← The Marketing Architects
The Marketing Architects
How Brands REALLY Grow with Dale Harrison
00:46:30
Marketing can't force people to buy what they don't need. According to Dale Harrison, 65-90% of market share within a category is determined by brand recall at purchase. This week, Elena and Rob are joined by Dale Harrison, former experimental...
Loading summary
Transcript52 lines
- [00:00]
Dale Harrison
This is the problem I think marketers have. Do you hold market share and try to grab your share of the underlying organic growth, or do you figure out how to actually grab market share?
- [00:11]
Alina Jasper
Marketing Architects hello and welcome to the Marketing Architects, a research first podcast dedicated to answering your toughest marketing questions. I'm Alina Jasper. I run the marketing team here at Marketing Architects. And I'm joined by my co host, Rob demars, the chief product architect of misfits and machines. And we're joined by a special guest, Dale Harrison. Dale started his career as an experimental physicist and biotech executive. But after being asked to build a digital marketing team inside a robotics startup, he ended up outpacing the actual marketing department with a homegrown e commerce platform and analytics engine to match. Since then, Dale's become one of marketing's sharpest thinkers, challenging popular narratives with deep research and mathematical clarity. He's an expert on the NBD Dirichlet model, a critic of misapplied marketing laws, and a strong advocate for efficient reach. Dale, thanks for joining us.
- [01:02]
Dale Harrison
I'm glad to be here.
- [01:03]
Rob Demars
Dale, I've heard that you were actually mistaken for the most interesting person in the world. So I'm really excited to dig into this. You started your career doing super conductivity research in robotic DNA synthesizing.
- [01:22]
Dale Harrison
That was sort of more mid career. So yeah, early career super connectivity work. So I started young and burned out young and started a company.
- [01:30]
Rob Demars
I was gonna say somehow you decided to take something on more challenging called marketing. And so we're super excited to hear more about that. But how in the world did your brain want to pivot there from DNA synthesizers to reaching frequency?
- [01:46]
Dale Harrison
I've always thought of marketing as hacking brains. Early in my misspent youth, when I was still in my teens, one of the things I was into, what was called phone freaking, which is essentially hacking into AT&T switching computers from payphones.
- [02:04]
Rob Demars
I remember this.
- [02:07]
Dale Harrison
And yeah. Where we would.
- [02:08]
Rob Demars
Using dial tones or something, right?
- [02:10]
Dale Harrison
Yeah, yeah. Those computers use what was called an acoustic command language. So instead of having, for people old enough to remember dos, where our unix where you have a command prompt, where you have a series of commands you would type in that you would control the computer with. With the switching computers, the command language was a series of tones. If you knew what the language was and you could produce the correct sequence of tones, you could walk up to a payphone, put a device up to the receiver, insert a series of tones and take control of the switching computer on the other end and use it like A sock puppet.
- [02:45]
Rob Demars
I love this.
- [02:47]
Dale Harrison
And from there, you know, I end up moving on into hacking mainframes and other things and obviously early misspent youth. What was interesting about that experience was that you don't hack into a computer by forcing it to do something that it's not otherwise going to do. The trick is to figure out what is it that it was already going to do, that you could somehow leverage our shift in some subtle way to where you get an advantage. And in marketing, it's very much the same way. And you see so many marketers who have this notion that they're somehow going to force people to pay attention or force people to buy or force people to buy more. We're going to go out and we're going to create some demand out of thin air. And it's so patently absurd. And the reality is that people are going to do what people are normally naturally going to do. If you don't understand what the default behavior is, you're never going to be able to get an advantage. And our job as marketers is to figure out how to make very subtle nudges that will move people to do what they're always going to do anyway, but in slightly different directions that have some commercial advantage for us. And so it's a very, very subtle field and a very subtle set of actions and responses that we're getting if we're doing marketing correctly.
- [04:06]
Rob Demars
That is such a good analogy.
- [04:08]
Alina Jasper
I feel like whenever someone is young and they're causing mischief in such a smart way, they're gonna turn out to be somebody really smart. Like you were hacking mainframes. That's not something that I was up to when I was in my youth.
- [04:21]
Dale Harrison
But it was anything to avoid boredom.
- [04:24]
Rob Demars
I mean, yeah, now, you know, not to go down the bunny hole, but now in this world of AI, it's that much more of, how do you take this platform and get what you need from it? By asking or requesting intelligent or maybe hack, like, questions. So, yeah, it's such a good analogy.
