Buyer Moderation

What it is

Byron Sharp names buyer moderation as one of the laws in How Brands Grow, and the evidence the book prints for it is one table: a leading United States tomato sauce brand, using panel data reported by Anschuetz in 2002. In the first year, the heaviest buyers, five or more purchases, were 9 per cent of households and bought 43 per cent of the brand's volume. In the second year the same households bought 34 per cent. Households that had not bought the brand at all in the first year supplied 14 per cent of its volume in the second.

Conference work by Jenni Romaniuk and a colleague in 2010 points the same way, with about half of a brand's heavy buyers still heavy in the following period. That paper was not published in a journal.

The mechanism is statistical. When people are selected for scoring high on something that includes luck, their next score tends to be closer to average. Purchase records are full of luck: a party one month, a holiday the next, a cupboard that happened to run out.

In effect

A loyalty programme that rewards this year's heaviest buyers will watch some of them buy less next year whatever it does, and can mistake that for failure. A programme can equally take credit for gains that were coming anyway.

The practical test is to follow the same customers across two periods rather than ranking them once. Who stays heavy, who drifts, and how much of next year's business comes from people who barely bought this year.

What it does not say

It does not say heavy buyers are unimportant. Some are genuinely heavy for years, and losing them to bad service is expensive.

It does not rest on a broad base in the book itself: one brand, one category, one country, two years. The direction is what regression to the mean predicts, which is reassuring, but the size of the effect will differ by category.

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