01 Practical applications and real-world scenarios
Making it matter
But why does this matter, and how do we bring it to life?
Imagine if your country had the identical patterns seen in the UK, except your country has a population of just 100 people. You have calculated that to be profitable, your brand sales this year must exceed $200 per annum. The average retail price of the brand is expected to be $2.50. The task then is how do I achieve 80 purchases a year?
How many people do I need to buy, and how loyal must they be? Two people (2% penetration) buying 40 times? Four people buying 20 times? Ten people buying eight times per annum? There are many possibilities. However, if you decide to plan in any of the ways described, Kantar’s data suggests the odds of achieving 80 purchases is unlikely. Why? Most brands find it hard to achieve the frequency (loyalty, repeat buying) levels needed, given your buyer attraction is insufficient.
The evidence suggests that 20 buyers buying four times a year is how you are most likely to make 80 purchases per annum. However, approximately only one in 10 brands manages to attract 20 buyers or more – it is not impossible but not easy either.
The consistency of the relationship underlines an essential truth: improving penetration — the breadth of your customer base — is significantly more impactful for sales growth than merely enhancing loyalty (frequency of purchase) among existing customers. This is not to say loyalty is unimportant, but rather, it highlights the scale of opportunity that lies in attracting new buyers.
This UK example is also widely representative. We see the same trend play out globally in our data.
We deliberately started our investigation with a simple to apply model and no market structure – just all brands in one country. If a more defined category structure has a Double Jeopardy pattern, and you look at them effectively all at once, we should discover the average pattern. This is what we believe we are seeing. But there is a vast amount of variation because there is a large variety of category penetrations and rates of buying presented e.g., a high frequency and penetration category like Bread versus a lower frequency and penetration like Skincare. With lower-level category definitions and better models we should be even better at quantifying brand growth.