- [04:42]
Dale Harrison
We have very little power. We do not have the power to force things. We don't have the power to make people do things. We only have the power to sort of just gently tweak the environment, you know, because in the perfect world, those customers are not thinking that you made them do something. They're thinking that they're doing the next most obvious thing for them to do. And you have sort of created the shifts and the nudges in the overall environment so that their version of the most obvious next thing to do is the thing that you want them to do. But you're not going to be able to force them. You're only going to be able to kind of nudge them, you know, so it's a very subtle force when it's effective and when you ignore that and you're going to go in and do the pile driver on your customers and force them to do things, pin them to the mat, the net result is you tend to get very poor results.
- [05:34]
Alina Jasper
Super excited to talk about that with you here today, Dale. Whenever someone with a scientific background enters marketing, we should be very grateful and also very nervous because you're about to debunk some of the more just subjective opinions and beliefs in marketing. And I think I chose a good article to open us up with today. I found an article from your LinkedIn. It's titled How Marketing Creates Revenue. And in that article you walk through the economics of a simple B2B startup, starting with nothing but a sales team. Then we layer in marketing, you know, performance and brand, and the model evolves. And you quantify marketing's role as not a direct revenue driver, but as a non linear multiplier of otherwise linear business functions like sales. So you show that sales alone might deliver a 4 to 1 return. Performance marketing adds lift and brand marketing becomes that accelerator. And then by the end of the article, you're looking at a larger return on marketing spend. Not because, as you said, marketing captured Demand or generated MQLs, but because it made the sales team radically more efficient and effective. And that leads into what we'll talk about today, which is your critique of the idea that brands grow in the way people often claim and why reach, not intent, is a dominant variable. Why a lot of marketing strategy is built on misinterpreted laws and broken math from the start. So that article of yours is just one example of the kind of thinking that you bring to marketing. You've got the science background that's unique in the marketing world. Do you think having that background does it help you think more clearly about how marketing actually works? Especially when our industry is driven by.
- [07:04]
Dale Harrison
Fads and trends indirectly, Having that sort of rigorous formal training at a young age gives you a different way of looking at the world. You if you're in the hard sciences, one of the things that's very important is when you say a word, what is the definition of that word? What is the definition of that label? Because what happens is that if everybody has their own definition, then nobody can communicate. Everybody can just go off and do whatever they want to do, and nothing's going to work very well. For instance, if you're an engineer and you decide you'd like to have your own personal definition of what momentum is or what force is, you don't like the definition everyone else uses because you have a different feeling about what force means. You probably are going to design bridges that fall down and planes that fall out of the sky. It is this sort of precision of how we think about language and words and how we tie that operationally to the things that we do and build that make a difference. And that's the thing I see in marketing, is that there is. There's no sort of formal discipline around thinking through what the words mean. And because at the end of the day, if we have a phrase or a word that ultimately has to be translated into some sort of discrete operational task, at some point, you know, we've got to do something real in the world. And a good example of this is the phrase that has bedeviled B2B marketing for a long time. Demand creation. We're going to go out and create some demand. And if you dig into the history of this, as a matter of fact, I dug back to the guy who invented the word, and I ended up being on a podcast where they brought him in and me in, and we had this discussion, and he literally invented the word because he thought that saying brand awareness was too mushy in the digital era. And he didn't want to have to explain to CFOs why they weren't measuring brand awareness. And so he decided to invent a new word. And for him, there was essentially no difference. It was just a way to essentially lie to the CFO about what? How they were spending their money. Oh, we're not doing that brand stuff. We're creating demand. But what happens is that within a few years, you end up having a whole generation of marketers who are not in on the joke, who hear those words and imagine that they're supposed to somehow go out and magically create demand. And what's interesting is when you start pinning them down, well, what do you mean by this? How are you going. Are you going to force someone to buy something they don't need? Oh, no, no, no. We just mean that we want them to buy our stuff. We're creating demand for our stuff. At which point you say, at what point in the history of marketing was marketing about anything other than than getting more people to buy our stuff than the other guy's stuff? That's the definition of marketing. So this isn't demand creation. This is just marketing. And so what are you doing to create the demand? Well, we're making people aware of the brand and what we can do. I said, but let me think. You need a word for having a brand and making people aware of it. For about 120 years, that was called brand awareness. Why do we need a new word that has nothing to do with what we're actually doing? So you get into this loop of what the words mean and how. Because what happens is when we start attaching our own personal, private definitions to these words, or we let the words themselves tell us what we should be doing, it ends up distorting the things that we think we're supposed to be doing in the real world. And this is why, you know, I think we need really strong, well defined operational definitions. And you see this with a lot of marketing, where there's this tendency to create flowery language that takes you away from any direct sense of what are these step by step operational things you need to be doing to make this thing occur.
