Does Size Matter? Why Brands Should Think Small To Grow Big

Byron Sharp delivered the simple truth in How Brands Grow that the ONLY route

to brand growth is through buyer acquisition. Our work looks at what happens

on the purchase occasions when a brand acquires a new buyer. These occasions

– which are essential for brand growth – are called First Purchases. By

contrasting First Purchases with Repeat Purchases we identify the drivers of

First Purchases to help brands gain new buyers. We have analysed nearly 5

million purchases spanning different countries and categories, and through this

work we have uncovered a number of ‘universal truths’ about First Purchases.

Previously we have looked at how First Purchases of brands are usually

unplanned in advance, and how price promotions impact First Purchases. Today

we look at pack size and price in a little more detail.

The First Purchase Curve

The First Purchase rate for a brand is the proportion of sales that are First

Purchases. Our research has shown that smaller pack sizes have a significantly

higher First Purchase rate than larger pack sizes.

Smaller pack sizes are, of course, associated with lower price points, and it

follows that lower price points have a far greater First Purchase rate than higher

price points. The First Purchase curve for a brand plots the First Purchase rate

by different price points.

Each brand has its own First Purchase curve. For most brands the shape of the

curve is similar to Brand A in the example above (although there are some

important exceptions, especially in the case of value brands).

The First Purchase curve helps explain what happens when a brand is price

promoted. If a large pack at a high price is discounted the First Purchase rate

increases slightly, but it is still significantly lower than the First Purchase rate for

smaller packs at lower prices. And it is not unusual for the lowest price points to

have a First Purchase rate that is 30%-40% greater than the highest price points.

Do Small Packs Really Matter?

Small pack sizes often make only a minor contribution to total brand sales.

In our example Brand A is available in 3 sizes – small, medium and large. The

small pack size accounts for just 13% of brand sales by value, BUT the small pack

is the entry point to the brand for new buyers, accounting for 36% of First

Purchases of Brand A. And even though the large pack size accounts for nearly 5

times as much sales value for Brand A, it does not attract as many First

Purchases as the small pack!

This creates a conundrum for the brand: the small pack size is essential for

growth, but it doesn’t contribute much to brand revenue. How can the brand get

retailers to prioritise the small pack, and ensure good distribution and position

on shelf?

Do Small Packs Matter to Retailers?

Retailers grow their share of a category in exactly the same way that brands do –

by gaining more buyers. So just as First Purchases drive growth for brands,

shoppers making a First Purchase of a category in the retailer drive growth for

retailers. We have seen that small pack sizes at lower price points drive First

Purchases for brands, but what helps drive First Purchases in a category for the

retailer?

If we look at the First Purchase curve for Category X in Retailer Y as in the

example above we see that there are two factors helping bring new buyers of the

category to the retailer. First is that brands, rather than private label, have a

higher First Purchase rate, and second is that it is the lower priced, smaller pack

sizes of brands that are most likely to attract new buyers of the category for the

retailer.

A Genuine Win-Win for Brands and Retailers!

Here is a genuine win-win for brand and retailer! The smaller, lower-priced

packs are winning new buyers for both the brand and the retailer, and are

driving growth for both.

So yes, size really does matter! If you are trying to drive growth for your brand:

• Do you put enough emphasis on smaller pack sizes?

• Do you know the First Purchase curve for your brand?

• Do you have an ‘entry point offer’ in each channel?

• Do you talk to retailers about the benefits of smaller sizes?