of the medals in competitions and that 20% of social security patients account for 80% of total expenses.

  The 80/20 Pareto Rule, which predicts that 20% of inputs will account for 80% of the results, has been recognized in many fields, from personal development to company management (such as Richard Koch’s The 80/20 Principle: The Secret to Achieving More with Less).

  As soon as I heard of the Pareto rule, I accepted its veracity without question. Let’s be honest, the principle is extremely persuasive. This rule has made its presence felt in many areas of our life, whether it’s the fact that a person spends 80% of his time with 20% of his acquaintances or the fact that 80% of Nobel Prizes are won by 20% of the countries.

  Years after learning this rule, when I examined the revenue statements of the company I managed, I realized that this percentage didn’t really hold true. The statements showed that 20% of customers accounted for more than half of revenues, but it wasn’t the 80% required by Pareto’s Rule. At the time, I never even considered questioning the truth of the Pareto Rule. When the rule didn’t apply to my company, I thought that it might be an exception. However, when I read Byron Sharp’s research, I realized that the Pareto Rule not only failed to apply to my company, it didn’t apply to any company.

  I have no idea how applicable the rule is in other fields, but I now know for certain that 20% of a company’s customers don’t account for 80% of that company’s revenues, and this knowledge now informs the consultancy that I provide to my clients.

  The 80/20 Pareto Rule is a marketing myth. What is the reality? According to household consumer panel data, 20% of consumers (customers) account for 60% of sales. In almost every country and every sector, in both consumer and B2B markets in both durable and nondurable goods, the rule is 60/20, not 80/20.

  In real life, of all the people who use almost any brand, approximately 80% are either first-time users or light users. This 80% majority accounts for 40% of company sales. If this majority accounted for 20% of sales like the Pareto myth predicts, instead of a much larger 40%, it might be reasonable to consider new customers and light buyers as secondary. But data shows that in real life, this group accounts for significant sales volume (40%). Thus, the goal of acquiring new customers (consumers) should be a management priority in every company in every product category.

  29.

  Over Time, Heavy Users Become Light Users (Law 4)

  People who purchase a product frequently during one period of time buy less frequently over time, while light purchasers increase their purchase volume. People remove some brands from their lives without even realizing it and include others in the same way. As people’s living circumstances and likes change, the brands they buy and the purchase frequency and volume change as well.

  Every researcher who studies consumer panels for a few years can see that light users begin to use the brand more, while heavy or frequent users make fewer purchases over time.

  Because total sales figures from one year to another for several product categories don’t show significant swings, most company executives think that their customer base is made up of the same people buying nearly the same amount of product. That’s a myth. In reality, there are always huge shifts in every brand’s customer base. Some stop buying the brand, some are first-time buyers, some use it less and some use it more. The fact that total sales numbers don’t vary greatly from one period to another doesn’t mean there is no movement within the customer base. In fact, every brand’s customer base is a boiling cauldron.

  For example, let’s look at television viewership. The number of viewers that a TV series has one week doesn’t change significantly the following week. However, in general, approximately half of the viewers from one week to another won’t watch the series. Although the rating of the series will remain almost the same, the fluctuation in individual viewers is massive. Patrick Barwise and Andrew Ehrenberg published these findings in the book they coauthored entitled Television and Its Audience, which shocked the industry. No one imagined that the people watching television programs would change so drastically from one week to the next. Even today, most television producers aren’t aware of this fact.

  Because of this fluctuation, first-time users and light users are crucial to a brand’s future for two reasons:

  First, as shown with Law 3, total revenues from first-time users and light users are too significant (40%) to ignore (details in chapter 28).

  Second, today’s light users will be heavy users of the future.

  For these reasons, targeting only heavy users isn’t effective or sustainable.

  30.

  Natural Monopoly Law (Law 5)

  Large brands attract first-time users and light users.

  In the studies he conducted in the 1960s, William N. McPhee (first mentioned in Law 1) determined that people who rarely listen to the radio listen to the most popular programs.

  Similarly, people who rarely travel head for the most popular destinations. The cities that attract the most tourists in the world are among the top choices of people who rarely travel. Paris, for example, is such a popular city that it’s the first international destination first-time travelers think of.

