Penetration or loyalty, what makes sense for your brand?

by Nigel Hollis | March 02, 2020

A couple of weeks ago I asked if there was a flaw in Burger King’s promotion strategy. Neil Hopkins replied and then queried the statement that I had made about "growth comes from increasing penetration", citing evidence from GFK that challenges that assertion. So, is penetration gain the only way to grow your brand?

The research referenced by Neil is summarised in an item in the WARC newsletter. Unfortunately, I find it a little difficult to figure out exactly what some of the statistics refer to – since “loyalty” seems to be used to refer to both behaviour and attitudes, and it is not always clear to me to which the text refers. Be that as it may, I can wholeheartedly agree with Oliver Hupp, Global Director Brand Strategy & Tracking at GFK when he states there is,

"ample evidence to show that brand success requires more than a one-size-fits-all approach to brand strategies that focuses on volume at the expense of the quality of customer relationships"

That said, I believe that growing penetration is likely to be the best growth strategy for most brands, because there is no doubt that higher penetration brings significant structural advantages that help lead to higher repeat rates and more than a fair share of category entrants.

There are a couple of specific data points that inform my belief. First, a separate analysis (from Europanel, which a joint venture between Kantar and GFK) found that nine out of 10 brands which grew market share by more than 0.5 percent points did so by growing penetration. Six out of 10 grew both penetration and repeat. one in 10 grew only repeat purchase.


Now that in itself suggests Double Jeopardy really is a generalisation not a law, and that brands need to be specific when it comes to their growth strategy. However, the really interesting thing is that the same analysis found that the bigger the brand, the more it relies on increasing repeat rate and gaining more than its fair share of category entrants.

The latter finding may simply be an advantage of size rather than an explicit strategy. Simply looking at attitudinal data from BrandZ finds that bigger brands are more likely to get predisposed buyers to purchase but they also pick up more undisposed buyers than the average brand. Again, structural advantages like better distribution, more frequent promotions, bigger ad budgets all work to keep the big brand big. It seems likely that people buying a category for the first time will simply find it easier to buy the bigger brands.

To me this suggests that growing penetration is a good strategy for most brands but that they cannot take it for granted that loyalty will follow, nor will the same strategy benefit different brands equally. Nor, contrary to a lot of people’s understanding, is growing penetration simply a matter of growing acquisitions. Simple maths will tell you that if you lose more existing customers than you gain you are not going to grow penetration. Our Mastering Momentum analysis very clearly showed that brands which grew fasted tended to retain existing buyers better than average. However, the analysis also showed that growth depended on growing attitudinal predisposition.

So again, I would agree with Hupp who says,

"Only brands that successfully build a higher number of positive emotional relationships with consumers will enjoy higher penetration and loyalty in the long run."

All of which is a long-winded way of saying, if you want to grow your brand then you better figure out where the real growth opportunity lies because growth is not a one-size-fits-all problem. But what do you think? Please share your thoughts.

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