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Episode #25

Byron Sharp is one of the global leaders in marketing research and the author of the best-selling book ‘How Brands Grow’. We discuss myths and realities of effective marketing, covering topics like customer acquisition, the effect of advertising, and loyalty programs.

This post is based on our podcast episode with Byron Sharp, one of the global leaders in marketing research and the author of the best-selling book ‘How Brands Grow’ You can watch the entire conversation here.

1. Rethinking customer acquisition and retention

There’s a common belief that retaining customers is much cheaper than acquiring new ones. But Byron points out that there is little-to-no empirical evidence for this claim. In fact, retention rates are very difficult to influence and they seem to be very consistent across brands.

What separates high-growth brands is that they have much higher acquisition rates. In order to grow, brands must acquire new customers. Many, if not most, of those customers will defect and not become loyal buyers of the brand. But there’s little we marketers can do about that.

2. Advertising is about the long-term

Many companies believe that advertising is about driving immediate sales. And if they don’t see a spike in revenue, they conclude that the advertising didn’t work.

Byron points out that something like 98% of all advertising’s effect is about the long-term. It’s not about a quick fix for immediate sales or brand visibility. Rather, it’s about building mental availability that will increase the likelihood of a future purchase.

The effect of advertising is weak, in the sense that it’s difficult to see any effect on specific individuals in a specific time period. But advertising is also very broad. It allows brands to reach millions of customers, and can therefore overtime generate a large number of new customers.

3. Do loyalty programs really work?

Sharp challenges the commonly-held belief that loyalty programs are effective for customer retention. Why?

Loyalty programs tend to be noticed and used by the customers who are already loyal, and who were likely to remain loyal without the program. While the customers whose loyalty the program is designed to influence are unlikely to even notice it.

In other words, loyalty programs cost a pretty penny while often not changing any actual buying behavior.

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Watch video: Byron Sharp – how marketing really works

