What do consumers have in common with earthquakes? Both, researchers say, broadly conform to patterns described by a formula known as Zipf’s law.
In the 1930s, the Harvard linguist George Kingsley Zipf found that “the” — the most-used English word — occurred about twice as often as “of” (second place), about three times as often as “and” (third) and so on.
Since then, scientists have found similar relationships between the size and frequency of earthquakes and in a variety of other natural and artificial phenomena.
Jan H. Hofmeyr, an expert on consumer behavior at Synovate, the market research arm of Aegis, said he recently discovered that Zipf’s law also applied to the brand preferences of consumers and their spending habits.
“Marketers have always known it’s better to be No. 1 than No. 2, but now you can attach a revenue consequence to that,” Mr. Hofmeyr said.Continue reading the main story
Before being adopted by Synovate, Mr. Hofmeyr’s ideas were tested in Australia on two product categories: toilet paper and instant coffee. Consumers were asked to identify the brands they used and to rank them in order of preference.
According to his model, consumers who used four brands of toilet paper might have been expected to spend about 53 percent of their toilet paper budget on the top choice, 27 percent on the second brand, 13 percent on the third and 7 percent on the fourth.
In the Australian test case, consumers actually spent 50 percent on the top choice, 33 percent on the second, 9 percent on the third and 8 percent on the fourth. Averaged over hundreds of consumers, Mr. Hofmeyr said, the study showed an unusually high correlation between stated preferences and actual purchase decisions.
Zipf’s law clearly demonstrates the relative benefits of moving up in the rankings, Mr. Hofmeyr said. A product that leaps from second to first in a category can really affect a company’s bottom line, he said, while the advantage of moving up to, say, No. 5 from No. 6 is much smaller.
“With this approach, the moment you determine a brand’s ranking, you can predict the market share,” he said. ERIC PFANNERContinue reading the main story