  Generally, the first international trip American families make is to one of the Latin and Central American countries, the second trip is to Paris or London, and any trip after that will be to less well-known countries. Less popular destinations are chosen by the category’s frequent users.

  This type of standard behavior, where light users choose the most popular alternative, applies to all product and service categories. Brands with large market share attract light users because of this effect.

  This law predicts that as a brand grows it will win over first-time buyers, creating a sort of natural monopoly. People who don’t watch much television tend to watch the most popular programs on the most popular channels. Those who watch a lot of television watch both popular channels and programs with fewer viewers. The reason that programs with the best ratings continue to grow isn’t because their audience of loyal viewers increases in size but because, as the programs grow, they attract people who watch television less frequently.

  Companies that target first-time users and light users will reach heavy users anyway, so this approach always yields much more effective results than selective targeting of heavy users.

  31.

  Rival Brands Sell to Similar Users (Law 6)

  The user bases of rival brands are rarely different. Every brand in a product category sells to the same type of user.

  When I ask executives, “Are the people who buy your brand different?” almost all of them say that their consumers (cust
omers) are different people. Most executives in the marketing world do, in fact, believe that the people who buy their brand are different people with different attitudes and behaviors from those who buy the competition’s brand. This belief is an absolute marketing myth. It is one of the greatest fallacies prevalent among marketers.

  When I first began conducting research, I performed countless customer (consumer) profile studies for companies. In later years, I did even more detailed studies, using advanced statistical techniques such as cluster analysis. My goal was to group the users of one brand from the users of rival brands based on various characteristics, thereby providing insights to the brands I worked for to aid their efforts to get a detailed knowledge of “their own audience.”

  However, I never encountered two rival brands with different groups of users in any of my research. In almost all of my research, rivals’ brands had the same customers (consumers) in terms of almost every characteristic. At the time, I assumed I just didn’t have the research techniques required to reveal the differences. I thought that if I had sufficiently advanced analytical tools and methodologies, I would be able to bring these differences into daylight. As a result, I always thought the problem was with me. Like most people, I believed there was a difference between Nike and Adidas users and between Mercedes and BMW users, but I couldn’t find any evidence of this in my own research.

  Any marketing professional who observes real life instead of believing the marketing myths will immediately recognize the reality: rival brands cannot have different users. In a world where everyone’s bathroom has more than one brand of shampoo, their kitchen has more than one brand of detergent and their closet has clothing from multiple brands, it’s abundantly obvious that no brand can have its own peculiar customer (consumer) base.

  In a world where one customer (consumer) purchases multiple brands within the same product category, no researcher can find a difference between brand users, no matter what methodology they use, because people who use brand A are the same people who use brand B.

  Yet, still today a majority of marketers believe the myth that the people who use their brands aren’t the same people who use their rival’s brands. As Andrew Ehrenberg says “Your customers are the customers of other brands who occasionally buy you.”

  Knowing that no brand can own any users on the market will convince all marketing professionals who have faith in science that there is always room to grow their brand.

  32.

  The Image of Growing Brands Improves (Law 7)

  The most important source of information that people have about a brand is their experience with the brand. Generally, the more people use a brand, the more information they acquire and the more positive their impressions are. People talk about the brands they’re familiar with and purchase the brands they know. On the other hand, people don’t know that much about brands they’ve never used. What they have to say about those brands is limited.

  Every researcher who studies perception (image) will conclude that bigger brands are perceived more positively than the smaller ones and that the market leader has the most positive attributes among them all. The reason for this is that the leading brand not only has many more users but also is the brand that has invested most in advertising and therefore occupies more mental space in people’s minds. As a matter of fact, the image (the perception) of any brand is directly proportional to its market share.

  It follows that the brand with the most users in each market is always the brand with the most positive perception. The more a brand grows, the better that brand’s image is.

  Every marketer who is aware of this law can predict the results of brand image studies even before the data is collected, simply by examining the market share of competing brands.

  33.

