Laws of Marketing

Gordon Wyner
Marketing Insights
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Key Takeaways
  • In some key areas of marketing, knowledge of law-like behaviors can have important implications for actual decisions yet to be made. 
  • Empirical generalizations are useful to inform strategic and tactical market planning, but do not exist as immutable rules to be obeyed.
  • Examination of the gaps between perceived laws and actual consumer behavior could identify potential new laws to be tested and verified.​

Practitioners of marketing notice certain recurring patterns in the behaviors of the customers and markets that they observe in their daily work. Some of these patterns are so consistent that they are almost law-like. For example, repeat purchase behaviors show the same patterns of frequency and concentration among the heavy versus light buyers across many products and markets. Another noteworthy example is that the impacts of marketing levers (such as advertising, pricing and sales force) on sales behaviors operate within a fairly predictable range.  

The accumulation of published research that has documented many of these patterns supports the idea that these are more than just anecdotal findings. Once established in multiple studies and contexts, it’s reasonable to believe that the patterns are likely to be observed in the future. They are referred to as empirical generalizations because they are based on data from specified contexts and are used to draw broader inferences about behaviors that have yet to be observed.

Are there practical benefits to knowing and applying marketing laws? Or is it better to treat each situation as a unique marketing challenge with no particular reference to previous history? Can knowledge of the laws impact and potentially change what practitioners actually do? 

In some key areas of marketing, knowledge of law-like behaviors can have important implications for actual decisions yet to be made. It can influence strategic planning, such as which types of consumers we should try to attract and what types of resources should be allocated. 

Taking advantage of the laws doesn’t presume that they are perfectly accurate for all situations, nor does it require conforming to some predetermined action. It also doesn’t mean that no new data or analysis is needed. There’s still plenty of room for creativity, and managerial priorities and judgment. It’s a matter of increasing the odds of success by drawing in prior information and updating the information as things change.

Buyer Behav​ior

One illustration of law-like patterns of purchase behavior is the concentration of usage among the heavy users. Often, we expect an “80/20” rule, in which the top 20% of users account for about 80% of usage. The actual concentration for many consumer products is somewhat smaller than this but is very consistent. In How Brands Grow, Byron Sharp summarizes data from many product categories that suggests that the typical concentration is 60/20. There aren’t enough heavy users to justify strategies that are targeted largely to this group, to the exclusion of lower usage groups. Furthermore, a consumer who is classified as a heavy buyer at a particular point in time actually is likely to purchase less in a subsequent period.

The implications of these patterns can have a dramatic impact on media, messaging and targeting. Sharp argues that the acquisition of all buyers is critically important, which implies that mass marketing to boost penetration will outperform heavy user-targeted marketing. The imperative to recruit new users (light, medium and heavy) should inform marketing decisions about allocating resources and the types of programs that will achieve best overall results. It questions excessive focus on the high-frequency target and provides a framework for assessing how to address the full range of behaviors in a particular product market. 

Marketing Impact

One of the most extensively researched areas (by practitioners and academics) is the effectiveness of marketing actions—that is, how do changes in marketing levers influence behavior and financial outcomes? In Empirical Generalizations About Marketing Impact, Dominique Hanssens brings together what’s been learned from decades of published academic research on factors such as price, sales force, advertising, promotion, product innovation and distribution. For certain specific contexts, such as brands within consumer packaged good categories, it’s possible to say quantitatively what the short-term sales elasticity generally is. For example, price typically has a larger impact than sales forces, which, in turn, has a larger impact than advertising. 

The empirical generalization framework enables the marketer to acquire a basic understanding of what’s possible (and likely) in his market and to use that to set expectations accordingly. This has useful implications for realistic goal setting, framing marketing objectives in ways that don’t anticipate high performance levels while ensuring that minimum thresholds are set to avoid “low-balling.” 

For example, under many plausible circumstances (based on, say, the last decade of marketing history), it’s reasonable to expect that advertising can account for 10% of incremental sales. It’s highly unlikely that it can account for 75% of incremental sales. 

It’s possible, though, that circumstances could change in the future and that much different (and higher) advertising contributions could result. New marketing technologies have the potential to achieve extraordinary targeting precision (such as finding candidates with rare medical conditions for a particular treatment) without resorting to mass consumer advertising and thereby achieve extraordinarily high impacts. 

As more research is done on Internet marketing, there will be opportunities to synthesize to determine if the empirical generalizations have changed.

Market Struct​ure

How are markets structured in terms of the number of meaningful and useful market segments, the number of relevant competitors, and the types of brand attributes that drive consumer choice? Experience suggests some fairly regular patterns to these questions. Much of the research is proprietary to marketing companies and research firms, so it’s not easily available in published form. I’d estimate that most segmentations focus on five to 10 segments and most brands are driven by dimensions of familiarity, affinity, quality, taste (for food products) and price. Additionally, the number of brands in consumers’ competitive sets is fairly consistent within product categories. What is the benefit of having this type of information? It provides a framework for strategic planning questions, such as:

1. How is value created in the product market?

2. Where are the future potential opportunities likely to be?

3. Is the market “crowded” with competition?

4. What are possible ways to break through a crowded market with a new proposition?

5. What would the marketer have to do to execute (in other words, enter the competitive set and capture certain types of consumers) with a distinctive proposition?

Empirical generalizations are useful to inform strategic and tactical market planning. They are not immutable rules to be obeyed. They may evolve and become more (or less) precise over time. 

The known laws may reflect a bias toward phenomena that are more easily measured. For example, a lot is known about buying frequencies since it’s one of the most basic measures in marketing and continuously reported in syndicated industry research. There may be fewer documented market structure generalizations since they are harder to specify and measure: What are the fewest dimensions necessary to capture a complex, multidimensional space of brands, consumers or occasions?

In addition to basing future empirical research on the availability of data, a complementary perspective would be useful. For example, from the vantage point of marketing decision makers, do they behave as if they are using laws (or rules of thumb)? Do they believe that there are laws governing their world of marketing? Examination of the gaps between perceived laws and actual consumer behavior could identify potential new laws to be tested and verified.

This was originally published in the November/December 2014 issue of Marketing Insights.​​

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Author Bio:

Gordon Wyner
Gordon Wyner is vice president of client solutions at Millward Brown and contributing editor of the Marketing Management section of Marketing News.
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