Byron Sharp – how marketing really works – Youtube transcript

Today’s guest is Byron Sharp a professor author and marketing researcher Byron is the director of the Ehrenberg-Bass Institute at the University of South Australia business school which is the world’s largest Research Institute studying marketing welcome to the show Byron thank you lovely said be here I’m in Adelaide on the upper side of planet um I’m really excited to kind of have this opportunity to to ask you questions and pick your brain and uh I just want to just take a minute to kind of set it up and explain why so years ago I was involved in a branding project for a client and we were trying to figure out kind of like this long-term Vision or overall direction to take this brand and I was really frustrated because in the pre previous years I felt that there were no principles on which I could base my kind of Intuition or or strategy when it comes to making these long-term bets and so in this project was was a really experienced marketer one of the most kind of well uh respected really experienced marketer and I I asked him for if he knows of any books that could kind of help me with with that and he uh he ended up buying me a book which I read cover to cover and it was exactly what I looking for it described these kind of law-like patterns of buying behavior um that were actually empirically derived and based and so I thought it was the best marketing book I’ve ever read I uh still think the same to this day and uh of course the book is how Brands grow which you wrote so for that reason I’m really excited to um like I said pick your brain and uh get to share some of your knowledge with our listeners thank you I was GNA say it’s a TR tremendous compliment but then I thought uh maybe not so much because most marketing books are awful so yeah well that that that’s true but it certainly stands out um in a kind of sea of a opinions and and cliches and truisms yeah I mean it’s design was to Using science to identify law-like patterns in marketing introduce the world to uh the fact that we did actually have scientific laws you know natural laws patterns that hold over a vast range of conditions to the world and you know colle Jo goodart said you know uh you know Mark is not knowing about these things it’s like uh you know it’s like being you know flight engineer and not knowing about gravity we we love we love to tell the rest of the organization that we’re the external facing part you know voice of the customer and all that uh and yet um awful lot of markets don’t actually don’t even get out of their office very much um but yeah weren’t aware of the empirical laws and you know empirical laws just mean law likee patterns in the real world exactly maybe it’s because we as marketers feel that we have the power to change perception so we these rules of how people actually think shouldn’t be applied to us um maybe oh I think it’s maybe that we we feel that we intuitively know things but but human beings have thought that for hundreds of thousands of years you know they intuitively knowing why the sun comes up or you know that that River was caused by a great snake 10,000 years ago you know stories like that we always felt that we have if we can tell a good story and everyone Nords well it must be true you know the Scientific Revolution is only about 300 years old it’s quite embarrassing for humans actually 300 years ago we decided Well maybe we should you know stop theorizing and go out into the real world and study it carefully you know just you know take timings or measure things and stuff and then lo and behold we started to document pattern and and that’s what scientific laws are and of course there are in marketing too uh because the marketing is in the real world and well we can’t predict what individual consumer might be able to do is going to do tomorrow we can predict an aggregate that a you know an 18% share brand will be bought by this many people over the next six months and will be bought by those people on average this many times we can predict that is I love what you said because that’s the feeling I had reading the book is that there were so many things that were completely not intuitive for me and there are so many things that are spouted that are that seem logically obvious or or or true and so I’d love to start that start the conversation there uh and just kind of throw out a few things that I think are generally seen as true but may not be so I I’ll let you respond in and however you want I’ll PR I’ll by you know it’s imp I think it’s near impossible to think of a scientific discovery that at least at the time was seen as really weird and counterintuitive and the I love saying the real world is a weird place so if you think you can understand it without going and collecting serious systematic evidence you’re wrong because your view will be wrong it’ll always be much weirder than you thought that that’s that’s a good point a good place to start so you you tell me you tell me the the classic yeah okay so the first one I have is everyone knows that it’s way Is it more profitable to retain customers than to acquire new ones? more profitable to retain an existing customer than it is to go out and acquire a new one what are your thoughts oh right well yes that’s very wrong uh if you think about that just l i mean think what what does that mean and and you you have to make those two things comparable acquiring a customer this is what would the would be stopping a customer leaving right and so and so you have to ask well how cheap is it to stop customers leaving and you only have to think about that actually for realize that’s actually really difficult um so research has shown the major reasons the customers leave are things completely outside of marketer’s control right so for things like um they die or they move country or you know there’s just all these big changes in their life that you can’t stop so e you know it’s a line in one of our um research articles it is even growing Brands lose customers now so then go okay how how cheap is it to change that and it turns out it’s it’s terribly difficult to change I mean we we don’t we when we compare Brands they all pretty much have exactly the same depiction rates what distinguishes