Understanding how brands compete and grow is crucial in B2B marketing. The Duplication of Purchase Law, a concept established by the Ehrenberg-Bass Institute for Marketing Science, sheds light on customer buying patterns across brands. This post will explain the duplication of purchase law, its implications for B2B brands, particularly in Japan, and how businesses can leverage this understanding to enhance their marketing strategies and growth.
Table of Contents
Understanding the Duplication of Purchase Law
Explanation of the Law and Its Implications
The Duplication of Purchase Law reveals that brands share customers with other brands proportionate to their market share. This means larger brands will share more customers with other large brands and fewer with smaller ones. For B2B companies, this law indicates that growth comes from gaining customers from all other brands, with more customers coming from larger competitors and fewer from smaller ones.
Every B2B company shares more of its business customers with larger penetration B2B competitors and fewer with smaller penetration B2B competitors. No brand has a lock on its customer base, and all category buyers could become your customers. Growth will come from gaining more business customers from all other brands proportionate with competitor share: more customers will be won from bigger competitors, and fewer customers will come from smaller competitors.
If a company or brand shows higher sharing than Duplication of Purchase Law benchmarks, it can indicate closer competitors, which can be factored into competitive intelligence. On the other hand, it’s important not to get distracted by smaller look-alike competitors unless there is evidence of excess customer sharing to suggest a higher threat to your business revenue than its market share would otherwise indicate.
A key implication is that your likely future new customers are current customers of (other) bigger brands. Their mindset is to have more extensive thoughts and feelings about at least one other big competitor and a heightened propensity to notice at least one competitor’s marketing activities. Strong branding in all marketing activities is imperative to overcome this natural attention bias towards competitors.
Factors Driving Brand Switching
Several factors drive brand switching in B2B markets, including:
Competitor Share: Larger competitors have a higher chance of customer overlap.
Market Penetration: Brands with higher penetration share more customers with other high-penetration brands.
Customer Needs: Changing business needs can prompt customers to switch brands.
Marketing Activities: Effective marketing can draw customers away from competitors.
Understanding these factors can help B2B marketers devise strategies to encourage brand switching. For instance, focusing on broad market reach rather than niche targeting can attract a more diverse customer base, thereby increasing the chances of gaining customers from larger competitors.
Consumer Behavior and How B2B Brands Compete in Japan?
Analysis of Japanese Consumers' Switching Patterns
Japanese consumers exhibit unique brand-switching behaviours influenced by cultural and market-specific factors. Loyalty is highly valued, yet practical considerations such as cost and quality can prompt brand switching. In Japan, trust and long-term relationships play a significant role in consumer decisions, but even these can be overridden by compelling value propositions from competitors.
Japanese business culture places a strong emphasis on trust and long-term relationships. This cultural aspect can make brand switching less common compared to other markets. However, when Japanese businesses switch brands, it is often due to significant improvements in value or service offered by the new brand. This behaviour aligns with the Duplication of Purchase Law, which suggests that brands can attract customers from competitors by offering superior value propositions.
Cultural and Market-Specific Influences
Cultural Norms: Japanese business culture emphasizes long-term relationships and loyalty. However, pragmatic factors can still drive switching behaviour.
Market Structure: The Japanese market is characterized by several dominant players, making the Duplication of Purchase Law particularly relevant.
Brand Reputation: Japanese consumers value brand reputation and quality, which can influence switching patterns.
Strategies to Encourage Brand Switching
Marketing Tactics to Attract Switchers
To attract switchers, B2B brands in Japan should focus on the following:
Effective Branding: Strong branding helps create mental structures that increase brand recall and consideration.
Market-Wide Reach: Targeting the entire market rather than narrow segments can enhance visibility and attract more switchers.
Value Proposition: Clear and compelling value propositions can entice customers to switch from competitors.
Customer Engagement: Building relationships through consistent and meaningful engagement can foster brand loyalty and encourage switching.
Focusing on effective branding involves creating a consistent brand message that resonates with the target audience. This can be achieved through various marketing channels, including digital marketing, events, and public relations. A clear and compelling value proposition highlighting the brand's unique benefits can entice customers to switch from competitors.
Importance of Brand Awareness and Positioning
Brand awareness and positioning are critical in the Japanese market. Brands need to ensure their marketing activities are attributed correctly to their brand. Consistent messaging and a strong presence across various channels can help achieve this. Positioning the brand as a trustworthy, high-quality option can also influence switching decisions.
Brand awareness plays a vital role in the context of the Duplication of Purchase Law. Since customers of larger brands are more likely to switch to other large brands, ensuring that the brand is well-known and perceived positively in the market can attract these switchers. This involves traditional and digital marketing strategies like SEO and social media marketing.
Duplication of Purchase Case Studies
Examples of B2B Brands Managing Brand Switching Effectively
Business Insurance Sector (US Example Applied to Japan): Companies like State Farm and Allstate have effectively demonstrated the Duplication of Purchase Law principles in the US business insurance sector. These companies share more customers due to their high penetration rates. Applying this to Japan, large insurance companies such as Tokio Marine & Nichido and Sompo Japan Insurance can be expected to share more customers than smaller competitors. Their strategy focuses on broad market reach and strong brand presence.
