Growing a brand by driving penetration is nothing new. It got a lot more focus after Byron Sharp published ‘How Brands Grow’. But I’ve noticed an interesting quirk in the way marketers interpret ‘driving penetration’ that can lead to significant problems. The challenge? Most marketers when challenged to ‘increase penetration’ automatically focus on recruitment – adding new shoppers. But that masks the reality that increasing penetration has two parts: adding new shoppers and retaining existing shoppers. Get this wrong and your penetration strategy starts to look as futile as filling a bucket which is full of holes.
The Byron Sharpe Effect
It is not possible to discuss penetration without mentioning ‘How Brands Grow’. By now, many of you will have read Byron Sharp’s text. Even if you haven’t, you are likely to have been exposed to many of the mantras that have spread across the marketing world since it was written. And by the way, you should read it! The idea that growth will come from focusing on winning new customers, rather than keeping growing existing ones is powerfully supported by oodles of data in Mr Sharp’s tome. And in many cases, the work we do with clients to identify growth opportunities often supports this.
But but but.
If you can’t retain a shopper, how valuable is that new shopper? Surely the value of any recruitment exercise is, to a large extent, dependant on how much value you create from them? And while I’d never go against the esteemed Byron Sharp and suggest that brands shouldn’t focus on adding new customers (I agree wholeheartedly!) paying no regard to retention means that the value of that recruitment might be completely misunderstood, and overvalued!
What happens when retention is terrible?
Last year I worked on a brand which had decided (rightly) that driving penetration was the key to growth. The category had low penetration, and while it also had low frequency, the gains of driving frequency were clearly going to be smaller than driving penetration. There were a LOT of very light users, but increasing their frequency would not lead to a size of prize anywhere near the value of a penetration win.
When we hear penetration, we think recruitment.
We all know that penetration is built from both recruitment and retention – we all understand the concept of churn. Maybe it’s a quirk of how the human brain works. Maybe it’s been magnified by ‘How Brands Grow’. But it seems to me that when a marketer hears the words ‘increase penetration’ they automatically think of recruitment. Try it. Go ask a random marketer for strategies they would use to drive penetration, and I bet the first (or second) thing they mention is trial or sampling or something similar.
But in this case the retention rate for the brand, and the category, were terrible. People drop out of the category all of the time. I can’t quote the churn numbers, but they were incredibly high.
Category penetration was dropping. Not because there wasn’t any recruitment (there was) but because shoppers were leaving in their droves
It was clear that if retention wasn’t improved, or at least understood, growing the brand and the category through recruitment was going to be slow, expensive work.
What to do before focusing on recruitment alone to drive brand penetration
Never take a marketing mantra at face value. Sure, in most cases, adding new customers is the best way forward. But not always. It’s a general statement. But your brand is unique. Just do the maths and check. Never assume! We’ve delivered huge growth for brands by driving frequency of consumption, and we’ve plugged the holes in many leaky bucket recruitment strategies too. If you’d like more examples and case studies, just let me know and I’ll be happy to share.
Remember that driving brand penetration isn’t just about recruitment
Remember that penetration has two sides. If your retention is low, it will reduce the value of any of your recruitment activities. While you might still want to continue driving recruitment, perhaps also looking at why retention is poor, and what might be done to stem the bleeding, is worth considering. Again. Do the maths for your brand.
Poor retention is often caused by clumsy recruitment
Bad retention might be caused by poor recruitment. If we recruit shoppers who are very unlikely to use our brand in the future, then we will see a massive issue with retention. If (for example) we recruit by (in part) using a deep discount, there is a grave danger that we will grab a lot of shoppers that would never buy our brand at full price. The outcome? A blip in sales, a massive falloff after the deal, and a temptation to repeat the deal in the future to drive more sales. And we all know where that ends!
Indeed, one could argue that a blind focus on driving recruitment is a self-fulfilling prophecy. A ‘recruit at all costs’ strategy is unlikely to develop and nurture relationships with the right consumers and shoppers: unlikely to deliver retention, and therefore lead to a need for future recruitment.
Take a step back – get another perspective
We are all victims of our paradigms. We focus on certain things. We all do. So get someone else to help. I guarantee, if you get someone else to look at the same data as you, they will see something else. Most insights and opportunities are hiding in plain site. It just takes a new perspective, or a new lens, to make it visible. If you want help finding category growth drivers or brand growth opportunities, get in touch now!
Never assume. Do the math
Do the math. How much does it cost to recruit a shopper? How much does that shopper need to spend to make that investment worthwhile? If it costs you three dollars to recruit a shopper but their current lifetime value is two dollars, then you’ve got the balance wrong. Either you need to:
- Reduce the cost of recruiting
- Increase the lifetime value by improving retention
- Focus on recruiting different shoppers who will have a longer lifetime value.
The data shows that a focus on penetration is a powerful growth driver for most brands, and for many it might be the biggest driver they have. But it isn’t the only growth driver. And penetration requires more that just recruitment: it requires retention too.
If you’d like to learn more about how we can help grow your brands and your categories, please get in touch now. I’d be happy to share case studies and examples
