The Leaky Bucket for Categories
Following up last week’s analyses how many of its buyers brands must expect to lose from one year to the next we focus on categories and their leakiness this week
The average category loses 1 in 3 buyers
For the average category 1 out of 3 buyers in year t will not buy the category in year t+1. Not surprisingly, as with brands, the level of leakiness is closely related to the purchasing frequency of the category: In frequently purchased categories (more than ten occasions in a year) 1 in 7 buyers does not rebuy in the next year, whereas in infrequently purchased categories (less than five occasions in a year) just more than half of the buyers return.
Leakiness lower in high penetration categories
Just like higher frequency, higher category buyer numbers also reduce leakiness. In categories that more than 50% of households are buying in a year leakiness is less than 1 in 6 buyers. When less than 25% of households buy a category the category must expect to lose more than half of its buyers.
Frequency and penetration – two sides of the same coin
Imagine two categories (A and B) that 80% of the population buy at least once in their lifetime. If the average household buys category A once every two years its frequency will obviously be lower than for category B that the average household buys once every month. But A also boasts a much lower penetration level in a given time period (whether month, quarter or year) because the percentage of households buying it in that very period must be lower. The table illustrates this phenomenon. The correlation between category frequency and penetration (in a year) is 0.54.