brands is and is that they they don’t have the same acquisition rates though growing Brands can be acquiring customers at way more than you expect that they should for this that’s why they’re growing right um and so growth is caused by acquisition unusual unusually high acquisition uh decline is not caused by unusually high defection it’s it’s caused by a lack of underperforming on acquisition so you know once you realize that that’s those are the empirical pads right that’s what happens in the real world and then a consultant comes to you and says oh it’ be way cheaper to move your defection you we on no none none of the other all the brand all the brands in the world they have they have pretty much the same defection rates depending on their category and their size uh so if I mean if it was easy to move why has no one moved it you know but but brands have outperformed each other in acquisition rates so that must be possible okay right you know Toyota has become the world’s are they number one or pretty close to that right number one car brand in the world but there used to be a little car brand in Japan uh and they’ve done a staggering job at acquisition but if we look at them now as a brand go do you lose customers oh yeah we still lose customers out to build the brand but they’ve done better at acquisition than that’s what that’s how they became number one are you saying that like these cold Brands like an apple like essentially Apple has the same defection rate as someone as a Samsung for instance yeah if you compare the you have you have to compare the um top in phones you can’t just look at all phones cuz Apple doesn’t play Samsung plays in all sorts of different you know lower end but take the flagship Samsung phones and the flagship Apple phones and they have the same defection rates which uh for mobile phones was pretty high repeat rates because particularly for the premium ones because people tend to trade up not down and uh yeah one once you’ve got a phone it’s really nice you tend to because they’re always bringing out new by the time you go to get to a new phone um there’s been three or four five model so the new one is pretty attractive you know so it’s repeat rates are quite High much higher than say something like cars but yeah top top Samsung model has same right as Apple yeah I think that’s really interesting because it kind of goes against this marketing lore that you want to build this cult brand that people tat to like Harley-Davidson um but actually you’re saying acquisition is the only thing that matters in the end if you want to grow your brand yeah Harley-Davidson owners buy Harley-Davidson about one third of the time two third of the time they on average they buy another brand yeah you you wouldn’t think that from how it’s kind of talked about and yeah I mean it’s not every Big Brand in the world right harleydavidson um but of course it it gets talked about way too much in the the marketing bubble yeah so we have a very distorted view of what how that brand actually competes with other brands I used to go around taking photos I think I’ve got in the I think in the online version of how Brands grow uh I think I’ve got a few photos there of all these lovely you know you know big touring bikes right and in each one it’s like is that a Harley no is that a Harley no is that a Harley no they have lots of competitors wow that’s that’s a good point we do and we do live in a bubble I think as as marketers I’m pretty sure if you ask something like a Triumph or something they’d go oh yeah I’ve got the Cool brand that’s true so a second one slightly related to the first one uh loyalty programs obviously Do loyalty programs actually work? they’re popular because they work you know it’s a for a small cost you can retain these very profitable uh customers and keep them loyal which is very profitable for the firm no I don’t the only builted programs that make money are the ones like Quantas and they don’t make money from the program per say you know holding on to more customers it’s that they sell involvement to other like Australian banks who want to you know entice people to use their credit card by giving them Quant points and that that’s quite lucrative for for Quantas but in general a loaly program for a retailer or something no they lose money uh they are in cost uh why do you get into them probably fashion because someone STS you that you should awfully hard to get out of once You’ got them which is yeah why you should actually do your homework beforehand um no the the pretty consistently cost now quite a lot of studies over um suppose it’s 20 years now uh have shown that loyalty programs have very weak effect on loyalty and and we know why because we now know why and that’s that uh of course they attract our most loyal customers right they’re the ones who are going to go oh I shop here all the time I’m going to get lots of points isn’t that excellent um who are actually the last people we want to join a loyalty program because they’re going to be the most expensive uh we want people who are the heavy loyal buyers of another brand to join us but we don’t get that um and then yeah they give away value to people who are going to buy from you anyway which is quite expensive and if someone is already you know giving you a very large share of their category purchases it’s very hard for them to give you any more and it’s not program points aren’t really much of incentive to do it so we we don’t get much of a loyalty effect and and but we do get the costs so um yeah well certainly they’re not grow they’re not they’re hopeless of growth I just remember we do actually get quite reasonable amounts of loyalty it’s a natural human behavior to be behaviorally loyal you consumers you know like if someone wants an expensive um executive development course they’ve got you know work signed off and paying $100,000 for you to go into a one month course somewhere you just immediately you know you think of you know the top business goals come to mind right and you choose out of you know two or three or four out of the 20 30,000 choices you could have so humans are naturally quite willing to be loyal uh and so it’s really dangerous to go giving them points or dangerous expensive giving them points for I well