I’ve read a lot about branding, but not much about how brand drives revenue. My friend Yashoda Sampath, who leads research at Instagram and previously was a Research Director at Huge, recommended How Brands Grow. I read it, and soon discovered how influential author Byron Sharp and his work have been. What surprised me most, however, was his controversial position against customer segmentation, which is rarely discussed in startup marketing circles. 

What Makes “How Brands Grow” Uniquely Valuable

Sharp’s book does something most marketing books don’t: shares tons of data. Sharp’s work is rooted in purchase data and advertising spend data from a dozen global brands like Coca Cola. By way of comparison, there’s virtually no data in other influential marketing books like Positioning: The Battle for Your Mind, 22 Immutable Laws of Branding, or anything by Seth Godin.

“How Brands Grow” on What Makes Advertising Effective

Sharp argues that when you look at the data, what works in advertising is surprisingly simple – making the brand easy to buy – by maximizing it’s physical and mental availability.

1. Maximizing physical availability means making the product available to purchase as widely as possible.

2. Maximizing mental availability means creating attractive, memorable and distinctive brand assets.

3. Next, maximizing mental availability means delivering the distinctive brand message to addressable customers as frequently as possible to create and reinforce the brand in their minds

Make Your Brand Distinct

A distinctive brand is created through sensory and semantic cues such as colors, packaging, logo, design, taglines and celebrity endorsements that make the brand easy to like, easy to notice, and easy to recall. Brands grow through repeating distinctive brand assets to form and strengthen memory structures in the customer’s mind. So be consistent, and avoid unnecessary changes.

This certainly aligns with a lot of conventional wisdom about having a consistent look & feel everywhere and with ideas around developing creative that is “remarkable.”

A great example of this might be Casper, which pioneered a whimsical illustration style that boldly set itself apart from a sea of competitors using lifestyle photography. An even better example is Lemonade, which took a similar approach in the renter’s insurance category, pairing illustration and animation with youthful slang and humor.

Further Reading: Here's a good post on “brand salience” and specific ways to increase what Sharp calls your brand's "mental availability.”

“How Brands Grow” Argues Against Segmentation 

Here’s where Sharp’s framework gets interesting! For fifty years marketers have been taught to 1) segment the market, 2) choose one segment to target, and 3) tailor your positioning to attract that segment. But Sharp argues the segmentation approach is wrong.

Sharp says consumers are “promiscuous loyals” - 72% of Coke drinkers also drink Pepsi. And “89% of brand users don’t think their brand is different from competitors.” People buy out of habit rather than commitment. Therefore, in order to grow, don’t focus on driving purchase frequency among your most loyal users, instead focus on mass marketing to drive deeper market penetration of your light and occasional users. 

Sharp’s argument has been gaining traction. According to Branding Strategy Insider, the CMO of Mars recently said “I’m not a great believer in targeting. Our target is about seven billion people” and “our task is to reach as many people as we can; to get them to notice us and remember us; to nudge them; and, hopefully, get them to buy us once more this year.”

This part of his argument makes sense. I’m already a deeply loyal Tide customer, no ad campaign or rewards program is going to make me buy much more Tide : I only have so much laundry. The next part of Sharp’s argument is a bit more controversial.

The Segmentation Approach vs. Penetration Approach 

Sharp then argues that we shouldn’t focus on defining a narrow customer segment that’s discrete from our competitors (remember, 72% of Coke drinkers also drink Pepsi). Instead, focus on sophisticated mass marketing to drive deeper penetration among non-users and occasional users. This intuitively makes sense, and he backs it up with math, but on the surface this seems to fly in the face of everything I’ve been taught for fifteen years.

I found a good explanation summarizing Sharp’s Penetration approach vs. the more traditional Segmentation approach:

In basic terms, segmentation aims to divide the market into some number of targeted customer groups based on sets of characteristics. Penetration argues that the best results come from broad and repetitive mass marketing to anyone who might be relevant. Segmentation tends to create individual marketing mixes for each group while penetration will usually use take a one-size-fits-all approach. Sharp is one of the fiercest advocates of penetration.

