Thinking big matters in marketing – here’s why
Even in challenging times, marketers can create most value for their businesses by seeing the bigger picture
September 2, 2020
“Why is McDonald’s more successful than Burger King?” the smooth-talking gangster asks the naïve investment banker. “Many reasons,” the investment banker replies. “One reason,” corrects the gangster. “There are more of them.”
Sound familiar? It’s one of the more memorable scenes from the big budget crime TV series McMafia, which hit screens across the world a couple of years ago. It’s also a very elegant expression of one of the most powerful truths in marketing: size matters.
Getting bigger by acquiring more customers brings brands several unexpected advantages. It influences how people perceive them, and how likely they are to buy from them. These advantages don’t justify international crime wars of the type our McMafia gangster goes on to recommend. However, they are significant enough that pushing to increase our share of the market should always be at the top of marketers’ agendas – even in challenging times.
The hidden advantages of bigger brands
Culturally, we love to celebrate businesses when they’re small. We root for challenger brands, start-ups and family firms. We associate being big with being faceless, frustrating and complacent. And we often assume that having fewer customers means that you have stronger relationships with them. After all, you share the same values, you understand them better, you can tailor your solutions to their exact needs, and you can lavish more time and attention on them.
The trouble is, human behaviour doesn’t back up these instincts. We may not like to admit it, but people are more likely to trust, invest in and buy from a big business than a small one. Understanding why is the key to building a marketing strategy that starts moving your business in the right direction – no matter what size you are currently. And the compounding effect of size means that it’s easier to keep getting bigger once you start getting bigger.
The Law of Double Jeopardy explained
From toothpaste in China to soft drinks in Africa to smartphones in America, whenever you look at a category in detail, you find that the brands with the most customers also get bought more often by the customers they do have. Brands with fewer customers have the disadvantage that their customers spend less and are less loyal. It’s so consistent a pattern that we can talk about it in terms of a marketing law: The Law of Double Jeopardy.
The Law of Double Jeopardy was first observed by the social scientist William McPhee in 1963, who noticed that less well-known radio announcers were also less well-liked by those who did know them. A decade or so later, the marketing scientist Andrew Ehrenberg showed that the same law applied to brands. Today, Professor Byron Sharp of the Ehrenberg-Bass institute is the double jeopardy law’s best-known advocate. In his 2010 book How Brands Grow, he sets out an overwhelming case, with evidence that the law applies across cultures and market contexts. It includes not just consumer categories but also B2B ones. If you’re selling concrete or coronary stents you remain subject to the double jeopardy law in just the same way as a brand selling haircare products. The more customers you have, the more loyal and valuable those customers are likely to be.
How size multiplies marketing profitability
The benefits of being big feed into the effectiveness and efficiency of marketing campaigns as well. In his groundbreaking analysis of the top ten drivers of advertising profitability, Paul Dyson analysed the different factors contributing to the returns that campaigns generate. One of his key findings was that the quality of ad creative had a bigger impact on profitability than almost anything else, including where campaigns ran and how much media cost. However, there was one factor that far exceeded even creative in its impact on profitability – and that was the size of the brand. Dyson found that a brand’s existing market share multiplies its profitability by 18x.
All of which means that a brand with fewer customers can run a great campaign and drive great results – but a brand with more customers can expect to get even better results from the same campaign. Its marketing has an inherent advantage. The old boxing adage seems to apply equally to brands: a good big ‘un beats a good little ‘un.
Why growing market share matters
The way the playing field is tilted means that marketers for smaller businesses have to work harder to earn their results. But that doesn’t mean that marketers for these businesses have to settle for the status quo. The more we understand about why bigger brands get these advantages, the better we can apply creative thinking and sound marketing strategy to close the gap. If we’re clear about what our objectives as marketers should be, we can aim to move businesses past the tipping point where the law of double jeopardy starts working in our favour. And if you’re looking to grow your market share from a relatively low base, there’s no better time to do it than when other businesses are cutting their budgets.
So where do the marketing advantages of big businesses come from? Many explanations put the Law of Double Jeopardy down to distribution. Bigger FMCG brands are available through more outlets and they tend to get a lot more either virtual or physical shelf space. The people who buy these brands therefore end up with a lot more opportunities to buy them – and as a result they buy them more consistently and more often.
Haircare products are a classic example. If you think Pantene from Procter & Gamble leaves your locks looking lovely, then you’ll have lots and lots of opportunities to buy that brand’s products. Now say you prefer the specialist, sustainable products of the brand Davines, recently picked out by Harper’s Bazaar as an unsung beauty hero. You’re no doubt very motivated to buy Davines when you can – but you’re likely to have far fewer opportunities. When you can go to the effort of ordering it online you will. But on the many occasions when you’re picking up shampoo from the supermarket (either by ordering online or in person), you’ll buy something else.
