Chapter 6 – Who do you really compete with? (Can Kotler be wrong?)

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These posts are a collection of notes and summaries from the book “How Brands Grow: What marketers don’t know” by professor Byron Sharp. This work is a must read for any marketer. My personal goal when I embarked on this series of posts was to get a deeper understanding of the book and its lessons, and as I have worked through them I have not only gained that understanding, but also an idea of the areas I need to investigate more deeply in the future. Sharp is always very insightful, but I feel the need for more perspectives on many of the topics he covers. You can buy How Brands Grow here.

Talking about the sixth chapter of How Brands Grow, I would sum it up with one word: competition.

This section starts with Kotler theory on mass marketing and how brands compete with one another.

Three Marketing Stages

Based on Kotler’s theory marketing has passed through three stages:

  1. Mass Marketing. It is characterised by mass production, mass distribution (against choosing specific channels) and mass promotion. The example is Coca-cola, which at the beginning of its history produced only one drink for the whole market.
  2. Product Variety Marketing. It is characterised by a manufacturer providing more than one product to the market. Products can differ in size, style, quality or features. Central to this change is the belief that consumers have different tastes and those change over time.
  3. Target Marketing. The manufacturer segments the market into different cohorts, based on some variables (social, demographic etc…) and defines the marketing mix to reach specific segments.            

Byron Sharp is very critical of Kotler and colleagues’ idea that brands should target specific segments of the market and consequently severely limit the number of other brands they compete with.

The example reported by Byron to counter-argue Kotler’s position is based on Coca-cola’s products.

Coca-cola produces and promotes different soft drinks, but is not because different and independent groups of customers exist. 

Based on data provided by Byron, Coca-cola’s promotional strategy for different soft drinks is more related to satisfying individual demand for variety.

Simply naming a segment does not make it exist

There is a short extract that I really like to quote: “Simply naming a segment does not make it exist”. This stresses again the importance of finding a correspondence between “marketing department assumptions” and reality. 

Here you can see the data Byron used to support his thesis. 

They are from TNS Impulse Panel UK on individual consumers buying for their personal use.

Buyers of X during the analysis periodPercentage of X buyers who also bought (regular) Coca-cola during the period
Diet Coke65

The first key thing is the high proportion of brand’s buyers that also bought Coca-cola. 

The second is the proportion between the various soft drinks. It varies little between the different brands.

From this kind of analysis, supported by data, companies can define their competition. 

It is also important to say that the percentages of customers shared by brands depends on the period of analysis. Longer periods will have higher percentages of customers shared, on the other hand shorter will have lower ones.

Photo by Fajri Nugroho

Duplication of Purchase Law

After giving this context Byron introduces the “Duplication of Purchase Law”: “all brands, within a category, share their customer base with other brands in line with the size of those other brands”

If you are aware of the Duplication of Purchase law, it is easier for you to spot market partitions and define your competition. 

Byron on that doesn’t say how, but based on my experience there are some paths that you can follow.

The most comprehensive (and also expensive) is based on the Nielsen/IRI/Epos data, but if you are a startup or your marketing budget doesn’t allow you to access these data sources you can still follow Steve Blank’s suggestion:
“Get out of the building and talk with your customers”. 

How much should a brand be worried about the shared customer base? According to Byron’s theory, not so much: the real critical point for a brand is to be distinctive. A brand must be easy to recognise. 

Also here there are no suggestions in this chapter (there is a specific one the eight called “Differentiation versus Distinctiveness”), and I was thinking about distinctiveness and I came up with some bullet points:

  • Product
  • Packaging
  • Customer Experience/Service 

I don’t know how a commercial can improve distinctiveness; probably a memorable ad can, but I am not entirely sure. (These are questions I need to answer: To what extent do ads that are memorable by some metrics make a brand more distinctive in the long-run? How can we even measure distinctiveness and memorability?)

This last point reminds me of the Purple Cow, a best-seller written by Seth Godin 20 years ago.

In fact the key point of Seth Godin’s book was to make your products or services stand out from all the rest.

Mass marketing is dead

While on the critical aspect of product distinctiveness Godin, Kotler and Byron agree, also Seth Godin believes that mass marketing is dead.

This for me is a very interesting point, for two reasons:

The first is the possibility to link two previous readings, looking to a thesis from different perspectives and opinions. 

The second one is connected to the fact that Byron Sharp will provide numerical and empirical examples on his thesis, while on that Seth Godin was very poor(but still worth reading of course!). 

In the end marketers should be aware (especially in FMCG) that markets are usually little fragmented, but they are very heterogeneous at the same time. 

Following these facts marketers must be very meticulous in competitors’ analysis if they want to protect and grow their customer base. 

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