What Makes Heavy Buyers So Heavy?

  • REPORT 65
  • Byron Sharp, Giang Trinh, John Dawes and John Scriven

Abstract

We investigate the differences between any brand’s heavy and light customers, and discover that heavy customers buy the brand more both because they are more loyal to the brand, and because they buy the category more often. This law-like pattern holds for big brands and small brands, in different product categories with different purchasing frequencies, and in different countries, for store brands as well as manufacturer brands.

Key Findings
  • A brand’s heavy buyers already buy the category a lot, suggesting it would be difficult to encourage them to buy even more from the category.
  • A brand’s heavy customers are very loyal, allocating a greater proportion of their repertoire to the brand. This high behavioural loyalty puts a ceiling on their sales growth potential.
  • A heavy buyer offers a brand only as much growth potential as a light buyer. Collectively they offer minimal potential for sales growth because they are a tiny part of a brand’s customer base.
  • Category buyers who do not currently buy the brand offer the greatest growth potential.

WHAT MAKES HEAVY BUYERS SO HEAVY?

Any brand has a few heavy buyers and many light buyers. These heavy buyers are of great value, even though there are few of them they contribute a lot of sales volume because they buy so often. The heaviest 20% deliver around 50% of sales volume (report 42: Sharp & Romaniuk 2007), while the really heavy top 5% can contribute 20% of sales.

So what is it that makes a heavy brand buyer a much more frequent buyer of the brand than a light buyer? This isn’t a trivial question; it determines how easily we can expect to win extra sales from our customers. If light buyers are light purely because they don’t have much need for the category then it should be difficult to win more sales from them. If our heavy buyers are heavy because they are extremely loyal then likewise we won’t be able to win much more from them.

What makes a heavy buyer heavy determines how easily we can win extra sales from them

Whereas if heavy brand buyers are heavy mainly because they buy the category more often then they are good prospects for growth by increasing their loyalty.

The answer to this question is not well known. We surveyed all the Institute’s researchers asking which of these three statements best described the average heavy brand buyer:

  1. they are more loyal
  2. they buy the category more often
  3. both of the above

The most popular answer was (2), while “don’t know” was also popular. We surveyed over a dozen highly knowledgeable consultants and practitioners and received mixed answers.

IN THEORY

Light and heavy buyers of the brand might buy the category at a very similar average rate and largely only vary in their loyalty – with the heaviest being the most loyal. If this were the case it would suggest the role of marketing is to nudge up lighter buyers’ loyalty, and that few extra sales can be gained from current heavy buyers unless they can be convinced to actually buy from the category more. For some categories this may be possible – say, yoghurt – but for many others (like, laundry detergent, or toothpaste) it seems unlikely.

Alternatively, light and heavy buyers might have very similar levels of loyalty to the brand, and so mainly vary in how heavily they buy the category. If this were the case it would suggest that the marketing goal would be to recruit more heavy category buyers. And perhaps try to improve the loyalty of all customers – depending on how high it is already.

Given that a lot of very light brand buyers are also light category buyers (since most category buyers are light), these people would have a high share of category requirements. These very loyal buyers would inflate the average loyalty metric for the light buyer groups. So perhaps then loyalty is lowest amongst a brand’s heaviest buyers?

As is often the case in marketing, theory doesn’t get us very far, pointing to very different possibilities.

REAL-WORLD RESULTS

To find out what happens in reality, we analysed data for packaged goods brands across three countries: UK, USA and Malaysia (data kindly provided by Kantar Worldpanel and IRI). 62 brands in 12 categories were included. The categories included food and non-food, and those that are bought quite frequently to much less often.

There are two main findings that are quite clear.

1. Heavy buyers are more loyal

Heavy buyers of any brand turn out to be much more loyal to the brand than its lighter buyers. They devote much more of their repertoire (their share of category requirements , or SCR) to the brand, as Table 1 shows.

Table 1: Average across 12 categories
Brand
purchases per
year
Average
brand
SCR
1
30
2
37
3
43
4
46
5
49
6
52
7
55
8
53
9
54
10 +
61

To show how consistent the result is, we plotted brand purchase frequency against SCR (loyalty).

Figure 1 shows how stark the relationship is.

Figure 1: Brand purchase frequency and share of requirements (12 categories, 3 countries)

Screen Shot 2016-04-11 at 10.04.45 AM

Figure 2: Brand purchase frequency and category purchase frequency (12 categories, 3 countries)

Screen Shot 2016-04-11 at 10.04.53 AM

This finding that heavy buyers are more loyal is particularly true of large brands: Large brand’s heavy customers are particularly loyal and don’t buy the category as often as the heavy buyers of small brands do (in line with the Natural Monopoly law). For example, 9 time buyers of Coca-Cola allocate 43% of their buying (9 out of 21 category purchases) to Coke. The story is similar for Pepsi, but 9 times buyers of the much smaller brand VirginCola give only 20% of their repertoire to the brand (9 purchases out of 44 category purchases). Suggesting that large brands already enjoy about all the sales they can possibly get from their heavy buyers. They can win more heavy buyers, but targeting their existing heavy buyers and encouraging them to buy more is likely to be a fruitless exercise.

You can win more heavies, but targeting existing heavy buyers and encouraging them to buy more is likely to be a fruitless exercise.

This discovery might strike some readers as odd if they know that 100% loyal buyers tend to be light category buyers. It is true that buying the category more often tends to result in a larger repertoire. But heavier buyers of the brand, not the category, tend to be more loyal to that brand – this loyalty is one of the reasons they are heavier.

Now we look at the relationship between brand and category purchase rates. What we find is:

2. Heavy brand buyers are also heavy category buyers

There is a systematic relationship between brand buying rate and category buying rate: light brand buyers are light category buyers; heavy brand buyers are heavy category buyers. Table 2 shows this.

This shows the other reason that heavy brand buyers buy the brand so often is that they can: they buy from the category enough to do so.

Table 2: Brand & category purchase rates
Brand
purchases
per year
Average category
purchase
frequency
1
11
2
12
3
15
4
16
5
18
6
19
7
21
8
24
9
26
10 +
33

GROWTH POTENTIAL

So it turns out that heavy purchasing of the brand is due to both loyalty and category purchase frequency. A brand’s so-called ‘super consumers’ are already very loyal which means that there is little room to extract extra sales from nudging this loyalty upwards. Fortunately these heavy brand buyers are also heavy category buyers so even a little more loyalty is still worth something meaningful in sales. A brand’s lightest customers aren’t very loyal, so there is lots of sales potential, lots of room to nudge them to include the brand at a higher level in their repertoire. Unfortunately they don’t buy the category very often, so this limits their growth potential.

Once this is all considered the sales growth potential of heavy and light customers is rather similar. So what really matters is how many of these customers there are – and here there is usually an enormous difference, even for large brands: any brand has far more light customers than heavy.

So light customers are by far the source of growth.

And the most attractive group for sales growth are those category buyers who don’t buy the brand (or only very rarely, say less than once a year). These are lighter category buyers but their purchase propensity to the brand has great room for improvement. And there are vastly more of these potential customers out there.

If a brand were to grow by only attracting light or non buyers, it would seem likely that penetration would increase but purchase frequency might decrease. Conversely if a brand were to grow by mainly attracting existing heavy buyers, penetration would not grow (maybe even decline) but frequency would grow.

But the Double Jeopardy law (and what happens in practice) tells us that serious growth (like going from mid pack to leader) and mostly even small growth involves increasing both penetration and frequency, hence must involve nudging up buyers (and non-buyers) across all levels.

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