- [11:08]
Alina Jasper
It might seem harmless at first, but like you're saying, if you start with the wrong definition, it's going to translate to everything else you're doing. We had talked to Liam Moroney on the podcast last week, and he was talking about demand creation and how he talks to some B2B marketers that, like you said, they won't even say brand at a board level because they just don't like what comes along with the term, which seems like a challenge.
- [11:33]
Rob Demars
It seems like sometimes there's just even a lack of definition. I still can't, in many times, I can't stand the word strategy because it's a fat word.
- [11:41]
Dale Harrison
What do you mean?
- [11:42]
Rob Demars
You know, what exactly do you mean when you're saying strategy right now? So, yeah, language is. That's such a great point.
- [11:49]
Dale Harrison
So there's a thing, this is a very old concept, goes back more than a century called the sapier Wharf hypothesis comes out of linguistics. And it's this notion that the words that we use alter the way that we cognitively structure the world and cognitively structure our activities. So words are not neutral. You can't just invent a new word without that word feeding back and altering not only what you see in the world and what's invisible to you in the world, but also what you think you're supposed to be doing to accomplish certain goals. And so the Sapien wharf hypothesis is a very interesting thing that people should read because you see A lot of this effect inside marketing, where again, the thing with demand creation, demand gen, the people in the beginning were in on the joke. They knew that it was a lie, essentially. They knew that they were twisting the words to be able to slip something by people who weren't going to dig too deep into what it meant, and they could then go off and do what they were going to do anyway. But a generation later, you end up with this whole generation of people who aren't in on the joke, and they actually are trying to figure out what they're supposed to do by interpreting their understanding of the meaning of these words.
- [13:07]
Alina Jasper
Dale, one thing that we talked about and that you post a lot about is the NBD Dirichlet model. And I want to talk about that because we're saying how people have their own definition in marketing. Marketing can become very opinion based, just based on your own sort of gut feelings. We start to have different definitions for things, but there is, as you've said, sort of a law of physics and marketing. So there are marketing truths that brands can ground themselves in. And I believe you think this is one of the most important ones. Could you walk us through what that model is?
- [13:38]
Dale Harrison
So the model goes back a long ways. The first pieces of this was put together in the late 1950s based on almost a decade worth of analyzing consumer purchase data. So this was Andrew Ehrenberg, who was a statistician, was not a marketer, he was a statistician who originally did work in economics, you know, and over his career in the 50s, shifted increasingly to marketing big because he had access to and was analyzing basically retail consumer purchase data. And he was finding statistical patterns in the data, sort of the final version of the model was a paper that he and Goodhart wrote in 1984 that sort of pulled all the pieces together. And it really pulled together 25 years worth of work around refining and proving this model. So one of the things about the model is that it has a very, very simple set of assumptions that I think most marketers would have difficulty objecting to. And the idea is that once you start with these assumptions, there are direct mathematical consequences for how markets have to function. That these assumptions structure and limit the range of things that can happen in buying situations. And the assumptions are very. So there's sort of two areas of the model, the nbd. So both of these take their names from obscure statistical distributions. So MBD stands for negative binomial distribution. And it sort of has famously been referred to as the banana curve because it's this sort of very steep long tail curve that looks like the shape of a banana. And so the NBD curve talks about purchase frequency. The Dirichlet, which is a different distribution, talks about brand choice. And so if we understand the rate at which people are buying things and then how they're choosing brand A over brand B, we now have a fairly complete picture of, you know, at a kind of a macro level of how things are going to fly off the shelf. And again, this is about buying behaviors that are not tied to buying a jug of milk or a box of laundry detergent. It applies equally well to a Corporation buying a CRN system. This is why it's, it's universal across B2C and B2B. There are a lot of very poorly informed arguments against this. One of the arguments goes back to the How Brands Grow book from Byron Sharp, where basically all the data he has in the book is pretty much all FMCG data. So basically consumer retail, supermarket product kind of goods. That does not mean that this only works for FMCG goods is what that means is the sort of data that academic researchers have access to is very limited. And the largest pool of that data is from very large brands selling consumer goods. And so this is sort of a selection bias problem that all academics face, which is it's difficult to get really large quantities of good data and most of that is coming from a relatively small number of sources. It's very hard to get data from, say, fast growing, early stage B2B startups. That data, for the most part just doesn't exist. So you work with what you've got. But there's been enough work to show that these are fairly broad principles. And so going back to the model, if you look at the underlying assumptions, the first