thank you that’s lovely thank you I always fly with Quantas I’m you’re Australian it’s quite hard not to fly with Quant so of course you join the program and and then they give you stuff yeah wow that’s great um no ly programs yeah they don’t have a huge effect they they’re not growth mechanisms because for a brand to grow it must expand its customer base and that means recruiting people who are actually uh non buyers of your brand or very rare occasional buyers of your brand you know they’re very you’re a very small brand in their repertoire and nudging them so you know make that a bigger brand well and you know I can think of you know a dozen things off the top of my head that will be much much much more targeting towards those light and non- buyers than a loyalty broker really hard it’s you’d really want to you’d really want to sell your loyalty program or or you know enrollment in your loyalty program in your competitive stores but they won’t let you so so is there any role for marketing um when you think about these loyal customers and and certainly like there I’m guessing is guess what I’m saying is is it the role of other business functions certainly like customer service to make sure that those customers are happy and they keep buying from you do you think marketing should primarily or only focus on light or non buyers where’s a role to play we’re always doing things for existing customers and existing customers you know even when we run out you know new advertising campaign and things this existing customers who notice them ahead of other people um it’s it’s the challenge the marketing challenge the great challenge is to reach people who are or you know even not in the category or they’re in the category but our brand is just you know not their records that that is the challenge um we’re you know we’ve course you know to see what are the best loyalty nurturing things uh they’re mainly you know fixing major stuff UPS you know like just making it easy for people to keep on doing what they’re doing whenever we do something like change a pack design move things around and store change policies uh these are disruptors that so we don’t want it this does not nurture loyalty that makes a lot of sense okay third one kind of talking then about how do we target these buyers so statement is you should always focus on a niche like you should pick within your overall customer potential customer base you Segmentation, targeting, and the reality of buying personas pick a certain segment and it’s complete waste to try to Target broadly pick a niche and then tailor your messaging towards that specific sub Subs segment of customers yeah and well we see we see some of that in the real world but it’s largely geography bound you know than an Adelaide Plumbing Service would be stupid to run ads in Brisbane because they don’t surus Brisbane houses so so we certainly see that on geographical basis but beyond that when you’re talking about brands that span geographies and compete with other brands that span geographies and you look at their customer base their customer base looks pretty much identical to the category you know in there are men and women and children you there’s lot of heterogenity in the customer based but that customer overall that HR looks exactly the same as the category that means you’re selling to everyone in the category so you can tell yourself that you’re you’re appealing to 28 to 38 urban women with a positive outlook and uh socially responsible or something but you know they’re a tiny didn’t I know they’re probably the sliver of your customer base and you’re actually selling to a lot more other people uh so that’s quite a you know we’re talking at the start about how marketing like to say to the rest of the organization we understand the customer and sometimes just comes up with this fantasy vision of a customer that’s how understanding the customer base yeah we should understand that the customer base is it’s it’s it’s quite and it’s everyone who can buy the category and then you think okay how do we appeal to all of those people and all the great brands of the world have have worked out how to have you don’t become Mass without Mass Appeal do you would you say that it’s generally a waste of time these exercises of creating icps or buying personas it just feels good but you’re not really doing anything insightful well certainly yeah there’s certainly a lot of time wasted yes but um uh can it be delusional yes absolutely abolutely you know Frozen I think frozen is fantastic hit for Disney right it appeals to little girls particularly yeah okay so but that said there’ll be tons of little boys who watch Frozen uh and but it you know it’s m Cuts appe appeals across cultures across socio demographics you know that and that’s why Frozen is a big success and there’s just no avoiding that you can’t say I want to be a big brand but I only want to sell to these sort of people yeah I I see sometimes I was in London I saw some women’s fashion thing that said you know such and such customer is positive and outgoing and caring and whatever you wish your customers are all sorts of people and some of them are having a bad mood day and you it’s ridiculous so it’s very easy that we can be quite delusional I want to sell to the I want to sell beautiful people uhhuh we can be a bit snobby in marketing can’t we absolutely so how do you think that then that should then I guess have a direct impact on how we think about media and what channels we use yes Making smart media choices exactly we need um we need media that can reach all of our category buyers and uh that might require using several different medium uh but uh unless we’re a super big brand probably in general marketers probably used far too much media they just sort of talk about targeting and then then you’re using 17 different channels crazy um but yes we have reach is not optional unless you want to be you want shrink I was just reading a American article in some it’s not an academic Journal it’s sort of a pretend academic Journal anyway uh and you know it’s talking about some it’s it was a thing selling some Consultants product you know and it was about targeting you know think it was about 15% of of the Brand’s buyer base and saying you know get a