TWO GUIDING GROWTH PRINCIPLES

Our model reveals two guiding principles for growth achievement

 

1. Penetration, not repeat, has the most profound impact on sales volume.

  • Increasing penetration yields a bigger pool of customers purchasing your brand.  
  • Repeat purchase rates in the aggregate are remarkably constant over time and are immovable since they are governed by underlying usage rates.
    • Exception: new use/occasion for existing product which increases underlying usage rates.

2. Advertising, not promotion, is the most effective and sustainable growth driver.

  • Effective advertising expands the customer base by selling buyers on brand benefits at full price. Repeat buying continues at full price even in the absence of advertising because of on-going brand satisfaction.
    • A percentage increase in advertising-induced penetration eventually leads to the same percentage increase in sales volume, as newly acquired penetration buyers have the time to make their repeat purchases. (We often measure advertising that can nearly double penetration.)
      • About 50% of the volume increase can occur within 12 months and the remaining full volume increase within 24 months.
  •  Price promotions sell buyers on the price, not the brand benefits, resulting in lower perceived price/value relationship and buyers who depend on promotions to sustain their repurchasing.   

Learn how our guiding principles can help you achieve sustainable growth.