Chat with us, powered by LiveChat First Four Chapters of Byron Sharp's How Brands Grow Please read the first four chapters of the text book, and blog about? the following areas: Based on your reading of all the fou | Wridemy

First Four Chapters of Byron Sharp’s How Brands Grow Please read the first four chapters of the text book, and blog about? the following areas: Based on your reading of all the fou

First Four Chapters of Byron Sharp’s How Brands Grow Please read the first four chapters of the text book, and blog about? the following areas: Based on your reading of all the fou

First Four Chapters of Byron Sharp's How Brands Grow

Please read the first four chapters of the text book, and blog about 

the following areas:

  1. Based on your reading of all the four chapters, how do you respond to Prof. Sharp's assertion that "Many of the 'facts' marketing people believe, particularly about brand buying, are incorrect. Furthermore, many marketers lack the deep knowledge necessary to ask the questions that will lead to new valuable insights" (Page #9)? Do you agree? Disagree? Why? Are you intrigued? Why?
  2. Do you see a link between Prof. Sharp's question "Which Customers Matter Most?" (title of Chapter #4) … and the Source of Business we discussed in the Incite model? Please explain your response.

For both the above questions, I am looking for your point of view, not a dump or paraphrasing of what you've read.

How Brands Grow

by Byron Sharp e-Book Edition

Originally published in hardback by Oxford University Press OXFORD is a trademark of Oxford University Press in the UK and in certain other countries

Copyright © Byron Sharp 2010 First published 2010, reprinted 2010, 2011, 2012 Revised e-book version 2014

National Library of Australia Cataloguing-in-Publication entry Sharp, Byron. How brands grow: what marketers don’t know / Byron Sharp.

Includes bibliography. ISBN 978 0 19 557356 5 (pbk)

1. Marketing. 2. Advertising. 3. Branding (Marketing). 4.Consumer Behavior. 5. Market Research. 658.83

Reviews of How Brands Grow

“Highly practical…includes many groundbreaking ideas.”

CHOICE

“More than anything else, I’m just plain envious. It’s a book I wish I had the intelligence to write…. Reading Sharp’s critique of the cult of differentiation made me smile. And I laughed out loud at his characterisation of supposedly committed consumers as uncaring cognitive misers.”

Marketing Week (UK)

“Marketers need to move beyond the psycho-babble and read this book… or be left hopelessly behind.”

Joseph Tripodi, Chief Marketing & Commercial Officer The Coca-Cola Company, Atlanta USA

“Until every marketer applies these learnings, there will be a competitive advantage for those who do.”

Mitch Barns, CEO The Nielsen Company

“A scientific journey that reveals and explains with great rigour the Laws of Growth.”

Bruce McColl, Chief Marketing Officer Mars Inc.

“This book puts marketing’s myth-makers, of which there are many, in their proper place.”

Thomas Bayne, CEO MountainView Learning, London.

Author Byron Sharp Dr Byron Sharp is Professor of Marketing Science, and the Director of the Ehrenberg-Bass Institute, at the University of South Australia. The Ehrenberg-Bass Institute’s research is used and financially supported by many of the world’s leading corporations, including Coca-Cola, Colgate-Palmolive, First National Bank, General Motors, Procter & Gamble, Turner Broadcasting, ESPN, and Unilever.

Byron has published over 100 academic papers and is on the editorial board of five journals. He recently co-hosted with Professor Jerry Wind two conferences at the Wharton Business School on the laws of advertising, and co-edited the 2009 and 2013 special issues of the Journal of Advertising Research on scientific laws of advertising.

His university textbook “Marketing: theory, evidence, practice” (Oxford University Press) was released in 2013.

www.ByronSharp.com

Contributors John Dawes Dr John Dawes is Associate Professor at the Ehrenberg-Bass Institute, University of South Australia. John has an extensive background in sales and marketing prior to becoming an academic researcher. He has published in journals such as the Journal of Services Research, Wall Street Journal, International Journal of Market Research, and the Journal of Brand Management. John is the editor of the Journal of Empirical Generalisations in Marketing Science (EMPGENS) www.empgens.com.

www.JohnDawes.com.au

Jenni Romaniuk Dr Jenni Romaniuk is Research Professor and Associate Director (International) of the Ehrenberg-Bass Institute, at the University of South Australia. Jenni’s research covers brand equity, brand image tracking, how to use advertising to build brands, and how to understand and use the brand perception-behaviour link.

