Penetration drives share – at different rates

Past contributions to this newsletter have shown that bigger brands have more buyers and growing brands grow by attracting more buyers. How much an additional percentage of penetration contributes to volume share differs depending on the category’s purchasing frequency. More purchases create more opportunity to switch.

For example, if a category was only bought once per year per household, penetration would equal share because by definition no one could buy more than one brand. Investigating the relationship for some 10,000 brands in FMCG across 16 countries reveals that the market share contribution of more buyers steadily drops as purchase occasions go up. For example, in categories with rare purchasing (less than 5 occasions per year), each additional penetration point adds .75% volume share. In categories with more than ten purchases per year, increasing the buyer base by 1% adds less than half in terms of volume share. Opportunity fosters promiscuity!