higher Roi if you did this it’s like well yeah of course you can target the people who are you know most likely to buy next month but that that’s pretty much the same as saying we could take the advertising budget and just spend a bit more in store and then we’ll be able to see it in next month sales yeah sure yes that’s true but the fact is if we want to grow as a brand we need to re and want to stay the size we are we need to reach that other 85% of of people and more uh it’s just not optional and I guess also there’s a kind of delusion there that we’ll be able to convince these people we’ll be able to influence these this small segment when in reality like it’s really hard as marketing uh well we’ll get to that later I think the role the kind of mechanism of marketing I’d love to get your take on that there was actually an acemic that just came out very recently and they showed that uh some some digital media that uh yeah you would you would need like you know if you did it wasn’t even that much targeting but you needed to to for the same materi you need to double the click rate and and then they look that when that doesn’t happen it doesn’t happen you’re not going to get double so you’re not going to get double then stop narrowing your targeting good point okay what are your thoughts on discounts and promotions as Why price promotions don’t work a way of getting those in incremental sales incremental new customers I guess the problem with there is incremental so so study you know there’s been I don’t know 50 years of studying price promotion so we know we know a lot about them they call sales spikes yes of course because the you know the Brandon deal gets but what’s happening is it’s not pulling an extra customers what it’s doing is that a typical buyer has know a repertoire Brands they come up to the shelf or you know looking on their phone on the app they see they see various options that they can buy and they see one of their brands is on special well then that that really helps the decision that that day quite substantially right and so they buy and that causes a sales um but those aren’t pulling in new customers to the brand those are pulling people who they had a chance of buying it so say say they had three brands in the repor and they were equally distributed so that person has about a third of a chance of buying them at any time but when you’re on special they maybe have 2third of a chance right so yeah sales Spike wonderful great but you haven’t won new customers from that they have very low reach and let’s face most of your customers aren’t in the aren’t in the store that week they’re not even looking to buy from you so they’re very very limited reach um but they produce a sales bike up and down um and then of course you can just do the same next week and steal from your full priced sales and we tell ation so it’s you know they they can’t make money they’re an investment well they’re cost they’re an investment you cannot make money from them they don’t do anything to grow the brand um why do you do them why do you do some uh because the they’re part of you know if a retailer is a high low retailer and they have price promotions then you have to play the game and do some but you don’t want to do any more than you you need to the idea that you’re winning new customers is is if you’re telling yourself that that then the odds are you going to over spend on because that delusion yeah if you tell yourself we got to do some of this to keep the retailer happy uh then you’re probably going to get it right you’re going to do just the amount you have to do to keep the retailer sweet so it’s a necessary evil kind of um it can it can be yes yeah it’s certainly um yeah there’s lots of stuff we do in marketing that you know if we had the choice we wouldn’t offer delivery we would there’s lots of things we wouldn’t do but you have to to get customers got it um this thing this one Does every brand need a higher purpose? kind of thing I I don’t think there’s necessarily much or any Empirical research on but I’d love to get your opinion on it just in general so this idea that brands in 2023 have to include some higher purpose some environmental or social cause in their kind of brand messaging because customers demand it and there’s it’s not just enough to just sell the product focus on the benefits and the features of the product what are your thoughts okay well there is some empirical evidence on that right I mean we we can just stop and think for a bit you go can you name a few brands that have been highly successful that don’t do that well yeah I can name hundreds if not thousands of friends that are highly successful that have not done that so there’s there immediate sort of falsification of you have to do it um but we’ve got research going on in The Institute are looking at the empirical claims for purpose um first of all just documenting do consumers really know what the Brand’s purpose is because if they don’t know it it’s very hard for them to react to it uh and secondly those who do know it do they does does it do they care about it does it in some way affect their behavior does it affect their perceptions of the brand I mean they’ve got to they’ve got to think better about it or think that it’s more you know differentiated with something right for it to work so we’re documenting those things uh it so the scary thing is what you’ve just said is fairly uncontroversial to be thousands of people have probably said that nodded their heads at conferences you really so we just launched into this we we like sheep we we just accept something because someone says it at a conference uh and if we think about it we can think of really successful brands that haven’t done that uh yeah what’s a poster child Patagonia right for um purpose yeah yeah and the hugely successful product is that puffer jacket right really puffer jackets big all around the world yeah which is made from fossil fuel by the way which is not really that sustainable trade in trade in your Woolen jumper for a fossil fuel paper jacket yeah anyway uh so pagonia is the poster child for but but then you look I mean I can look around people in the Adelaide and and there there’s people with puffer jackets that are by catm do and Kmart and Target