Essay

Market Share Explains Growth Better Than Loyalty

Decades of marketing science point to a counterintuitive truth about how brands actually grow.

Ask most marketers how brands grow, and they will talk about customer loyalty. Build deeper relationships with existing customers. Increase repeat purchase rates. Create brand advocates. The logic seems sound: keeping customers is cheaper than acquiring them, so invest in retention.

There is just one problem. This is not how brands actually grow.

Decades of marketing science research, conducted across hundreds of brands and dozens of categories, tells a different story. Brands grow primarily by acquiring new customers. Loyalty metrics are largely a function of market share, not a driver of it. The most successful brands do not have more loyal customers; they have more customers.

The Double Jeopardy Law

One of the most robust findings in marketing science is the Double Jeopardy law. It states that smaller brands face a double penalty: they have fewer buyers, and those buyers are slightly less loyal.

Conversely, larger brands enjoy a double benefit. They have more buyers, and those buyers are slightly more loyal.

The counterintuitive insight: the causation runs from market share to loyalty, not the other way around. Larger brands do not become large because they have more loyal customers. They have slightly more loyal customers because they are large.

This has profound implications for marketing strategy. You cannot loyalty your way to growth. You cannot close the gap with larger competitors by making your existing customers more loyal. The only path to growth is acquiring more customers, which will automatically bring slightly higher loyalty as a side effect.

The Research Base

This is not speculation or theory. Byron Sharp, Jenni Romaniuk, and researchers at the Ehrenberg-Bass Institute have documented these patterns through empirical study of actual buying behavior.

They studied brands across categories: packaged goods, services, B2B, retail, financial services. They studied brands across countries and decades. The patterns are remarkably consistent:

Brands grow primarily by increasing penetration, not loyalty
Loyalty metrics follow market share with mathematical regularity
Light buyers, not heavy buyers, drive brand growth
Most brand buyers are light buyers who purchase the brand occasionally
Loyalty programs rarely produce the growth they promise

These findings hold across categories, geographies, and time periods. They are among the most replicated results in marketing research.

Why This Is Counterintuitive

The loyalty-focused view is intuitive for several reasons:

Heavy buyers are visible. Your best customers are salient. They interact frequently. They provide feedback. Light buyers are invisible, occasional purchasers who barely register. It is easy to over-index on the people you see.

Acquisition costs are tangible. You can see and measure the cost of acquiring a customer. The opportunity cost of not acquiring customers you never had is invisible.

Loyalty feels controllable. You can design loyalty programs, create engagement initiatives, build community. Acquiring light buyers feels less actionable.

The narrative is compelling. Stories about beloved brands with passionate customers are emotionally satisfying. Stories about brands that are bought occasionally by many indifferent people are less inspiring.

What This Means for Strategy

If growth comes from penetration, the marketing task changes fundamentally:

Reach matters more than engagement. Instead of deep engagement with a narrow audience, you need broad reach to light buyers and non-buyers. Mental availability among people who buy you rarely or never is more valuable than deeper engagement with your best customers.

New customer acquisition is the priority. Marketing investment should flow toward acquiring new customers, not rewarding existing ones. The marginal return on acquisition typically exceeds the marginal return on loyalty enhancement.

Light buyers are your growth engine. The large pool of people who buy you occasionally, or who buy your competitors but could buy you, represents growth opportunity. Heavy buyers, by definition, cannot buy much more.

Category entry points matter. Category Entry Points are the situations that trigger category consideration. Being linked to more CEPs means being mentally available to more buyers in more situations. This is how penetration grows.

The Loyalty Trap

Loyalty is not worthless, but it is widely misunderstood.

Terrible service will erode your customer base. Basic competence matters. But there is a large gap between "not driving customers away" and "investing in loyalty enhancement."

The research suggests diminishing returns to loyalty investment quickly. Once you have achieved acceptable service levels, additional investment in loyalty programs, retention initiatives, and customer engagement produces little incremental growth.

Loyalty programs in particular tend to reward people who would have bought anyway. They subsidize purchases that were going to happen. Meanwhile, the budget that funded the loyalty program could have been spent reaching new buyers.

Implications for Local Businesses

Local service businesses often believe they are different. "Our customers are loyal because of our relationships." "We grow through referrals and repeat business." "Our community knows us."

The research does not support local business exceptionalism. The patterns hold across contexts. Local businesses grow when they acquire new customers, just like everyone else.

What changes for local businesses is the mechanism of acquisition. Demand capture through local search, Google Business Profile optimization, and targeted advertising becomes critical. The geographic constraint means growth comes from increasing share of local demand, not from loyalty among existing customers.

The Operator Perspective

From an operator standpoint, understanding this changes resource allocation:

Google as a demand engine becomes strategically central because it reaches people at the moment of need, including light buyers and new buyers who represent growth opportunity.

Distinctive brand assets become valuable because they help the brand be noticed and recognized by the large population of potential light buyers.

Follow-up infrastructure becomes critical because every new lead represents potential penetration growth. Losing leads to poor follow-up is losing growth.

The metrics that matter shift from engagement and loyalty metrics toward reach, penetration, and new customer acquisition.

What I Got Wrong

This is one of the areas where I had to update my thinking significantly. Coming from an operations background, customer retention seemed obviously important. The math on customer lifetime value is compelling.

But customer lifetime value calculations often assume loyalty is controllable, that investment in retention produces proportional returns. The research suggests this assumption is wrong. Loyalty is less malleable than we think, and more determined by market share than by our loyalty initiatives.

What I was wrong about in marketing includes several beliefs related to this. The evidence changed my mind.

Reading the Research

The best starting point is Byron Sharp's "How Brands Grow," which synthesizes decades of Ehrenberg-Bass research. The operator's view of marketing science requires reading the primary research, not just summaries.

The findings can feel discouraging because they limit what marketers can control. But there is freedom in accepting reality. When you stop trying to achieve the unachievable, more loyalty from existing customers, you can focus on the achievable: reaching more buyers in more situations.