Sharp says that “brand-specific segments generally do not exist – rival brands usually compete as perfectly interchangeable options in what for them is a single, unsegmented mass market. There is no support for the idea that competing brands each appeal to a unique subset of users that look different from the customer bases of competitors. Unfortunately, few marketers are aware of this fact.”

How Does “How Brands Grow” Apply to Startups

Most of Sharp’s thinking is around CPG brands in mature categories, so I was left wondering how these insights might apply to startups.

Don’t Try to Persuade, Try to Reinforce What the Brand Does and Where to Buy

Sharp says “advertising works best when it doesn’t try and persuade, but merely makes us remember the brand at the point of purchase.” He calls this expanding mental availability.

In MarketingWeek, addressing SMBs specifically Sharp says “a lot of small businesses think a large chunk of their job is to tell the world why they should buy from them. But the biggest battle for small businesses, especially those starting out, is that people don’t know who you are and they don’t know how to buy from you.”

Sharp continues, saying small brands should focus on “reaching many and doing it over and over and over.” So rather than creating a persuasive 60-second video that explains why your product is better, instead focus on a 15-second video that raises just gets across what the product does and how to buy. I’ve been a skeptic of SoFi’s decision to brand a stadium ever since they announced it, but this framework might support that approach.  The stadium has already earned SoFi continuous earned media coverage and will earn a few low-value brand impressions everytime a game is attended or broadcast.

*Do* Exclude Users Outside Your Addressable Market

Sharp argues in favor of “sophisticated mass-marketing.” Let’s take EasyKnock, which offers a home equity loan-alternative. We know people over 65 are a bad fit for our product. And we know that our underwriting criteria excludes applicants in urban and rural areas (i.e. these MQLs never convert to SQLs). So the mass-marketing framework would support segmenting out urban and rural customers and anyone over 65, because they fall outside our addressable market.

*Do Not* Ignore Potential Customers Who Buy Your Competitors Products

In EasyKnock’s case, we compete in the home financing category with new entrants like Opendoor and incumbents like Bank of America. What we see some advertisers doing is further sub-dividing category buyers into a “Bank of America segment” with certain demographics and an “Opendoor segment” with other demographics and  an “EasyKnock segment” with a third set of demographics. A data-driven marketer might argue that we should create three different audience segments that we use to target on ad platforms. Next, this marketer run ads to all three segments and measure the the ROAS (return on ad spend) for each segment. Finally, if the BofA and Opendoor segments don’t convert at a high enough rate, the marketer might turn off the campaigns targeting these segments.

However, applying Sharp’s framework, we might chose not to turn off these two underperforming segments and instead shift our strategy and deliver brand campaigns. To adjust our strategy we might make optimizations to lower our CPM, such as changing our bid optimization strategy, switching ad platforms, or changing the placement type. And we might change our attribution model, or accept that we’ll never be able to directly attribute this spend to conversions. But we should never stop advertising to customers within the home financing category, because that’s where our growth will come from.

*Do Not* Sub-Divide the Category Into Personas

This one is a grey area. Sharp seems to be arguing against having multiple sub-segments within the category. In EasyKnock’s case we might identify one persona that skews male, African American, age 45-62 and a second persona that skews caucasian, female, age 36-50. Whereas in the past we might have run a different mix of channels and different creatives for each persona, Sharp seems to argue we ought to lump them all together as long as they are category buyers. 

Another way of segmenting might be by job-to-be-done: for example we might have two personas: one that represents empty nesters hiring our product to downsize into a simpler home, and a second that represents entrepreneurs hiring our product to invest capital into a business. We might build two different

We actually did test interest-based Facebook audience segments for entrepreneurs, and found that the ROAS underperformed relative to our broad lookalike audiences. So this data does bear-out that the mass-marketing approach is what’s performing for us on Facebook.