and P be tiny tiny tiny brand so there’s lots of other brands that don’t do that and they succeeded why have they succeeded because puffer jackets are really popular I I guess also that the marketers are kind of threatened by that because it could make us seem a bit redundant and we’re not the Masters of the Universe we’re actually controlling and building this loyalty and Affinity towards the brand um yeah maybe that’s my thing I think Mars are often very arrogant and quite snobby and a little bit delusional I don’t know what psychologists would fle those things together for uh but yeah you know like we wonderful jobs marke is a wonderful profession it is um the market economy has made the world richer safer happier than ever before um it’s not a bad thing to I mean the economy is people doing things for other people so market and things that other people want marketers work to work out what people want and deliver that like Pue jackets yeah that’s a fantastic thing to do I don’t I don’t I don’t I’m bit surprised why marketers feel they need to layer on sort of layer on an apology as as well you know consumers don’t consumers are very happy you look you know little kids and you watch them delighted that they’ve you know opened a can of soft drink this is fun you know they don’t go oh and now I also have to you have to tell me what you’re doing for you know building wells in Africa or something that yeah I think maybe it’s also um Can speaker or marker sense of self-importance I guess um also cringe I think I think there is some cringe there’s there’s a lot of people in marketing who who feel that they are somehow committed commercial is bad it’s the old we still inherit a whole lot of Victorian um things where the only Noble profession is to own land and not work and looking down on the merchant class this is funny we have we still have this snobby attitudes don’t we so kind of related to that is this idea of differentiation and that being the key to all success in marketing and McDonald’s and differentiation vs. distinctiveness branding that you must build a very differentiated product and brand that appeals to again a very specific segment of the overall Market what are your thoughts on that um so that logic comes from one is avoiding competition right I’ve seen even non-m marketers do this they just naturally want to not compete right so can I find something that someone else is not making which is pretty hard but you know there is a natural desire for that then there’s also what’s sounds like impeckable logic which is the David AER and Cotler have all Express this of saying if people don’t see a meaningful difference in a product you know they don’t they don’t see it’s different from the others and it’s a difference they like then why would they be loyal and that sounds this is the problem of intuitive um myths if they sound sensible they endure and that sounds just like impeccable logic yeah of course so if someone just thought this brand was pretty much the same as that other brand then why and Earth would they be loyal to it but what we’ve learned in studying consumers is it’s a bit like consumers have said back to us consumers said but why wouldn’t I be loyal to it but why would you be loyal to your car or your bank when you feel that it’s just the same as the others they know well why wouldn’t I it’s just so easy it’s just so easy to keep buying R if I think it’s the same as the others well then I’ll just keep buying this one then because it’s just just as good and and and indeed they’re right you know it is so can you talk about then how distinctiveness is different from differentiation and why matter yeah so most if we look if we look in a you know look at I don’t I work in a business school right here in Adelaide and uh you know every year we will graduate hundreds and hundreds of accounting students and they’ll go out to accounting practices and each accounting practice will be pretty exactly the same as every other accounting practice um except for maybe a few creative ones will’ll end up in jail but you know in the main they will be undifferentiated in that sense and any other other than you know where geography where their offices that is the fact of modern markets markets tend to have competitive matching there isn’t huge differentiation but there are Brands right so um I don’t if you know the M&M’s right multi-billion dollar brand from Mars is actually copy of um what became niss Smarties I don’t think it was n orig why in brown tree or I don’t know anyway candy coated chocolate right so it’s a complete copy of that um but one of them is just so much bigger than the other one the one is just fabulous because it’s got the it’s got the M&M’s characters right I mean it’s just it’s branding is just wonderful and and so much better the other so cons branding is essential because consumers can’t consum so so here you’ve got consumers they’re busy distracted they have lives very happy to be loyal to a few brands that they know and to pretty much disregard the others unless the others come up with some amazing creative way to get their attention they’re willing to be loyal but they do need to know which are their brands they do The Branding has to be there otherwise they will get distracted and go after another one if they come up to the shelf and they go oh right what’s our milk which which milk will we buy you know which which if they don’t know you know which is the one is theirs that they’re not going to get in trouble with where they take go yeah then they then they can’t be loyal uh so distinctiveness branding making sure that people can if if someone if a new consumer tries you and goes oh I like this I like this yogurt this is really nice that they get in their brand what the brand name is and what it looks like and where it is on shelf or where you would buy it so branding is very very important in in a world that is largely not hugely um differentiated you know McDonald’s wow are they just such a fantastic distinctive what do McDonald’s sell they sell American diner food right you know the American classic American Diner you know the sort of James Dean you know 1950s for mic tables so what soft drinks shakes fries Burgers oh wow just a 1950s American Diner yeah but it’s so distinctly