Zipf’s Law - The Power of Number One Number Two Brands
In the 1930s, Harvard linguist George Kingsley Zipf found that “the” — the most-used English word — occurred about twice as often as “of” (second place), about three times as often as “and” (third) and so on.
All well and good, but how does Zipf’s Law apply to the discipline of branding? A recent study in Australia illustrates the power of branding in developing consumer preference and market share. From the New York Times:
Jan H. Hofmeyr, an expert on consumer behavior at Synovate…said he recently discovered that Zipf’s law also applied to the brand preferences of consumers and their spending habits.
“Marketers have always known it’s better to be No. 1 than No. 2, but now you can attach a revenue consequence to that,” Mr. Hofmeyr said.
Before being adopted by Synovate, Mr. Hofmeyr’s ideas were tested in Australia on two product categories: toilet paper and instant coffee. Consumers were asked to identify the brands they used and to rank them in order of preference.
According to his model, consumers who used four brands of toilet paper might have been expected to spend about 53 percent of their toilet paper budget on the top choice, 27 percent on the second brand, 13 percent on the third and 7 percent on the fourth.
In the Australian test case, consumers actually spent 50 percent on the top choice, 33 percent on the second, 9 percent on the third and 8 percent on the fourth. Averaged over hundreds of consumers, Mr. Hofmeyr said, the study showed an unusually high correlation between stated preferences and actual purchase decisions.
Zipf’s law…demonstrates the relative benefits of moving up in the rankings, Mr. Hofmeyr said. A product that leaps from second to first in a category can…affect a company’s bottom line, he said, while the advantage of moving up to, say, No. 5 from No. 6 is much smaller.
“With this approach, the moment you determine a brand’s ranking, you can predict the market share,” he said.
A real world understanding of Zipf’s Law is found in the Number One Number Two strategy initiated by Jack Welch early in his tenure as CEO of GE. If a GE business wasn’t first or second in its markets worldwide, or couldn’t be made so, it would be sold.
And how might any brand become number one or number two in its industry? By use of an own the conversation® strategy.
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Saturday, June 30th, 2007 - 4:36pm |
Ahead of Their Time + Brand Equity + Brand Management + Laws Of Branding |
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