Jenni has published in journals such as the Journal of Business Research, Journal of Marketing Management, Marketing Theory, European Journal of Marketing, International Journal of Market Research, and the Journal of Financial Services Marketing. She is executive editor (International) of the Journal of Advertising Research. For the past ten years she has been providing research on brand strategy to companies in industries as diverse as retail, food, tourism, financial services, insurance, telecommunications, universities, event management and government departments.

www.JenniRomaniuk.com

John Scriven John Scriven was previously director of the Ehrenberg Centre at London South Bank University. John specialises in the study of brand performance measures and the effects of marketing inputs, particularly price and advertising. He has over 20 years experience in marketing, market research and marketing planning having held marketing positions with three major corporations: United Biscuits, RJR/Nabisco and Pepsico.

Preface Marketing is a creative profession. So is architecture: architects design masterpieces like the Taj Mahal and the Sydney Opera House, but architects use their creativity within a framework of physical laws. Architects must design buildings that will not collapse under their own weight or blow over in a breeze; they cannot choose to ignore the law of gravity, or hope their building is immune to the laws of physics.

Marketers, even senior marketing academics, like to say that there can be no laws concerned with marketing. These people argue that consumers are far too individual and unpredictable. Research has shown this is utter nonsense. This ill-founded belief stops academics doing their job and searching for law- like patterns in buying behaviour and marketing effects. It also allows marketers to carry on with ‘anything goes’ marketing plans. Imagine if architects designed ‘anything goes’ plans – “Let’s build out of fairy-floss’, ‘Let’s add another 68 floors!”

Marketers argue with each other about things that have nothing to do with the creativity of the discipline; about things that should be known for certain. It’s time for this to stop. This book reveals the predictable patterns in how buyers buy, and how sales grow – things all marketers should know, not argue about.

These patterns are valuable knowledge. It’s often thought that great marketing strategy is obvious – with hindsight everyone can see what you did and copy you. This might be true for new products or some advertising campaigns, but in reality marketing offers the ability to outperform competitors while they scratch their heads wondering why on earth you are doing so well. Unfortunately, marketers themselves often have no idea why one of their own campaigns worked and others did not. Their explanations as to what they got right or wrong are often wide of the mark because their assumptions (the theories in their head) are wrong.

This book is for marketers who are willing to learn new things based on classical science, and to shake off the superstition (and unfounded speculation) that today passes for marketing theory.

Read the assumptions in Table 1.

Table 1: Marketing assumptions

Strategic Assumptions True, False, or

Don’t Know?

Differentiating our brand is a vital marketing task?

Loyalty metrics reflect the strength, not size, of our brand?

Customer retention is cheaper than acquisition?

Price promotions boost penetration not loyalty?

Who we compete with depends on the positioning of our brand image?

Mass marketing is dead, no longer competitive?

Our buyers have a special reason why they buy our brand?

Our consumers are a distinctive type of person?

Our heaviest 20% of customers deliver at least 80% of our sales?

If you believe that most of these are true, you are operating under many false assumptions. This book will give you the evidence. If it changes your mind it might revolutionise your marketing.

Table 2: Towards a new view of marketing priorities Past World View New World View

Positioning Salience Differentiation Distinctiveness Message Comprehension Getting noticed, emotional response Unique Selling Propositions Relevant associations Persuasion Refreshing & building memory structures Teaching Reaching Rational involved viewers Emotional distracted viewers

The most important knowledge contained in this book No marketing activity, including innovation, should be seen as a goal in itself, its goal is to hold on to or improve mental and physical availability.

Decades of research into how buyers buy and how brands compete has led to these surprising conclusions:

1. Growth in market share comes by increasing popularity; that is, by gaining many more buyers (of all types), most of whom are light customers buying the brand only very occasionally.

2. Brands, even though they are usually slightly differentiated, mainly compete as if they are near lookalikes; though they vary in popularity (and

hence market share).

3. Brand competition and growth is largely about building two market-based assets: physical availability and mental availability. Brands that are easier to buy – for more people, in more situations – have more market share. Innovation and differentiation (when they work) build market-based assets, which last after competitors copy the innovation.