Data collected by Ehrenberg-Bass Institute (2019) ※1
Statefarm: 25% penetration, shares 26% of customers with Allstate, 18% with Geico.
Allstate: 23% penetration, shares 27% of customers with Statefarm, 25% with Geico.
Geico: 17% penetration, shares 26% of customers with Statefarm, 34% with Allstate.
Aviation Fuel Contracts: In the B2B aviation fuel contracts category, Shell's dominance effectively illustrates the Duplication of Purchase Law. As the largest player, Shell shares more customers with big brands like BP and Total. In Japan, companies like Japan Airlines (JAL) and All Nippon Airways (ANA) may exhibit similar patterns, where they procure fuel from dominant suppliers such as JXTG Nippon Oil & Energy Corporation and Idemitsu Kosan Co., Ltd., demonstrating higher customer overlap among the largest brands.
Data from Uncles, Mark and Andrew Ehrenberg (1990) ※2
Shell: 73% of customers overlap with BP, 38% with Total.
BP: 44% of customers overlap with Shell, and 63% with Total.
Total: 28% of customers overlap with Shell, and 76% with BP.
Business Banking: The UK business banking sector's defection and acquisition patterns illustrate the Duplication of Purchase Law. Bigger banks like Barclays and HSBC gained more new customers from other big banks and lost fewer to smaller banks. In Japan, similar patterns can be observed with banks like Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMFG), which dominate the market and experience significant customer overlap.
Data from UK Business Banking (2019) ※3
Bigger banks: 62% of defectors went to other bigger banks, 20% to medium, 18% to smaller.
Medium banks: 56% of defectors went to bigger banks, 25% to medium, 19% to smaller.
Smaller banks: 70% of defectors went to bigger banks, 12% to medium, 18% to smaller.
Insights and Best Practices
Leverage Strong Branding: Consistent and strong branding helps create a lasting impression and attract switchers.
Focus on Quality and Value: Emphasizing quality and value in marketing messages can influence switching behaviour.
Engage Customers Meaningfully: Building strong relationships through meaningful engagement fosters loyalty and attracts new customers.
Additional Examples
To further illustrate the application of the Duplication of Purchase Law, here are some additional examples from different industries:
Technology Services In the technology services sector, companies like IBM and Fujitsu have successfully managed brand switching by leveraging their strong market presence and comprehensive service offerings. In Japan, these companies often share customers due to their extensive penetration and reputation for reliability.
Key Strategies:
Broad market reach through integrated marketing campaigns.
Strong emphasis on innovation and customer service.
Logistics and Supply Chain Management In logistics and supply chain management, companies like Nippon Express and Yamato Holdings dominate the Japanese market. These companies share many customers due to their extensive networks and high service standards.
Key Strategies:
Investing in advanced logistics technology to improve efficiency.
Building long-term relationships with customers through reliable service.
By focusing on effective branding, broad market reach, compelling value propositions, and meaningful customer engagement, brands can attract switchers and achieve growth. The examples from business insurance, aviation fuel contracts, business banking, technology services, and logistics highlight the importance of these strategies in managing brand switching effectively. By leveraging these insights, businesses can navigate the competitive landscape and drive sustainable growth in Japan.
※1, 2, 3 Data presented is from prior research conducted by the Ehrenberg-Bass Institute for Marketing Science.
FAQ Section
What is the Duplication of Purchase Law?
The Duplication of Purchase Law, established by the Ehrenberg-Bass Institute, reveals that brands share customers with other brands in proportion to their market share. Larger brands share more customers with other large brands, while smaller brands share fewer. This law is crucial for B2B marketers, as it suggests that growth comes from attracting customers from all competitors rather than focusing on niche segments.
What factors drive brand switching in B2B markets?
Several factors drive brand switching in B2B markets, including competitor share, market penetration, changing customer needs, and effective marketing activities. Larger competitors with higher market penetration share more customers, and businesses often switch brands due to changing needs or compelling marketing propositions from competitors.
How do Japanese consumers' switching patterns differ?
Japanese consumers exhibit unique switching patterns influenced by cultural norms and market-specific factors. While loyalty and long-term relationships are highly valued, practical considerations such as cost and quality can prompt switching. Significant improvements in value or service can lead to brand switching, even in a market that emphasises trust and reliability.
Why is brand awareness important for encouraging brand switching?
Brand awareness is critical for encouraging brand switching as it ensures that the brand is well-known and positively perceived in the market. Higher brand awareness increases the likelihood of attracting customers from larger competitors, aligning with the Duplication of Purchase Law. Effective branding, consistent messaging, and strong market presence are essential.
What strategies can B2B brands use to attract switchers in Japan?
To attract switchers, B2B brands in Japan should focus on effective branding, broad market reach, clear and compelling value propositions, and meaningful customer engagement. These strategies help create a strong brand presence, increase visibility, and entice customers to switch from competitors by highlighting unique benefits and building long-term relationships.
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