In my first post, last week, I made a point on the importance of sales impact to decode marketing performance. To paint a full picture, we need more sophistication – thanks, Magda, for pointing this out. Brand Penetration is the key metric we need to pay close attention to. The concept of penetration is now embraced widely in the marketing industry, extensively evangelized in books and academic articles, originating in a beautiful city on the South Coast of Australia, Adelaide. Distant from me is the goal to nail that thesis again here, I am just attempting to add an advertising lens to the concept of brand growth via penetration growth, seen through an engineering lens.
What is Penetration?
Don’t you love a simple math formula? Penetration is the ratio between the number of brand buyers and the total number of category buyers over a set period (most commonly is one year, to account for the shockingly unexpected lower brand purchase frequencies in fast-moving consumer goods). Expressed as a percentage, it is a measure of the power of your brand on the category. It is cleaner compared to other measures like market value share as it takes out pricing from the equation or any loyalty effects, not common in all categories. The maximum penetration for your brand is 100%, when everyone active in the category also buys your product, at least once during that year. Yet, since 100% penetration brands are very rare in non-monopolistic industries, the only way is up for your current brand penetration. To measure penetration, use actual sales data from a nationally representative panel or any comprehensive and complete purchase data set. Let’s not even open the conversation about measuring penetration with declarative data here. If you think that’s a good idea, please read my previous post about 20 times.
Advertising builds both penetration and purchase frequency
Traditional (reach based) advertising has an impact on both the penetration of your brand and increases the purchase frequency for your existing buyers. I often receive the question: what type of creative elements drive the highest penetration gains? I don’t know! The quest for this golden nugget, an ad that only drives massive amounts of penetration, is a favorite waste of time for marketers. Unless you know you are always extremely lucky, you are better off focusing your creative efforts on nailing a great effective ad, which drives by default more penetration compared to a lower effective creative. You can also better use your resources to ensure your ad reaches people who don’t buy your brand today but are active in the category. You can use either broad reach targets if the budget allows, or a targeted reach approach if data is on your side.
You don’t need to target current brand buyers
In CPG, if you are using a reach-based strategy, you don’t need to also advertise directly to your brand buyers. They get exposure to your mass advertising, and on top, they are exposed to your real product and experience it firsthand, which is more important than the 1 second, they pay attention to your message on Facebook. The famous leaky bucket metaphor Byron Sharp uses is an excellent analogy for your quest to continuously build penetration, as your buyers become lapsed buyers as time passes. In a world where all media impressions are costly, choose wisely, and reach everyone that can convert to your brand. Keep building penetration, and measure it using real sales data, not declarative data.
Did you think about brand penetration today?
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