Therefore, marketers need to improve the branding of their product (i.e. it needs to look like them and only them) and to continuously reach large audiences of light buyers cost effectively. Marketers need to research what their distinctive brand assets are (colours, logos, tone, fonts, etc.); they need to use and protect these. Managers also need to research how buyers buy their brand, when they think of and notice it, and how it fits into their lives (and shopping). Marketers need to manage media and distribution in line with this knowledge.

Advertising works largely by refreshing, and occasionally building, memory structures (and less by convincing rational minds or winning emotional hearts). Marketers need to research these memory structures and ensure that their advertising refreshes these structures by consistently using the brand’s distinctive assets.

In short, there is a great deal to learn, and much to be discovered, about sophisticated mass marketing.

Tables 3, 4 and 5 summarise old and new aspects of marketing.

Table 3: Consumer behaviour Consumer Behavior

Past World View

Attitude Drives Behavior

Brand Loyals

Brand Switchers

Deeply Committed Buyers Involvement Rational Involved

Viewers

New World View

Behavior Drives Attitude

Loyal Switchers

Loyal Switchers

Uncaring Cognitive Misers Heuristics Emotional

Distracted Viewers

Table 4: Brand performance Brand Performance

Past World View Growth Through

Targeting Brand Loyals

Obscure Proprietary Metrics

Price Promotions Win New Customers Target Marketing Differentiation

New World View

Growth Through Penetration

Predictable Transparent Metrics

Price Promotions Only Reach Existing Loyal

Customers

Sophisticated Mass Marketing Distinctiveness

Table 5: Advertising Advertising

Past World View Positioning Message

Comprehension Unique Selling Propositions Persuasion Teaching Campaign Bursts

New World Relevant Refreshing & Continuous

View Salience Getting Noticed, Emotional Response

Associations Building Memory Structures

Reaching Presence

Examples in this book The scientific laws presented in this book apply to many categories:

• products and services

• industrial products

• supermarket packaged goods

• national and retailer brands

• brand buyingand store choice.

The laws apply across countries and have held for decades. This is why they can provide useful predictions.

I’ve tried to demonstrate the breadth of generalisation by deliberately using diverse examples; for example, retention levels for both cars in France and banks in Australia. I am grateful to Nielsen and Kantar for providing data spanning many countries. Please don’t infer that just because the example refers to, say, UK store brands, that the law doesn’t apply to your category. If you are in doubt, please refer to the cited references, as these will provide further examples that illustrate the breadth of the law.

Acknowledgements The empirical laws in this book might not have been discovered without the years of research that has been funded by corporations around the world. In particular I would like to thank the following corporations for their many years of continuing support of the Ehrenberg-Bass Institute: ABC

ANZ Bank

Bristol-Myers Squibb

CBS

Coca-Cola

ConAgra Foods

Elders

Fonterra Brands

Goodman Fielder

Kraft

Mars

National Pharmacies

PepsiCo

Advertising Research Foundation

Australian Research Council

British Airways

Colgate-Palmolive

Distell

ESPN

General Mills

Highland Distillers

Kantar

KWP! Advertising

Mondelez

Nielsen

Procter & Gamble

AkzoNobel

BASES

Caxton Publishing

Commonwealth Bank of Australia

Dulux

FirstRand

General Motors

Hills Industries

Kellogg’s

Leo Burnett

MountainView Learning

Network Ten

People’s Choice Credit Union

Roy Morgan Research

Sun Products

Unilever

Wm. Wrigley Jr Company

Reckitt Benckiser

SA Dept for Environment & Heritage

University of South Australia

SABMiller

SC Johnson

Turner Broadcasting

Special thanks Thank you to the readers of the original version of this book for making it such a success. Thank you for your kind words, and your very interesting questions – please keep asking them, you can contact me through the book’s official website.

I would like especially to thank my wife Anne and daughter Lilith, and my colleagues in the Ehrenberg-Bass Institute, University of South Australia. I would also like to thank our collaborators at universities around the world – especially Professor Jerry Wind at Wharton.

Special thanks also are due to Dr Thomas Bayne at Mountainview Learning for working with me to introduce behavioural science to marketing executives around the world. The graduates from this training are ushering in a new era of evidence-based marketing for the corporations they work for.