assumption is that individual consumers have a relatively stable buying frequency. The analogy I give is if you're a single guy living by yourself, you may buy one box of laundry detergent a month, because that's all you need. If you're a family of seven, you're probably buying two boxes a week. And in both cases, you know, that single person isn't going to suddenly go to buying 10 boxes a month from one. And that family of seven isn't going to suddenly go from buying eight boxes a month, you know, to buying one box a month. So these patterns are extremely stable over long periods of time. And we have decades of data that show this across huge numbers of product categories. So the first thing is an individual buyer has a relatively stable purchase frequency for a given category of product and that different buyers have different purchase frequencies. So again, it's very hard to argue against that, that if you start with those two assumptions, then the entire NBD side of the model falls out of the math. On the Dirichlet side, the Dirichlet side is about brand preference. And what it says is that buyers have a relatively stable set of brand preferences that they choose from. And the way to think about this is that each buyer has like a little histogram in their head where 60% of the time I'm going to buy Tide, 20% of the time I'm going To buy Gain, and 20% of the time I'll buy Arm and Hammer. So there is some sort of a definite set of brand preferences that are inside their head, and they're going to buy based on the percent probability of, of having a preference for one brand over another. And so each person has this little histogram in their head of brand preferences, but their histogram doesn't necessarily look like anyone else's. So everyone has their own unique one. And that's essentially the core assumptions of the Dirichlet side. And then there's one final assumption that connects the two, which is called the zero choice rule. This is a little bit more complicated, but what the zero choice rule says is that there is not a fundamental difference in brand preference for people who buy frequently versus people who buy infrequently. So purchase frequency is uncorrelated to brand choice. And again, we've got decades of data that show this for at least for certain categories of goods. This is much more true on the B2C side. There are some major exceptions on the B2B side, but this idea that how frequently I buy doesn't influence my preferences for different brands, that these are sort of two completely independent tracks. One of the other things that's interesting that falls out of this, and this also comes out of the zero choice rule, which is that when you go to make a purchase, you're choosing a brand from that little histogram of preferences as if you rolled ice, as if you made the choice by random, which is a very hard thing for marketers to wrap their heads around. This does not mean that you're rolling dice in your head to decide you're going to buy Tide this week instead of Arm and Hammer. What it means is that the number of factors that make up that product selection, that brand selection at the next purchase occasion, is probably hundreds or even thousands of very complex parameters that you're maybe subconsciously juggling in your head to make that choice. And it's so complex that as an outside observer, it appears as though you made a randomized choice. And one of the interesting things in this is that there is this long standing belief that goes back decades in marketing that the brand you choose on the next purchase occasion is correlated to what you chose on the last purchase occasion. I bought Tide last time, therefore I'm more likely to buy Tide this time. And it turns out that's absolutely not true. There's a model that was developed in the late 60s called the Hendry model that specifically bakes that assumption in. And we now have 50 years worth of data that shows this is absolutely not what happens when people buy that. They have this fixed set of brand preferences and they're essentially choosing as if by random on each purchase occasion with no, no correlation to what they chose last time or what they might choose next time. So there's a lot of very counterintuitive things that fall out of the model. The other thing is this notion of loyalty that people believe that. It's one of the weirdest beliefs I have ever encountered and is so common in marketing, this idea, this sort of implicit idea that I have a lot of customers that buy only my brand. And there's the phrase that people are polyamorously loyal to a repertoire of brands, not to a single brand. And this again comes directly out of the Dirichlet side of the model that we have some finite set of preferences for. It may be a very low preference for certain brands, but we've got some finite set of probability of choosing brand A versus B versus C on the next purchase occasion. That probability of preferences is relatively fixed over time. It can be shifted. But you're choosing from a repertoire of brands. There's no such thing as loyalty. Now, you may have a high preference for a particular brand. You may buy Tide 90% of the time, but it's not like you're going to walk out of the store with no detergent and quit washing your clothes. If they're sold out of Tide, you'll just happily pick the one next to it. But if you go back to what marketing can accomplish, this tells you a lot. One, it says you're not likely to get people to buy more stuff. So you're not going to increase the purchase frequency. You're not going to get me to Suddenly start buying 10 boxes of detergent a month. Am I going to wash all my shirts 10 times between wearing so I can use up all this extra detergent? That you convinced me to buy. No.
- [22:46]
Rob Demars
Unless you can come up with an alternative use for a Tide Pod. But that's a whole other issue.