McDonald’s isn’t it I mean it’s distinctiveness it’s just fantastic Golden Archers um Scottish name you know all of these things are sort of weird nothing really to do with American diners but they’re all about branding McDonald’s I can tell you we’ve done surveys consumers rank McDonald’s rather very low for perceived differentiation wow that’s interesting but it’s distinctive yes wow distinctive uh legal judges make a very clear distin distinction between these two concepts um because uh differentiation meaningful benefit for consumers either has to be covered by a patent or otherwise you don’t get protection for it you know I always think there must have been a time I I know when it was when some TV manufacturer came out with the first remote control and consumers loved it right they loved not having to get up from the couch they could change the channel this was fantastic and it’s so good that all the other manufacturers just copied it immediately now if that TV company gone into court with the judge and said they did we we said we are the only ones allowed our remote control unless they had a patent for the tech you know which last for a little while the judge would just go no sorry it’s a benefit to Consumers so you know the law does not protect anything that’s a benefit to Consumers however if someone tried to steal the M&M’s characters of Mars and they went into court the judge will rule no those are Mars they they signal that the product is coming from the Mars Corporation that’s branding no you’re not allowed to steal that that is covered by law so distinctiveness can be defended by law differentiation not and so judges I do find it interesting because I see debates on LinkedIn and things you get seriously well-paid marketers who who find it difficult to handle these two concepts and I go but legal judges can they’re not even in marketing they have no problem whatsoever I think I think yeah I guess speaks to the fact that certain professions are more rigorous than others uh you hear some marke and they’ll say differentiation distin it’s just semantics isn’t it I go uh no tell you try telling that to a judge you Tred telling that to a judge yeah we stole the R’s characters but you know it’s really differentiation you know it’s it’s a benefit to the consumer so you know just just semantics right yes you will get laughed out of cour one thing that I’d love to ask you How marketing really works I you know this kind of a very broad question so you can take it however you want but this idea of the mechanism through which advertising marketing actually works works I think we touched upon youve touched upon certain pieces of it but if you had to explain like succinctly how does it actually what is the actual benefit to the company through which mechanism does marketing actually work and because what I find is that there’s there’s so many different understandings and expectations let’s say across for instance management team CFO as one expectation that marketing will be very measurable it would be maybe very immediate uh the CEO may have another and the CM CMO have a completely different expectation so so in your view how would you describe the process through which marketing actually generates growth well the the the the story The the theory that that matches the empirical laws that we know right matches the real world is that in the long run or to to explain why a brand has so much sales and this one doesn’t or you know it’s about how much mental and physical availability those two brands have so marketing has a fairly good claim to say that you know it’s our job to nurture those along with sales and stuff but you know we play a substantial role in nurturing those two assets of mental availability and physical availability and the building of those assets takes a long time uh the fortunately they don’t disappear overnight either that’s good but the nurturing of them is required but it means that what I’m what I’m doing today as a marketer is largely about building the value of the share price which is based on our 10 20 in years next performance right it’s not about what we’re doing today if you want to actually know what’s driving the sales today is the work of the marketing and people that were here 10 years ago and 20 years ago that that is the reality uh that’s the way that marketing works it works you know there are few things that we do that show up immediately in this week sales and that’s like a price anything we do in store or at the point of buying you know Google you know paid search and things like that that are just that are just hitting the people who are actually buying this week but everything else we do is is putting things in place that are there for all the people who aren’t buying this week that you know aren’t going to buy for ages therefore the children that aren’t yet born yet or the or the little kids that learning today that you know Ford is a brand of car it’s going to substantially increase their chance that they’ll buy forward later on in their Liv that that’s that’s the way that marketing uh affects the world I think this is I remember reading some article of yours you said you were taught when you were studying marketing correctly that uh advertising was a weak Force so I guess that’s what uh how you should think about it yeah that’s um that is the the classic debate was that and about weak yeah it is I mean it’s a weak Force but but a very it’s like gravity gravity is a weak Force right uh but it still substantial impact um look hardly anyone in the very rarely in your life do you see an ad and go oh yeah that is that is a much better brand yeah it does happen but it’s not a big part of advertising um so you know it’s a weak force in the sense that it can’t and political advertising has been shown to do this too that it’s some effect is pretty much zero as far as persuasive you know you tell people to just because people we know it’s being s The Source that’s coming to us is quite biased and wants us to say this one’s better than that one you know uh so it’s not it’s not very persuasive for us but it does refresh memories and it does tell us about new brands build memories it does tell us things like the McDonald’s now does breakfast or you know builds memories that