E-book version Hundreds of small improvements have been made to this new version. New material has been added on:

• category growth

• profitability and loyalty

• industrial buying

• an additional law on physical availability and growth

• a ‘Frequently Asked Questions’ chapter

• an expanded bibliography pointing readers to the many relevant peer- reviewed scientific publications.

There are new examples and data, for example, new tables showing Apple’s brand loyalty. A number of tables have been updated that will allay any fears that the scientific laws might not continue to apply.

Chapter 1: Evidence-based Marketing Byron Sharp

Imagine you are the Insights Director of Colgate Palmolive. Margaret, the Senior Category Manager for toothpaste, is standing at your office door and she is obviously distressed. She is waving a recently received report from your global market research supplier, and this is what it shows:12

Figure 1.1: Toothpaste brands: US market shares (volume)

Data source: Spaeth & Hess 1989.

The market research shows that Procter & Gamble’s Crest brand of toothpaste has double the market share of Colgate in the US. However, this has long been known and is not the reason why Margaret is upset. It’s the next couple of graphs that have her worried (see Figures 1.2 and 1.3).

Figure 1.2: Crest consumer base

Data source: Spaeth & Hess 1989.

Figure 1.3: Colgate consumer base

Data source: Spaeth & Hess 1989.

These charts decompose the sales volume of each rival brand according to the recent repeat-buying behaviour of their consumers.

The percentage of Colgate’s sales that came from loyal customers is almost half that of Crest’s loyals (‘loyals’ being people who bought the brand for the majority of their toothpaste purchasing during the analysis period). Colgate’s sales come much more from ‘switchers’ – people who bought Colgate at least once in the analysis period, although most of their buying was of other brands.

Margaret is demanding an explanation. What does this mean? Why is Colgate’s sales base so unhealthy? Is the brand doomed? What does this mean for her ambitious growth targets?

How would you answer?

Of course, you would call for more research. It’s an Insight Director’s prerogative.

The additional research further breaks down the market share of each company by analysing the switchers within both the Crest and Colgate customer bases.

The additional research consists of a survey; the first question of which asks customers about their attitudinal loyalty. Figure 1.4 reports the percentage of switchers who agree with the statement: “This is my preferred brand”, (the switcher group is the interesting one, as we can safely assume that both Crest’s and Colgate’s loyals will report that their brand is their preferred one.) As you can see, Figure 1.4 shows that Crest switchers are substantially more likely to say that Crest is their preferred brand.

The survey’s second question asks customers about their perceptions of quality. Figure 1.5 reports the quality perceptions of the switchers in each customer base. Both Crest and Colgate buyers perceive both brands to be quality products – as they should, because these are both well researched and well-made products.

Figure 1.4: Percentage of brand buyers who say “This is my preferred brand”

Crest switchers Colgate switchers

Data source: Spaeth & Hess 1989.

Figure 1.5: Percentage of brand buyers who say “This is a quality product”

Data source: Spaeth & Hess 1989.

Here are the ‘brand insights’ the market research agency reports:

• Colgate’s sales volume comes mostly from non-loyal buyers

• Colgate is 50% more dependent on switchers than Crest

• Colgate buyers are less loyal, both behaviourally and attitudinally

• Even Colgate buyers think Crest is a quality product

• Colgate is a quality product but it has perception problems and lacks loyalty

• Colgate is attracting the wrong sort of buyer.

These insights are translated into the following action recommendations. Colgate needs:

• more persuasive advertising that stresses Colgate’s quality

• comparative advertisements against Crest (common in the USA)

• media schedules that emphasise frequency of exposure (to shift attitudes)

• research to profile Colgate ‘loyals’ with the aim of attracting more people like this.

All this sounds perfectly normal. It happens in marketing departments around the world every day. You personally may have come up with a somewhat different marketing strategy, depending on your own experience, preferences, and creativity, but the insights and the strategy appear reasonable, and not unusual. Except that they are wrong.

The ‘insights’ suggested here reflect ignorance of relevant scientific laws

about buyer behaviour and marketing metrics, laws that we’ll cover in this book.