- [22:50]
Alina Jasper
Yes, that was a lawsuit, I think, actually.
- [22:54]
Dale Harrison
But you actually do see this. But it's very, very difficult to do. The great example of this is Arm and Hammer Baking Soda. In the late 1960s, baking soda was a rapidly declining product that was used exclusively as a baking aid. And people were doing less and less baking. And so this product was in terminal decline. And so the company decided to reposition the product as a household deodorizing agent. And it took them 25 years and several hundred million dollars in print and TV to pull this off. But they pulled it off. They started this in the early 70s. By the mid-1990s, they had a dominant market position as a household deodorizing agent. You can reposition the product into a new usage where that new usage is going to have a much higher purchase frequency than the old usage and much broader brand preference than the older usage. That sort of shifting to a new category to increase purchase frequency is extraordinarily expensive. It takes often decades, and it takes enormous amounts of cash to be able to make that jump. But it can be done. But for the most part, what marketers have the ability to do is to shift that little histogram of brand preferences in people's heads to make me slightly more likely to buy gain detergent instead of Tide the next time I go to the store. This is this idea of reach, like reach primacy, this idea that 65 to 90% of market share is determined by did the person recall the brand at the moment of purchase? So was that brand in their head? It's not 100%. There's still another 10 to 30 or 40% of that that's related to product features, to recommendations, lots of other things that we have to think about as marketers. But the bulk of it is, did your name come into their head at the moment that you know that they were ready to make a purchase? Which is a bit different than brand awareness generally, because brand awareness is lots and lots of people who may know your brand today but will have forgotten it by the time they come in market to buy. So what you really. And this goes back to operational definitions. So this is what I call brand recall at purchase. If you can engineer things so that more people have brand recall at purchase, going to have a slightly higher little bar on that histogram of brand preferences inside that buyer's head. And the way you're going to do that is by having more reach, by having got in front of more people.
- [25:25]
Rob Demars
So what's a marketer to do if all these playbooks are challenged or broken or flawed in some way? But I need to move the needle. What should a CMO focus on?
- [25:33]
Dale Harrison
You may not move the needle. Ooh. There's no God given law that says you're going to move the needle. So there's two things that's interesting to look at. There's a difference between growing revenue and taking market share. And I'll give you a very specific personal example. So when I jumped into biotech in the late 90s, I jumped into, this was a VC backed company, very early stage. When I came in, we were like half a million in sales and had about two dozen employees. Five and a half years later we were 55 million in sales, 500 employees, eight facilities around the world. It was just this massive rocket ship ride of growth. So we grew a hundredfold just in that five and a half years when that market first started to take off and when it flatlined. But what happened was there came a point to where demand for the product flatlined and we were growing demand because we were producing the product cheaper and cheaper at larger and larger quantities. The product was synthetic DNA, so it was a very specialized product in biotech. Every year we were upgrading and changing the automation platforms for the synthesizers and the sample processing so that we can make the product at half the cost in 10 times the volume year after year, because we were in this kind of technological arms race. So this company grew a hundredfold. But at the end of this process, the whole industry hit a wall where there was basically some physics limits to where we couldn't continue to make the product cheaper in larger quantities. And so everybody hit this plateau and the market froze in place in terms of revenue. When it froze in place at revenue, the relative market share was identical at the end of that period as it was 10 years earlier. But we had exactly the same market share at the end of that that we had at the beginning. And so did all of our competitors. And so this is an important lesson that most these apocryphal stories you hear about hyper growth has little to do with the marketers and the marketing or the sales or even the product. And it has to do with rapid organic growth of the underlying product category. And the reason that this is usually tech companies that you're looking at and not some amazing new laundry detergent is that technology has the ability to allow you to radically reduce the cost of something that people were otherwise already doing. And a good example of this is if we go back to the introduction of the ipod back in 2001. So portable music players had been around since 1975 with the launch of the Sony Walkman with cassettes. By 2000, the market was still dominated by Sony. So Sony took dominant market share and held it for 25 years and largely by continuing to upgrade the technology. So the dominant music player in 2000 was the Sony Discman that played CDs. So creative with the Rio was the dominant player. And then Apple comes in with the ipod and within four years Apple has 90% market share. They put everyone out of business. But the difference was what Apple did was they introduced a thing that people wanted at a minuscule fraction of the cost. The Sony Walkman was 250 bucks. The original iPod was 400. So you would think that's a lot more expensive. Nobody's going to buy something that's that more expensive. And that was what the people at companies like Creative that had the Rio, which was the early MP3 player that everybody was downloading their Napster music onto. So Rio was $175. And their idea was we have to make it cheaper than Sony because Sony's the big player. So to make it cheaper, they skimped on the amount of RAM in the device. They put just enough ram to hold 10 songs. And their thinking was the Sony Discman only holds 10 songs. So we're going to do a feature match, but we're going to do it in such a way that we're cheaper than them and that's going to be our advantage. We're going to sell cheap. So people are imagining that people were buying some basket of electronics and some, some amount of memory. But in fact what Apple understood was that people were not buying X number of megabytes of ram, they were buying X number of songs in their pocket for only a little bit more. I have a thousand songs in my pocket and if I price these products out as the price per song in my pocket, it turns out that the iPod is 70 fold cheaper than the Discman and it's 50 fold cheaper than the Rio. And what they understood was that people are buying a song in your pocket, they're not buying a collection of electronic components.
