In a companion blog on LinkedIn, I reference evidence that big share brands generate 67% better advertising returns than small share brands, based on 1,400 campaigns evaluated via frequent shopper data.  I also noted this is predictable based on Movable Middle(TM) theory.

Let me connect the dots here.

In Movable Middle theory, the percentage of consumers who have a certain probability of buying a brand is completely predictable using a Beta probability distribution.  The parameters of this distribution, applied to marketing, are essentially market share and Markov repeat rate.

Focusing on market share, as a brand’s share increases, the Beta distribution’s shape starts to change.  The most important change to note is that, as brand share increases, the percentage of consumers in the Movable Middle segment increases and the percentage of low loyals decreases.

Let’s juxtapose these observations with the Movable Middle modeling relationships (now confirmed on 12 out of 12 experiments) that Movable Middles are hyper-responsive to advertising. As the percentage of consumers increases, the “weighted average” of campaign response increases as well.  For big share brands, the ROAS for the overall campaign gets closer to the ROAS of just the Movable Middles. Now, we also know from Movable Middle math that the multiplier (the ROAS of Movable Middles divided by Low Loyals) decreases as share goes up.  However, based on modeling and experiments, it seems that 2X is the floor. 

Consider this illustrative example for an 11% vs. 22% share brand (developed from the Movable Middle equations)

*% category buyers do not add to 100% because high loyals not shown.

Note that these shares for the illustration were chosen to align to the simulation in the LinkedIn blog. They also replicate very closely the experimental evidence across 1,400 campaigns from frequent shopper data.

How can a smaller share brand compete when the larger share brand has such an advertising ROI advantage and bigger ad budgets?  The smaller share brand has to find or construct audiences where it is, in fact, a larger share brand with a much larger Movable Middle.  Through lookalike modeling for example, our 11% share brand can construct an audience of IDs where it IS a 22% share brand!  By directing advertising to those audiences via pushing ID lists or programmatic bidding, the smaller share brand can punch above its weight.