Brand Growth – Why First Purchases Are The Only Purchases That Matter

Previously in this series I have focused on showing how brands can win First

Purchases. Today I am going to show why First Purchases drive growth for

brands, why First Purchases are the only route to growth for brands, and hence

why winning First Purchases should be the aim of a brand’s marketing activities.

Does Anything Else Matter?

It is nearly 15 years since How Brands Grow was first published and Byron

Sharp introduced us to the “fundamental law of brand size: big brands have

markedly larger customer bases.” If we think of an ‘active buyer’ of a brand as

someone who has bought the brand in the last 12 months, then First Purchases

are the occasions when a brand gains an active buyer. We know from Sharp that

all brands lose active buyers from one period to the next, so to maintain a steady

buyer base a brand needs to win a number of First Purchases each period to

offset these losses. But if you are trying to grow your brand does anything other

than winning First Purchases matter? Or is brand growth a very simple

equation: more First Purchases = more active buyers = a bigger brand?

Why Does More Buyers Mean A Bigger Brand?

The example above shows the annual number of buyers for each of the top 7

brands in Category X by frequency of purchase. What do we notice – other than

that it is a very dull chart? Each brand would appear to sit on a pre-ordained

curve, with the only difference between brands being the start point – i.e. the

number of active buyers that each brand has. If more people buy a brand once,

then more people will buy it twice, and more people will buy it three times, and

so on. This data is from one of the largest markets in the world, and the category

is one of the biggest. The brands are owned by some of the world’s leading

manufacturers, and the marketing spend on these brands is huge.

Yet none of the brands move away from the curve when it comes to frequency of purchase, and brand size is determined solely by the size of the active buyer base. I can think of three possible explanations:

1. Each brand’s marketing is equally effective at driving frequency

2. Each brand’s marketing is equally ineffective at driving frequency

3. Marketing activity doesn’t affect frequency of purchase for a brand

Whatever the answer, in this example (and all others I have looked at) the

frequency of purchase for each brand is very similar, and the size of the brand is

determined by the size of the active buyer base alone.

What Happens When A Brand Increases Its Active Buyer Base?

Let’s look at what happens when a brand enjoys a sudden jump in the number of

First Purchases it attracts.

In the example above Brand A is tracked across 7 quarters. In Q1 and Q2 Brand

A’s share was stable and the active buyer base was broadly unchanged as any

lost buyers are compensated by a similar number of First Purchases. Thanks to

some temporary distribution in a key retailer Brand A enjoyed a surge of sales in

Q3 which boosted its brand share, and the rapid increase in the number of First

Purchases meant that Brand A saw a step change of +10% in its active buyer

base. From Q4 onwards Brand A won First Purchases and lost active buyers at a

similar rate.

At the same time the distribution of Brand A’s buyer base by purchase frequency

was maintained – i.e. the proportion of buyers buying brand A once, twice, three

times etc. was unchanged. The combined effect of the increased active buyer

base and the unchanged frequency of purchase meant that Brand A’s share

remained significantly higher from Q4 through to Q7.

Do Brands Understand This And Have They Got Their Response Right?

This explanation is not new news: Sharp observed in How Brands Grow “that all

brands [...] face an NBD distribution of heavy to light buyers. When brands grow

[...] they simply move from one weight of this distribution to another.”

But do brands really understand this? Back in my Kantar days we used to preach

the mantra “get into the shopper’s repertoire, get chosen from the repertoire.”

Get people to buy you once, and then get them to buy you again. It’s hard to

disagree with and it keeps everyone happy. Those that have bought into Sharp

and How Brands Grow are satisfied because the importance of new buyers – or

getting into the repertoire – is stressed, and those who continue to plough the

furrow of buyer retention and brand loyalty are satisfied because they can carry

on trying to get chosen more often from the repertoire. But is it right??

The Double Jeopardy law shows that big brands have a lot more buyers than

small brands, but their average purchase rates vary little. The only thing that

isn’t predictable for a brand is the number of buyers it attracts. Everything else –

repeat rates, frequency, loyalty, buyer defection etc. – follows a predictable

trajectory. Any brand trying to get chosen from the repertoire more often is

trying to buck this trajectory - not 'mathematically' impossible but something

that Sharp (and my work across different categories and countries for that

matter) shows doesn’t happen.

Surely the mantra should be “get into the shopper’s repertoire.....and everything

else will take care of itself”?! The best way for a brand to increase the number of

people buying twice is ..... to increase the number of people buying once!

The Route To Brand Growth

The route to brand growth appears to be both narrow and simple - grow the

active buyer base by winning more First Purchases! If a brand grows its active

buyer base then more buyers will buy twice, three times, four times, and so on.

If you are trying to grow your brand:

• Do you know how many First Purchases you require to achieve your growth targets?

• Do you understand how First Purchases are different to other purchases?

• Do you have a plan to target and win First Purchases?

If you don’t then maybe we should talk?