- [30:24]
Rob Demars
And it only worked on a Mac in the beginning.
- [30:26]
Dale Harrison
Yeah, but, oh actually there were ways to do it even on a PC from day one there were third party tools.
- [30:33]
Alina Jasper
Dale was hacking the mainframe and figuring.
- [30:35]
Dale Harrison
Out he was hacking how to do that.
- [30:36]
Rob Demars
No, I remember at the time too, like the Nomad was out and that did have a lot of storage. But they promoted gigs and like, who.
- [30:44]
Dale Harrison
Knew what a gig was? It's not what people are buying. But going back to what do you do to grow, I think it's very hard. I think almost every single company that anyone can point to that has undergone any measurable amount of growth. It is not because they have brilliant marketers. It's because the underlying category was growing at a fixed rate. And all the marketers had to do was just barely enough stuff to continue to take their share of the overall market, which is a much, much easier task, obviously. And a couple of examples the. When electric washing machines were introduced in the late 30s, one of the things that was very clear was that the old soaps that were used, which were basically bar soaps that were flaked, that were used for hand washing because everybody was washing, you know, with a scrub board and a ringer. Before the electric washing machines came, those soaps did not work. And if you ever put like laundry, like dish soap in your washing machine, you will get this massive avalanche of foam coming out of it because so you need a different sort of soap. And so there's a thing called synthetic detergent that Procter and Gamble invented. They invented it in 1938. We're ready to launch it. Then World War II came and, and which collapsed the cell of washing machines because all the steel was going to build tanks. And so they held onto the product and they launched it in 46 after the war. By 47 they were the number one brand of what was called synthetic detergent. And, and largely because it was P and G and, and P and G had an utterly massive amount of available cash to pour into promoting Tide as the. Is the appropriate detergent to use for electric washing machines. Fast forward to today. 80/80 years later, Tide is still the number one product with 40% market share in the US and what in category after category is, is that the first mover tends to take dominant market share. They take that market share by basically draining adjacent categories. So in this case there were these older flaked soap products that were. That people rapidly could figure out was a disaster to use in the machine. And so Tide was able to leverage that and basically take all that market share for themselves and then they held it. And what is first mover advantage holds the market share. And the only way they get bumped off is that they basically fall off that they are more precisely they fling themselves off the cliff. That they usually have to make some fatal mistake to be able to lose that market share. And then that opens the door for others to come up behind them. Another example is the number one supplier of commercial aircraft in the US is Boeing. They were the number one supplier in 1929, and they're still, a century later, they're still the number one supplier of commercial aircraft. And so across thousands and thousands of product categories is relative market share never moves. And in the cases where it does move, it tends to take years or decades to see any sort of substantial movement. So if you go back to how do we grow? There's two ways to grow. You either take market share from a larger competitor, or you get lucky enough to put your boat on a rising lake and you simply do the minimum to grab your share of the organic growth of the underlying category. That's the only two mechanisms to grow. And both of these are tough because either you have to pick the right product and so that you're in a category that has rapid sustained organic growth, or you have to be there first. And again, you're essentially just grabbing existing share from someone else in an adjacent category. Or the third one is you've got to have utterly massive amounts of external capital poured into the brand in order to buy reach to get your share. And so again, the only two categories where you see substantial market share gains are VC backed companies. And often these are companies that there's rapid organic growth. But you can also see new entrants take a lot of market share because they've got $500 million in investment like Gong or something that you've got enormous amounts of outside capital to be able to buy market share. The other example are companies like P and G, General Mills, these really massive house of brands, consumer product companies, where they have hundreds of other brands that are highly profitable. So they're sitting on this enormous pile of cash and then they can choose to essentially act like internal VCs to allocate some portion of this cash flow to a new brand being launched. This is the problem I think marketers have. Do you hold market share and try to grab your share of the underlying organic growth, or do you figure out how to actually grab market share from a larger competitor? And even if you have a massive amount of cash, you still often have to have the category leader stumble.
