Why brands should not expect to grow market share in just one year

Brands with the ability to stand out can achieve sustainable growth, reduce their reliance on short-term tactics and command a higher price point, according to new data.

Kantar’s analysis of attitudinal and behavioural data reveals that on average consumers are willing to pay 14% more for brands they perceive to be “meaningfully different”.

But growth will not happen overnight, with very few brands able to significantly increase their market share in just one year.

The wider three-year study of 3,907 brands from the BrandZ database, spanning 21 countries and 58 categories, finds that for organisations with high brand clarity, the brand itself contributes 17% to sales. This figure drops down to 12% for a business with medium brand clarity and 10% for those with low brand clarity.

Brand has never been more important at a time when consumers have so much choice and are looking for companies that match their values, argues Chad West, head of global marketing and communications at digital bank Revolut.

“I always say to my team, the millennial audience, who are going to become the majority consumer market, are looking for a greater deal of affinity with the brands they interact with,” West explains.

“You only need to look at brands like Spotify or Adidas. They’re no longer just selling a product, they’re running huge campaigns on social action and social change. They’re trying to be as relevant as possible to their entire customer demographic. Everything they’re trying to do is with meaning and cause, and that’s on top of having a great product or service.”

Brand differentiation becomes even more important in an age where it’s easy to compete on price, agrees Kate Cox, global CMO at B2B call and chat answering service Moneypenny. In fact, brand clarity is even more critical due to the fragmentation of marketing channels.

“If you’re active in paid social, content marketing, advertising and search you need to have a really clear message and sense of brand, like the writing in a stick of rock, that goes through the entire company,” Cox states.

It’s not the biggest or the strongest, it’s the most adaptable to change that are most likely to succeed. We’re feeling that, I think everybody is feeling that.

Mark Evans, Direct Line

Maintaining growth momentum is a key area of focus for brands. The Kantar analysis finds that less than 6% of brands grew their market share over the first year of the study. While six in 10 sustained this growth over the three-year period, just one in 10 improved on their initial gains.

Mark Evans, managing director of marketing and digital at Direct Line Group, acknowledges that momentum, growth and market share gains are all difficult to build and even harder to sustain, especially for big brands.

He cites research from the Ehrenberg-Bass Institute for Marketing Science, which explains that when a new entrant enters a market they take proportionate share compared to the overall market share, meaning bigger brands naturally have more to lose.

“It’s mathematical, but also a common-sense thing. As you gain, unless you substantially grow the market, you’re hurting others and they’re going to respond,” Evans reflects. “So, don’t underestimate the competitor response and the way the market will equilibrate.”

He describes business as a battle and advises organisations to capture that competitiveness, as well as have the conviction and confidence from the outset that they are onto something important and enduring. Getting the wider organisation to share the same conviction is essential, as is having the patience to stand by those convictions and the tenure within the team that encourages long-term thinking.

Momentum mindset

Lessons could, in fact, be learnt from China. In November Evans embarked on a “discovery tour” of China, meeting with major domestic insurers Zhong An and Ping An, as well as tech giant Tencent. What he found was a “tremendous ability” to mobilise quickly to create brands and businesses, while at the same time implement long-term thinking based on a multi-generational approach.

Having a business model focused on continuous innovation and diversification means that regardless of the age of the business, real momentum is possible.

West cites the example of Amazon, which has transitioned from online marketplace to grocery retailer and TV giant, with its eyes now reportedly set on the banking sector.

Revolut takes inspiration from the likes of Amazon and Uber, and their ability to bring disruption to new sectors. Now entering its fourth year, the digital bank is experiencing rapid growth based on organic traffic. When West joined the bank had 50,000 users, which leapt to 5.5 million in the space of two and a half years. Revolut has gone from opening 600 accounts a day to 12,000, the equivalent of 4 million accounts a year.

This is despite the fact only 10% of the company’s growth typically comes from marketing spend. Some 70% of new sign-ups are driven by referrals, which come organically and are not incentivised through a money-per-referral scheme.

West argues that while Revolut could be seen as being “unorthodox” in its approach, he believes this is where the market is moving.

“Whenever I meet CMOs at a big FTSE 100 company they’re always asking ‘how much are you spending a year? What’s your budget, is it less than £3m?’,” he states. “I’m astonished that the results they get are not too far in comparison to what we do and they’re spending £6m a quarter, as a minimum sometimes.”