Your B2B brand may not be competing for space on a supermarket shelf – but it’s still subject to other forms of physical availability. A position near the top of relevant search rankings for your category adds up to many more opportunities for people to buy from you – and these positions are easier to obtain for big brands that people search for and visit more often.
Mental availability and the benefits of being big in B2B
The law of double jeopardy isn’t just about physical availability, though. It’s also about the mental availability that big brands establish – and the important signals that they send to buyers along the way.
Throughout marketing history, there’s always been value in signalling that you’re a big and established brand – even if you’re not yet as big and established as you want to be. This is why the buildings created to house bank branches on UK high streets are all so grand and ostentatious. In the Victorian era, this was the best possible way of signalling that you were “too big to fail.” If you could afford to spend this much on architecture, then you must be a big bank, a solvent bank, and one that could be trusted with people’s money.
For years, TV advertising played a similar role for brands. Rory Sutherland, the Vice Chairman of Ogilvy UK, has long argued that TV ads work not just because they provide a great creative canvas and reach lots of people – but because they signal that your brand can afford to be on TV. If you’re prepared to pay for a TV ad then you must intend for your business to be around for a while to benefit from the returns. You’re therefore a reliable business to deal with. This same argument applies 10 times over to Super Bowl ads, which is why these continue to make sense for the brands investing vast sums of money in them.
When we’re investing for the long term, as with many B2B purchases, we pay even closer attention to the reassuring signals that a big brand sends. This applies to investors in shares as well as B2B buyers investing in solutions. The S&P 500 has rallied dramatically in recent weeks since the Federal Reserve announced that it would buy corporate bonds, helping big firms finance their debts. Look closely though, and this surge in stock prices is far from evenly distributed. The top ten companies in the S&P 500 are up. The rest of the S&P 500 is down. Look more closely still and you’ll find that the five companies investors are putting most of their faith in are Alphabet, Amazon, Apple, Facebook and Microsoft. So much so that these top five stocks now represent a fifth of the entire S&P 500 index. Being really big is a signal of stability and trust.
The secret advantages of the rich and famous
Brands and businesses that get big relative to their category also tend to get famous at the same time. Mental availability, the readiness with which they spring to mind in a buying situation, is a big part of the advantage that they enjoy. However, you don’t have to wait to be the largest player in your industry to become a famous brand. The key thing is to start investing in marketing like the business you want to be.
Research by Les Binet and Peter Field for the B2B Institute confirms that B2B businesses that can increase their Share of Voice (SOV) relative to their Share of Market (SOM), can then expect to growth their Share of Market (SOM) in response. As a smaller business, you can often get this Extra Share of Voice (ESOV) Rule working in your favour through just a small increase in advertising spend. Because your existing market share is on the smaller side, it doesn’t take vast investment to raise your SOV relative to it. If your market share then grows, as the ESOV Rule predicts that it would, the effects of being bigger start compounding to your advantage.
It’s not just about how much you have available to spend on marketing, though. It’s also about the way that you spend it. Brands can generate a higher effective SOV than would be implied by their advertising budget, if they invest in creative that gets talked about, or thought-leadership that’s genuinely pioneering and groundbreaking. And they can grow their SOM effectively if they make sure their marketing spend is introducing them to new customers.
Byron Sharp argues that businesses can’t expect to grow sustainably just by expecting their existing customers to keep spending more – the Law of Double Jeopardy works against them. Binet and Field’s research shows that the most effective B2B marketing strategies are ‘Reach’ strategies, which focus on acquiring new customers while also reassuring existing customers that they’ve made a good choice. Investing in growing SOV through a Reach strategy starts to deliver the benefits of being bigger even before you reach that size.
While sales teams support customers, marketers must keep thinking big
You don’t have to be a multinational company or a member of the S&P 500 to think big and start realising the benefits of doing so. It comes down to ambition – a determination to be as competitive as possible within your category by taking every opportunity to grow your customer base. As a marketer, it leads you towards brand advertising that can increase your fame and mental availability, but it also leads you to working more closely with sales and supporting the most promising opportunities to acquire new accounts.
In the current situation, those opportunities can feel harder to come by. With pipelines under pressure and buyers working from home, sales teams are putting more emphasis on strengthening their existing relationships, supporting their customers and finding ways to grow together. From a sales perspective, this makes perfect sense. However, it’s the role of marketing to do more. Sellers need our tactical support on priority accounts – but they also need us to think and act bigger, growing the number of people who know our brands and buy our products. It’s what will ultimately make our business more successful – and it’s the role of our profession to make it happen.