This article is an excerpt from the Shortform book guide to "How Brands Grow" by Byron Sharp. Shortform has the world's best summaries and analyses of books you should be reading.
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What are bad marketing strategies? Why are people so inclined to use these strategies for their marketing campaigns?
There are plenty of marketing strategies to utilize for your business, but you should be wary of some of them. Bad marketing strategies can cost your company thousands of dollars, and you’re less likely to gain new customers from them.
Here are two bad marketing strategies to avoid if you want your business to be successful, according to Byron Sharp in his book How Brands Grow.
Bad Marketing Strategy Examples
Byron believes that marketing efforts that only target existing customers fail. Let’s examine the shortcomings of two of the most common marketing strategies aimed at existing customers: loyalty programs and promotional discounts. Sharp states that in most cases, marketers should steer clear of these techniques.
Why Loyalty Programs Fail
Sharp explains that in general, it’s wasteful to spend money marketing to existing buyers because they’re the most likely to make purchases without marketing intervention. We can see this principle at work by examining why loyalty programs fail to increase profits.
Loyalty programs attempt to incentivize existing customers to purchase from a brand more often by rewarding buyers with points or free products with every purchase. However, when comparing loyalty program members to non-members, the data shows that loyalty programs don’t influence members to buy any more frequently. Members are just getting value for the purchases they would have made anyway, without the loyalty program. Thus, the loyalty program is wasteful and unnecessary.
Why don’t loyalty programs influence people to buy more frequently? Sharp claims that for the most part, people only buy things when they need them—their purchase schedules are fixed. No marketing can influence existing customers to buy more than they want or need. On the other hand, when you market to new customers, you can increase your profits without futilely attempting to persuade anyone to buy more frequently. Instead, you simply wait until consumers need to make a purchase and influence them to choose your brand instead of your competitor’s.
What About Subscriptions?
The subscription business model has boomed in popularity in recent years, and at first glance, it appears to be a viable way for brands to increase their profits by targeting existing customers. Unlike loyalty programs (which Sharp argues have no impact on a customer’s purchase schedule), subscriptions that require a monthly fee by their very nature allow the company to set their customers’ purchase schedules.
However, subscription services may fall prey to the same downsides as loyalty programs, making them a bad marketing strategy. Like loyalty programs, all-you-can-eat-style subscriptions are more valuable to customers who would have made purchases anyway—with a subscription, a brand’s heaviest buyers often end up paying significantly less than they would have a la carte.
For example, Taco Bell’s subscriptions service is a bad marketing strategy: one free taco a day for $10 a month. Since Taco Bell sells individual tacos for around $2, this means that for the cost of five regularly-priced tacos, customers can get up to thirty via the subscription. In this case, subscribers who would have already eaten more than five tacos in a month are getting value for purchases they once happily made at a higher price, cutting into Taco Bell’s profits for no clear gain. Similarly, Amazon Prime Video subscribers who watch a lot of TV and movies may have been willing to pay for more expensive individual rentals or purchases of that same content.
It’s also possible that consumers who already planned on buying frequently are the majority of those who choose to enroll in subscription services, while consumers who know they wouldn’t use the subscription enough to save money choose not to participate. If this happens, brands suffer losses not only from subscribers who are getting extra value for no clear gain to the brand, but also from potential new customers who turn away because of the intimidating commitment of a subscription.
Why Promotional Discounts Fail
According to Sharp, many marketers believe that offering promotional discounts will influence existing customers to purchase more frequently. However, this bad marketing strategy also fails to generate meaningful profits. Sharp explains that promotional discounts are attractive to marketers because they successfully boost sales for the duration of the promotion. However, this strategy entails several drawbacks that often keep it from being profitable.
First, Sharp points out that promotional discounts result in decreased profit margins, which means you need to sell much more for the promotional discount to be profitable. Second, if a discount persuades a customer to buy something they wouldn’t have normally bought, it also makes them less likely to purchase again in the future—their need for this kind of purchase is fulfilled early, and they won’t need to buy the item again for a longer time. In this way, you’re earning present sales at the expense of your future sales. For example, if you give someone a car wash for 50% off, their car will still be clean tomorrow. This is considered a bad marketing strategy on the car wash’s part because it reduces the likelihood that they will come and buy another car wash soon.
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Like what you just read? Read the rest of the world's best book summary and analysis of Byron Sharp's "How Brands Grow" at Shortform .
Here's what you'll find in our full How Brands Grow summary :
- Why everything you know about marketing is wrong
- An unpacking of the unsubstantiated marketing myths that business schools teach
- The psychology behind consumers’ purchasing decisions
