In my first post, 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 marketing industry widely accepts the concept of brand penetration. Books and papers originating in the Australian city of Adelaide, widely evangelized the topic. Remote from me is the goal to prove that thesis again.
I am simply attempting to add an advertising lens to the concept of brand growth via penetration growth.
What is Brand Penetration?
Don’t you love a simple math formula?
Penetration is the ratio between the number of brand buyers and the number of total category buyers, over a set time period. The commonly used period is one year, to account for any seasonality of sales. In addition to that, 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.
Compared to other metrics, penetration is more reliable. For example, compared to value share it takes out price from the equation. The maximum penetration for your brand is 100%: when everyone active in the category buys your product, at least once. Yet, as 100% penetration brands are 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 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 brand penetration and purchase frequency
Traditional (reach-based) advertising has an impact on both the penetration of your brand and the increase the purchase frequency of 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 better focus your creative efforts on nailing a great effective ad. This will drive by default more penetration compared to a lower effective creative. You can utilize your resources better to ensure your advertising reaches people who don’t buy your brand today but are active in the category.
Using either broad reach targets if the budget allows, or a targeted reach approach if data is on your side are two ways to go forward.
You don’t need to target current brand buyers
In CPG, if you use a reach-based strategy, you don’t need to advertise directly to your brand buyers. They are exposed 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.