Be Wary of the Limitations of Personas

In Part II of How Brands Grow, the authors argue “a really dangerous practice in modern marketing is to describe a market segment as a single person: for example, ‘our target consumer is Nicole, she’s 28 years old, is passionate about the environment and sustainability, shops at whole foods market, likes new experiences, reads classic literature but also watches Keeping up with the Kardashians as a guilty pleasure....This is the height of inane target marketing… lazy dangerous thinking that often finds its ways into advertising and media plans, and the brand ends up talking to only a fraction of its potential market.”

My take-away here is that while offering this persona might be helpful for the team to visualize the customer, we should avoid writing for just this persona and avoid targeting just that persona. For example, Nike doesn’t speak to only athletes, they speak to the athlete in each of us, whether we’re just getting started or already a pro. Furthermore, Nike doesn’t advertise only in sports magazines, they advertise in Esquire and Wired as well.

For Startup Brands, Focus on Earned Channels As Well

Most of Sharp’s research is focused on paid advertising. But what does all of this mean for earned channels like PR? Sharp advises that mental availability is about encoding your brand in the customer’s memory in the way that maximizes retrieval. Research has shown that consumers are more likely to accept new ideas when introduced via earned channels. Imagine the difference between hearing about a new product on a morning show vs. an infomercial. As innovators, startups have the ability to earn PR in a way that incumbents often don’t. So PR should get weighted more heavily for startups than for mature brands, and can give startups an advantage in by increasing the chance the brand-impression is remembered.

*Avoid* Content Marketing That’s Too Far Afield of Your Core Value Prop

When I was at Bloc, we launched free courses on topics like Webflow, a no-code web design tool and on Swift, a new programming language from Apple. The goal of these courses was to garner press, back-links, and free email leads from these free courses, with the hope that some small fraction of these free leads would become customers of our $9K coding bootcamp. While some of these courses succeeded in garnering thousands of leads, they failed in driving meaningful numbers of bootcamps enrollments.

Sharp might argue that these free courses were too far removed from our core offerings, and that we should have spent that time and energy on strategies that more directly promoted our core product offering. In fact, the content marketing program that was most successful for Bloc over our three years was our product overview webinar. We spent years perfecting the content. We also spent years organizing our funnel around the webinar to maximize the website visit to attend conversion rate and optimizing the follow-up experience from attendee to sales call. At our peak, we were running 10 webinars a week and had a 10% conversion rate from webinar attendee to enrolled student.

Conclusion

In summary:

• Sharp’s Penetration approach has had a big impact in consumer marketing but there’s an opportunity to apply his thinking at startups, which are still quite focused on the Segmentation approach.

• Startup creative teams should be focused on creating a distinctive brand and assets that quickly set the brand apart from the competition.

• Despite Sharp’s anit-segmentation rhetoric, segmentation is still necessary to define the boundaries of the category and find those customers who do and fall within the addressable market. Sub-segmenting further into specific personas for each competitor or each persona may be going too far.

• Startup marketers need to focus less on persuasion and more on reach. Instead of long form advertising that explains why the brand is better, focus on greater reach of a simpler message that reinforces what the brand does and where to buy.

• Optimize brand advertising campaigns to deliver that simple message with consistent and distinctive creative at as high a frequency as possible. Optimize for low CPMs but don’t compromise on reach or frequency. Accept that brand ads are a long-term investment and may never achieve a positive ROAS through direct attribution.

• Don’t forget that earned channels like PR are inherently better for creating mental availability and are also more likely to cover disruptive startups than established incumbents.

• Avoid creating content marketing assets whose value isn’t tightly aligned with your product’s core value proposition because the conversion rate of those leads will be far lower. When possible, focus your content marketing on what your product does, and how to buy it. Deliver that message to the whole category as frequently as possible.