- [36:12]
Alina Jasper
So, Dale, we've talked about the law of physics behind marketing. Those are a lot of really great examples of how it plays out in the real world and just how hard it is for marketers to actually drive Growth. I believe that's why you take a little bit of an issue with the name, how brands grow, because it's like they're describing the law of physics, but actually taking it to if you do this, then you'll grow. That's not always how it plays out in the real world, because like you're saying, it's extremely difficult to grow market share. One question I do have for you that I really wanted to ask is I love reach primacy. And how you talk about that is like a practical takeaway for marketers who are interested in these principles, like they want to grow their brands. I know we're all in a really difficult situation. One thing I've wondered is we're a television agency. All we buy is tv, big screen, Linear and CTV for our clients. And our business has been built off of this belief that everything works at zero. And that principle has been tough sometimes for us because most marketers don't buy into that. But we've found that the best way for brands to perform well on TV is to reach as many customers as they possibly can at the lowest CPM possible. And I believe that's how we've helped some of our customers actually punch above their weight because they're acquiring the same media that these giant competitors are acquiring for a fraction of the cost. So could that be one way to compete in your category? If you're a brand and you're trying to grab market share, do you have to be very focused on reach? And how do I see CPM as the most important metric? How do I reach the same people and more people for less than my competitors? Do you think that's a practical takeaway that marketers could have to this huge challenge?
- [37:52]
Dale Harrison
I think there's a couple of things in there. One that you see in B2B, especially B2B digital marketers, they have these weird obsessions over efficiency without really understanding whether or not that efficiency makes a difference. And so there's this sort of almost fetishizing this idea that we don't want to pay our ads to be seen by anybody who's not a customer, not a buyer. So this drives the performance marketing, this drives the hyper targeting, this drives the personalization that we don't want to have any wastage of dollars. And what you end up doing is the ad platforms aren't stupid. They know they have a mark that they can completely roll in the back alley and take their money. And so what you see is the more targeting you want, you're asking for the more you're going to pay for it. So instead of focusing on what is it costing me, how many eyeballs I'm reaching with my dollars, they focus on how many eyeballs I'm reaching who are not going to be buyers and trying to minimize that number. And the point is, doesn't matter. And one of the examples I give is that if you could reach 2 billion people tomorrow, but in that 2 billion is 100% of your buyers, would you do it? Most people say, well, no, because it's 99% wastage. Almost everyone seen my ad will never buy. I said, if you could reach 2 billion people and it only cost you a thousand dollars, would you do was like, yeah, you do it. Because what matters isn't how many people you're reaching. What matters is what does it cost you per person to reach a future buyer. And so even, you know, if you have a very, very cheap media in terms of CPM cost, like CCTV or linear TV, as long as your buyers are somehow buried in that giant pool and the total cost you spend divided into the fraction of those people who are future buyers is a reasonable number. So it's what I call effective CPM as opposed to total CPM. Your total CPM might be $4, your effective CPM might be 10, but if you go to some hyper targeted channel, it might be 50. And so the deal is, what does it cost you per future buyer to reach them or per thousand future buyers to reach them? And it doesn't matter how many extra people saw that ad that are never going to buy from you. And I think this is a deep fundamental fallacy that a lot of marketers, especially in B2B have. I think people in B2C suffer from that problem as much, partly because their products are often much broader. If you're Coke, roughly 50% of the US population drinks a Coke once a day. 90% of the population drinks a Coke at least once a year. It's sort of like throwing a rock into a mosh pit. It's impossible not to hit someone and they're all buyers. And so, you know, if you're a B2C brand, that's a much less concerning problem. But if you're a B2B brand, you have narrow markets. And so again, you get this sort of obsession about going back to the Rio vs. Discman vs. IPod. The manufacturers were obsessed about how many gigabytes of Ram you know, were delivering. The buyers were concerned about completely different efficiency metric, which was how many songs in my pocket. And I think marketers have to make that shift. Doesn't matter how many people see your ad that are never going to buy. What matters is what's the effect of CPM for the people who are going to buy. And because again, this goes by this idea of reach primacy, nobody is going to buy your product who doesn't know you exist. And the only way to get people to know you exist is to buy reach and to keep buying reach, because even when you reach them, they will immediately start forgetting you. And one of the things that we see, and there's very interesting