  Behavior Drives Attitude (Law 8)

  Marketers and especially advertising professionals believe that if they want to change a person’s behavior, they must first change their opinion. They assume that if they can persuade people, they can change their behavior. This is why advertisements are loaded with efforts to “convince people.” However, this is an approach with little chance of success, because the human mind is programmed not to accept other people’s ideas. (See chapter 14) No one wants to change their mind. Even children like their own ideas.

  Even though marketers try to persuade people to favor a brand and then change their behavior, in real life this mechanism works in reverse. First, people see the brand’s advertisements for a certain period of time and become accustomed to the brand, all while encountering the brand constantly at different sales points. Ultimately, they purchase the brand during a shopping excursion without actually making a cognitive decision. Later, as they see the benefit of the brand and how it solves their needs, they develop positive opinions of the brand. Attitudes come after, not before.

  Although it’s almost not possible to persuade people with advertising, it’s possible to change their purchasing behavior in favor of the brand by creating a brand memory through long-term exposure. As Byron Sharp says, everyone passively “consumes” brand advertising, and after some time they begin to buy these brands without even realizing it (details in chapter70).

  Again, remember choice supportive bias in chapter 14. Whenever people engage in a certain behavior, whether consciously or unconsciously, they justify their behavior. Therefore, every person loves the brand they purchase. This is actually how big brands become favorable brands without even trying to become favorable.

  34.

  Competing Brands Share the Same Image Attributes (Law 9)

  The reasons that one shopper has for buying brand A are the same as the reasons another shopper has for buying brand B in the same category.

  People pay money for toothpaste to prevent tooth decay, whiten their teeth and freshen their breath. These are generic benefits provided by every brand of toothpaste. Whatever brand people purchase, they all purchase it more or less for the same reason. All bank customers believe that the bank they’ve chosen is “reliable,” provides “good service” and offers “good telephone and Internet banking.” All TV set brands offer features such as “unrivaled picture quality,” “advanced technology” and “elegant design.”

  If in every product category consumers buy the competing brands for the same reason, it’s expected that every brand owns similar image attributes. The category’s purchasing reasons necessarily become the perception elements (image attributes) shared by the brands.

  In addition, some brands in some product categories have obvious attributes, such as being German, French or Japanese. These are natural differences, and all of them are subcategories (or partitions) of this category. Likewise, some brands are cheap or expensive. Some are sporty or classic. These constitute the lower or upper partitions or sporty versus classic partitions of that market.

  No brand can claim ownership of a characteristic that belongs to the category. Brands that advertise for many years to stake out a generic attribute of the category can conduct market research and find that this very same characteristic is also attributed to the competing brands.

  Many of the positioning strategies recommended by Al Ries and Jack Trout (details in chapter 23) are strategies that, for this reason alone, can’t succeed in real life.

  35.

  Duplication of Purchase (Law 10)

  If brand A has a market share of 10%, the users of all rival brands will purchase brand A about 10% of the time. If brand B has a market share of 40%, it will make up approximately 40% of every brand’s consumer (customer) base. The reason is that all consumers buy more than one brand, and every brand on average accounts for a portion of the brand repertoire of every consumer equivalent to its penetration.

  This law says the following:

  Every brand shares the most consumers (customers) with the market’s leading brand.

  The brand with which a brand shares the fe
west consumers (customers) is the brand with the smallest market share.

  There are marketing researches that evaluate brands on a brand perception or image map (called a “perceptual map”) representing which brands match with which attributes (such as “having outstanding design” or “good customer service”). In such researches, usually some brands that “own” some attributes appear to form a distinct group together, separate from other brands. Executives who utilize this kind of research tend to make the mistake of thinking that these brands constitute “a partition” in the market and compete only with each other. But the analysis technique (mostly correspondence analysis) that produces such maps exaggerates the similarities and differences between brands and misleads those trying to interpret the research (more on this in chapter 90, “Bad Research Habits”).

  The 10th law of marketing states that in the same product category, every brand shares customers with every brand in proportion to its market share. Therefore, executives interpreting these maps must take into consideration not only the position of their brand on the map but also the duplication of purchase of their brand with every other brand. If they look at these data, they will realize that their brands share customers with every brand, in proportion with their market share—even with brands that are distanced from their brand on such a perception map.