allow us to buy and it does that at scale or can do that at scale right and the great thing it’s a weak Force but it but it’s a force that can act on Millions if not billions of people so you know you know say you’re super you know Coca-Cola or something and you you look at one of your Brands and you go you know today a million people in this country you know bought from the the category like okay cool but there’s 400 million people in the country and with advertising I can actually reach that 399 other million people and then they will buy at some other time so advertising is a weak Force but but it’s potentially very very broad Force which means that potential impact or time can be absolutely enormous between a brand that does it well and one who who doesn’t do it well yes and so there are brands that have been built without advertising I mean particularly if their categories taking off and they open stores they get into stores yeah that’s fine but it’s very hard to stay a Big Brand when you’ve got competitors without advertising uh so it’s hugely about the main it’s about the future of the brand so how much we spend on Advertising uh is largely a forecasting question how much do we want to invest in this brand do we think it’s got a great future yes then we should be investing in it if we think no this this thing is like it’s going to be gone in 5 10 years then yeah you wouldn’t spend much on Advertising if you stop advertising our research shows that uh it appears that there is a you know a Decay effect that you know the brand starts to lose share Etc but it doesn’t happen immediately you know the fact is how advertising today is largely about the next you know 5 10 years so turn it off for a quarter and what happens pretty much nothing whereas if you shut the doors of his store wow you see it in sales immediately because that’s about the people who are buying this week advertising is not about the people who are going to buy next month got it price price got it uh one final question for you Byron so if marketing then is is this Force which acts over a very long period of time and spread very spread very very thinly you know the the we last year we advertised some scholarships for really bright people coming into the marketing degree um and we know that you know the amount of you know year 12 sorry about 17 year old students who are considering a business degree is is an absolute fraction of the population and uh our chance to you know the weak force of saying that there’s a scholarship a very very small Force the main effect of our advertising is just reaching the 99.9% of people who aren’t about to start a business degree but who might later in the future or have children or colleagues or grandchildren and then they might go Oh in Adela this is a this is the best one of the best marketing degrees in the world I I remember seeing an ad for that many years ago most most of I’m about to write an article that says um I think some people have said that most of advertisings effect you know maybe like 55% of advertising’s effect is longterm I’m like no it’s that’s a way underestimation it’s like 98% of advertising’s affect is in the long term you cannot have much of it the stuff that affects next week’s sales is the advertising that was done way way way way ago and the stuff that you’re doing in store on screen to which is not advertising wow 98% yeah I I understand you know something in that working about what portion of your category buyers are actually in the market next week and even for big fast moving Goods categories it’s it’s not it’s not that many so if if it is really really about Crafting the right message the long term how do we today judge whether the the kind of the the strategy of or the message that we’ve picked is the one is the correct message that we can really kind of push for the next 5 10 15 years and when do we when do we know when it’s time to to to switch and and to try something else like how can we know today if it’s really about long term if if what we’re doing will work in the long term um well this is about understanding so you need to you need to have a disciplined knowledge base of understanding um what are this this distinctive assets your brand and and making some strategic choices of which assets you’re going to invest in you need to understand what Jenny calls the category entry points the cues that fire in people’s brains that bring them into the category and you need to say you know are we communicating those and and once you have that then you can assess your advertising of and you can craft your advertising message to do that um and then you can get creative because there’s no there’s no textbook thing that says that you know this sort of you know ads with kittens and them work better you know there just there’s no there’s no clear guidelines on that there’s all different ways of being creative but you need to do it in a way that builds the right memory structures for your brand and for your category got it Byron thank you so much for taking time to uh to come on the show what’s the best place for people who want to follow your research uh kind of what you’re interested in and reading about and and and and learning is it LinkedIn the best place to follow you uh yeah we’re active on the the AR bass institute’s active on LinkedIn and Twitter uh of course we pop onto Amazon and stuff and buy our books which of course I recommend uh and I recommend you read them multiple times uh marketing science. info if you if you just Google Byron sharp or uh I I think we’re that hard to find in this very connected world and um you know if you I mean if you’re serious about that then you become a sponsor of The Institute and so we have a family of many corporations around the world that are trying to transform their marketing which is not as easy as it sounds uh and so they they get access to a lot of stuff in the Institute but we also took stuff out to the public domain as well awesome like I said thank you so much for taking time and I I really look forward to keep following you and and learning from you thank you thank you for listening you can find all episodes of the growth pod on Spotify YouTube and apple [Music] podcasts

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