research data that goes back into the mid-1960s and carries forward all the way to the present, there is a very strong correlation between share of voice and share of market that is almost a perfect linear correlation between the two. Which means the more people you can reach, the more share of market you're going to have. And what is share of market? Share of market is how many people are buying your product. And again, this especially goes back to the MBD Dirichlet model, which says you're not going to convince people to start buying 10 boxes of Tide detergent every month when they were only buying one. They're going to keep buying at the same pace. What you need is to get them to switch brands. And the only way to get them to switch brands is to keep reminding them that you're an option. And this is the problem with reach is that if someone is outspending you 10 to 1, 20 to 1, it doesn't matter how crappy their ads are, they're still going to crush you. And there's just a limit to how much gain you can achieve if you're a small player, a small market share player, by making your ads more efficient versus finding ways to reach more people. And this goes back to the CPM thing, is that what I think a lot of companies, especially in digital, are doing is they're wasting a lot of their budget because they're going to very, very expensive, high CPM cost channels because the channels are promising high targeting, often of which is a false promise. And so what they're doing is they're wasting a lot of money reaching far fewer eyeballs than their budget should allow them to reach. The goal is to get up to the maximum number of eyeballs your budget will allow you to reach. But you're not going to get beyond that unless you start to get outside capital. So it's about reaching your maximum level of efficiency, which still means you're going to be crushed by that company that's spending Ten times as much.
- [43:28]
Alina Jasper
Dale, I actually might get some of your quotes, like crocheted on a pillow or something, because they're so. It's just like music to my ears. And I'm going to clip this and I'm going to share it with marketers because I do not think that this is something that's widely known or followed. But it really helps how you set things up and you have all the data and all the principles. You're like the final boss of marketing effectiveness. And someday I will understand everything that you're talking about, but we're going to have to have you on again.
- [43:55]
Dale Harrison
I'm happy to come back.
- [43:56]
Alina Jasper
Uh, Dale, where can people follow you? I encourage everybody to go follow Dale on LinkedIn, because your LinkedIn content, I think, is some of the best in the industry. But is there anything else you want to plug? Anything you want to talk about before we close out?
- [44:07]
Dale Harrison
No, the main thing is to follow me on LinkedIn. You know, I've got other things in the works. I'm actually close to launching podcasts that Liam Maroney and I are going to co host about marketing effectiveness. And so, you know, we should have that out the door in the next month. I've got a few other things that are coming. Very interesting project around a new quarterly journal that's going to focus on marketing effectiveness and have a focus on translating basically these ideas, these more complicated ideas coming out of academic research into the language of practitioners. And I think this is what's really is missing, is there's interesting stuff in academia, but a lot of that is very poorly translated into practice and very poorly disseminated. And a lot of this is that you have to be able to translate this stuff in the language that practitioners can understand, which means that you've got to have a foot in both worlds. You got to be able to understand sort of the math and the complexity of some of these models and some of these ideas. I've spent 20 years now in marketing. Kind of boots in the mud, in the trenches, doing it by hand. You have to understand both of those to be able to make that translation. And I think there are relatively few people that have that ability to bridge that gap.
- [45:19]
Alina Jasper
Agreed. You and Liam are very talented at it. So excited that you're banding together.
- [45:24]
Rob Demars
And your first guest is going to be Simon. Talking about the Golden Circle.
- [45:32]
Dale Harrison
Yeah, it's all about brand purpose, man.
- [45:34]
Alina Jasper
In conclusion.
- [45:37]
Dale Harrison
I really care about what my brand of toilet paper thinks about oral hunger. I mean, why choose it?
- [45:44]
Alina Jasper
Oh, my gosh. Fun. Dale. Well, everybody should look out for that podcast. I will be one of your first listeners for sure, and excited about what you're doing. And we're trying to do the same. Just like getting this stuff out there and distilling it in a way people can understand. But it's been so fun having you today, so thanks for joining us.
- [45:59]
Dale Harrison
Oh, this has been a fun conversation. Yeah. And this is a great podcast. I would encourage everybody to listen to it. It is always on the top of my playlist every week when the next episode comes out.
- [46:07]
Alina Jasper
Gosh, that's a huge compliment. So thank you. That's it for this episode of the Marketing Architects. We'd like to thank Taylor De Los Reyes for producing the show. You can connect with us on LinkedIn. And if you like the podcast, please leave us a review. Now go forth and build great marketing. Marketing Architects.