Definition

Any brand has a few heavy buyers and many light buyers. These heavy buyers are of great value, because even though there are few of them they contribute a lot of sales volume as they buy so often.

On the other hand, light buyers are of great value due to the sheer number of them. Individually, a light buyer buys little and infrequently and therefore does not contribute much sales volume. However, collectively light buyers contribute a great deal of volume.

Key Findings

• Brand growth (and decline) is due largely to changes in buying amongst the brand’s many very lightest buyers.
• Natural Monopoly Law shows that as brands grow, a greater proportion of their customer base is made up of lighter category buyers.
• The heaviest 20% deliver around 50% of sales volume, while the really heavy top 5% can contribute 20% of sales.
• Heavy customers buy the brand more because a) they are more loyal to the brand, and also b) 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.
• 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.
• Lighter and non-buyers of the brand, and lighter buyers of the category overall are harder to talk to. They are less engaged with the brand and the category. They have less well-developed mental structures so they find it harder to ‘take in’ a brand’s advertising, and easier to mistake the brand for a rival.
• There are some very real practical problems in targeting heavier buyers. Firstly, they are harder to identify than is usually realised. Secondly, buyers change; there is random variation, which makes it hard to identify who the true heavy buyers are.
• The ‘Law of Buyer Moderation’: in subsequent time periods heavy buyers buy less often than in the base period that was used to categorise them as heavy buyers. Also, light buyers buy more often and some non-buyers will become buyers. This ‘regression to the mean’ phenomenon occurs even when there has been no real change in buyer behaviour.
• On average, only about half of a brand’s heavy buyers will remain its heavy buyers in the next year. The sales contribution of heavy buyers also declines by 15 percentage points in the next year. This means that if your heaviest buyers contributed 60% of your sales in 2010, then this same group of people will contribute 45% of your brand’s sales in 2011.
• Heavy category buyers are more stable over time – 65% remain heavy category buyers next year and they only dropped 5 percentage points in share of total sales.
• Larger brands tend to have proportionally more light buyers in their user bases than do smaller brands. Light, occasional buyers tend to favour the bigger brands. This is the ‘Natural Monopoly Law’ and is purely a statistical selection effect.

Best Practice

• 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 even for large brands: any brand has far more light customers than heavy. So light customers are by far the source of growth.
• 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.
• Lighter, less frequent buyers make an important contribution to sales, and being less frequent buyers they arguably need more reinforcement as the brand is only a small part of their lives. Therefore media and distribution that reaches the wider market cost effectively is vitally important.
• While some potential customers are definitely worth more than others, efforts to target the very top customers need to be tempered by the knowledge that small groups of customers, even of the of heaviest customers, still offer limited overall sales potential.
• Pursue a marketing mix that has the ability to reach lighter brand and category buyers, who are also important for arresting decline and delivering growth.
• Targeting based on category buying behaviour is more reliable than targeting based on brand buying behaviour. However, the ability to convert heavy category customers to be heavy brand buyers needs to be tempered by the fact that they tend to buy more brands. While it is easier to get into a heavy category buyer’s repertoire it will be more difficult to make them predominantly buy your brand.