The growth formula

Through its three-year analysis, Kantar has developed an ‘Exposure-Activation-Experience’ curve, which identifies a formula for growth for brands.

The research finds brands which made it easy for customers ‘predisposed’ to buy their brand grew by 27%. Brands grew by 12% by framing ‘positive expectations’ and grew by a further 7% by maximising their retention of existing users, leading to cumulative growth of 46%. However, brands that overachieved at each point of this curve grow the fastest, but they only made up 4% of the data set.

“I’m not surprised that only 4% of companies scored well on all three, because all three of them take quite a lot of resources and I suspect that if you are in different stages of a product curve you will be investing in different parts of that funnel,” says Cox.

“If you’re just starting out, making it super easy for people to buy your product is important because you can get quite a lot of momentum from cleaning up that experience and getting people through the process quickly.”

Cox quotes Les Binet, head of effectiveness at Adam & Eve DDB, and marketing consultant Peter Field, whose research suggests that companies should invest in brand activation early in their lifecycle in order to gain momentum quickly, but then understand that to keep growing at pace you need to start talking to people outside your immediate market.

The fact that brands experience 27% growth by making their customers’ lives easier is a key takeaway for Evans, who recognises this could be a reason why some big brands suffer.

“If your business is built on legacy assets and old infrastructure it’s even harder to give that frictionless experience,” he suggests. “This is why we say our vision is about making insurance much easier and better value. It sounds quite basic, but I think it’s pretty fundamental.”

Making the mobile experience seamless for its millennial consumers is central to the ethos at Revolut. While people typically sign up because they like Revolut’s analytics or they want to spend abroad with no fees, West insists that if the customer experience is any less than stellar users can easily walk away, which happened when the app was in its infancy.

“The moral of it is, we always say ‘be customer obsessed’ and then ultimately if you apply that logic to all aspects of the business you shouldn’t experience issues,” says West.

“You have a lot of companies who apply the logic of the best possible experience to the sign-up stage, but when you get to other areas of the business it isn’t represented quite as well. This has to be a culture that’s ingrained.”

Market share under attack

The size of the brand can have a big impact on its future growth potential. The Kantar data indicates that smaller brands, with less than 5% market share, achieved stronger growth over the three-year period under analysis, compared to larger ones.

Coming from the perspective of one of the world’s fastest growing fintechs, West is convinced that growth only slows down if the business slows down.

“If you’re just doing that one thing and doing it well you’re not really broadening your horizons, you’re not trying to reach new demographics and audiences, and you’re not trying to break into new areas,” he argues.

“The difference we have is we’re not even 10% where we want to be in any area in terms of growth, in terms of countries we launch in, in terms of products and services we want to disrupt next. I don’t see that breaking down, because we’ve got a clear pipeline and projection.”

Now live across Europe, Revolut has just launched in Australia and plans to roll-out to the US, Canada and Singapore over the next few months. The next big product launch will be commission-free trading, enabling all Revolut customers to invest in the stock market for free. West insists that if you continue to think big in business, long-term growth will not be a problem.

The picture may be slightly different for long-established legacy businesses that have hit a certain level of maturity. The Kantar analysis shows growth at big brands (with 20% market share and over) declined by 4% on average during the study, although four in 10 of the biggest brands managed to hold ground and grow despite competition from new entrants.

Evans explains that inevitably the biggest brands have the most to lose when markets are being disrupted. This means that as the consumer landscape changes larger brands need to free up their thinking, adapt quickly and develop a hunger for progress.

“It’s the good old Darwin thing. It’s not the biggest or the strongest, it’s the most adaptable to change that are most likely to succeed. We’re feeling that, I think everybody is feeling that,” Evans states.

“From comparison websites to the big Chinese insurers who are definitely curious about moving out of their own market, you’ve also got the likes of Google and Amazon looking to get into insurance. You almost don’t know what the winning formula is, but you know it’s going to require advancement in the way the organisation works.”

Cox agrees it is true of all markets that once you hit a certain level it gets harder to grow and then a brand needs to find new tactics or it ends up “playing defence instead of offence”.

The challenge is to quickly find the short-term wins that allow you to invest in long-term brand building, which is where “the big prizes come”, says Cox, who is adamant that culling investment is never the right answer.

“Pulling back on brand investment when you’re under attack is not the best way to deal with that situation, because you’re allowing share of mind to competitors if you’re not constantly front of mind.”