Consequently, Colgate’s fictional Insights Director is jumping at shadows, and overly worrying Margaret. Colgate’s loyalty metrics, both attitudinal and behavioural, are normal for a brand with half the market share of Crest. Indeed all the other research findings are essentially repeating the findings of the first graph (Figure 1.1), that is, that Colgate is half the size of Crest in this market. These metrics don’t show why it is half the size; they are what they are because of Colgate’s size. All will be explained in the forthcoming chapters (if you can’t wait, turn to the end of the book for a list of laws including those that relate to this Colgate case study)

Note: this case study could have been written from the Crest (Procter & Gamble) perspective, where the danger would be in patting oneself on the back for having such a ‘strong’ brand with highly loyal buyers. Brand equity consultancies make money flattering owners of large market share brands that they are not just large but also strong with attitudinally committed consumers.

Are marketers bleeding the companies that employ them? I am in awe of the modern market economy and the diversity and quality of products that marketers deliver. This modern economy is the product of one of the most incredible social experiments: in the twentieth century classical, planned economies were tried alongside market economies (Hunt & Morgan 1995). The results were startling. Market economies won by a mile, as they provide people with more choice, fewer queues, and better, cheaper products and services3. For example, within a few hundred metres of where I am sitting I have a choice of multiple grocery stores, bakeries, pharmacies, cafes, wine stores, even several fine chocolate shops. Not bad!

Once when I was in Thailand my charming host Professor Tasman Smith asked if we had many Thai restaurants back home in Adelaide, Australia. I did a quick mental count and tactlessly replied, “Yes, there are four within a short walk from our house”. My faux pas illustrates the fact that those who live in developed market economies are spoilt for choice – we can eat pizza in Thailand, or order a curry in Paris, if we want to. This is because today’s marketers do an amazing job of getting attractive goods to market.

Yet marketing is far from perfect; there is much waste. This matters because

marketing activities consume a vast amount of our time. As Robert Louis Stevenson said, “Everybody lives by selling something”. Poor marketing wastes an incalculable amount of resources, and it prevents and slows the uptake of life-enhancing products and social initiatives.

Marketing practice, for all its advances, has never been strong on R&D into marketing practices; there is plenty of ineffectiveness and room for improvement. Response rates to advertising are perhaps in indicator of inefficiency. However you define a consumer response – from clicking on a web ad to driving to a store – response levels are extremely low, and in some places falling. It’s even more scary if you look at the impact of advertising on memory. For example, one of our yet-to-be-published studies4 on advertising productivity examined 143 ads on Australian television that were screened on consecutive weeknight evenings. That weekend respondents were telephoned and those who watched the programs during which the ads were played were asked if they recognised the particular television commercial (i.e. each ad was verbally described to only those people who had an opportunity to see it). The average recognition score for a television ad was barely 40% (i.e. 40% of potential viewers noticed the ad when it aired). Those respondents who recognised the ad were then asked what brand it was for, and on average the correct brand was linked to only approximately 40% of the ads. Consider that for an ad to work, at the very least, it needs to be noticed, processed and be linked to the correct brand. So only around 16% of these advertising exposures passed the two necessary hurdles; put another way, there was 84% wastage! 5

Note that the effectiveness of the ads varied widely. Some were noticed by more viewers, and correctly branded too. But most were not. This suggests that there is much to gain from learning how to make better advertising.

Though hard to see, the advertiser here is actually ASB Bank, they are trying to knock a competitor Kiwi Bank (who should be laughing…all the way to the bank)

There is much to learn about marketing. Even very senior marketers (and marketing academics) believe many things that are wrong, and there are many important facts that simply aren’t widely known. Many well-paid marketers are operating with wrong assumptions, so they are making mistakes and wasting money, without even knowing it.

Marketing professionals today are better educated than in the past, and they have access to much more data on buying behaviour. But the study of marketing is so young that we would be arrogant to believe that we know it all, or even that we have got the basics right yet. We can draw an analogy with medical practice. For centuries this noble profession has attracted some of the best and brightest people in society, who were typically far better educated than other professionals. Yet for 2,500 years these experts enthusiastically and universally taught and practised bloodletting (a generally useless and often fatal ‘cure’). Only very recently, about 80 years ago, medical professionals started doing the very opposite, and today blood transfusions save numerous lives each and every day. Marketing managers operate a bit like medieval doctors – working on anecdotal experience, impressions and myth-based explanations.

It would be arrogant to think that the current marketing ‘best practice’ does not contain many mistakes and erroneous assumptions. I used to teach some erroneous stuff to my university students; I know how easy it is to parrot a falsehood simp

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