[TL;DR: Byron Sharp's 40+ years of empirical research proves growth comes from reaching new buyers, not doubling down on existing ones. The "5x to acquire vs retain" myth has no data behind it. For SMEs, this changes where your ad budget should actually go.]

Why Your Best Customers Are Quietly Holding Back Your Growth

Most business owners I talk to have a version of the same belief: look after your best customers, and the business will grow. Keep them happy. Reward their loyalty. Bring them back again and again.

It makes intuitive sense. Your best customers already trust you. They buy more. They refer people. Keeping them is cheaper than finding new ones, right?

The problem is that the research doesn't support it.

Byron Sharp, Professor of Marketing Science at the University of South Australia's Ehrenberg-Bass Institute, has spent more than four decades studying how brands actually grow. His findings, drawn from real consumer purchase data across more than 130 brands in 13+ product categories, consistently point to the same uncomfortable conclusion: you cannot grow a brand by focusing on your existing customers.

Growth requires new buyers. Almost always.

The "5x More Expensive" Claim Has No Research Behind It

Before we get into what Sharp found, let's address the claim you've almost certainly heard: "It costs five times more to acquire a new customer than to retain an existing one."

This number is everywhere. Sales training decks, marketing workshops, LinkedIn posts. Business owners repeat it as settled fact.

Sharp's team went looking for the research behind it. They couldn't find any. The claim appears to have originated as a consulting talking point, repeated so often that it became accepted wisdom. There is no large-scale peer-reviewed study that established this ratio.

That matters because the "retention is cheaper" belief shapes how businesses allocate their entire marketing budget. If the premise is wrong, the strategy built on top of it is wrong too.

The Double Jeopardy Law: What Actually Happens to Small Brands

Sharp documented something called the Double Jeopardy Law, one of the most consistently replicated findings in marketing science.

The law says that brands with smaller market share suffer twice: they have fewer customers (first jeopardy), and those customers are slightly less loyal (second jeopardy). Both penetration and loyalty decline together as brand size falls.

Here's what this looks like with real data. In the UK washing powder market:

• Persil (22% share): 41% of households bought it, average 3.9 times per year
• Ariel (14% share): 26% bought it, average 3.9 times per year
• Bold (10% share): 19% bought it, average 3.8 times per year

The practical implication for an SME: loyalty is not something you can manufacture through better service or reward programs. It is largely a function of how big your brand already is. You don't get more loyal customers to grow. You grow to get more loyal customers.

The only way out of double jeopardy is more buyers.

82% of Marketing That Works Does the Same Thing

The Institute of Practitioners in Advertising (IPA) analysed hundreds of effectiveness award-winning campaigns to understand what actually drove growth. The breakdown is stark.

82% of campaigns that achieved meaningful brand growth did so through penetration, meaning they reached and converted people who hadn't bought before. Only 2% succeeded primarily through loyalty strategies.

When you look at the gold award winners specifically: 21 penetration campaigns won gold, versus 2 loyalty campaigns.

This is not fringe research. The IPA effectiveness database is the largest study of real-world marketing outcomes in existence. And it says, overwhelmingly, that growth comes from new buyers.

The Heavy Buyer Trap

Here's the specific dynamic that catches SMEs. You look at your customer data and see that your top 20% of buyers generate roughly half your revenue. So you focus there. You design loyalty programs for them, send them VIP offers, make sure they feel looked after.

What you're missing is what Sharp calls the Law of Buyer Moderation.

Heavy buyers naturally regress toward the mean. The customer who bought from you six times this year will almost certainly buy less next year, not because you did anything wrong, but because heavy buying behaviour is not stable. People go through phases. Circumstances change. That person's buying rate was above their long-run average, and it will correct.

Meanwhile, the people who bought from you once or twice last year, or haven't bought at all yet, represent a far larger pool. Sharp found that non-buyers in one year typically contribute around 14% of a brand's sales in the following year. Light buyers who make just one additional purchase deliver more aggregate impact than heavy buyers buying slightly more.

The math is simple. You have maybe a few hundred loyal customers. You have tens of thousands of potential customers who've never heard of you.

Where's the growth?

What Loyalty Programs Actually Deliver

Sharp's team studied the impact of loyalty programs on real purchase behaviour using Australian data. The results were modest at best.

Kmart with a loyalty program: predicted penetration 52%, actual 48%. Predicted frequency 3.4 times, actual 3.7.

Coles with a loyalty program: predicted penetration 64%, actual 61%. Predicted frequency 9.4 times, actual 9.8.

In both cases, the loyalty program delivered a marginal bump in purchase frequency among people who were already heavy buyers of the brand. Penetration, the thing that actually drives growth, went backwards.

Loyalty programs reward people who were already going to buy. They rarely convert the light buyers who represent your actual growth opportunity.

What This Means for Your Google Ads

Most SMEs running Google Ads eventually drift toward over-reliance on retargeting. It feels safe. The ROAS looks great because you're showing ads to people who already know you, have already visited your site, are already warm.

But you're measuring efficiency inside a shrinking pool. Every month you run retargeting-heavy campaigns, your reach into cold audiences gets smaller while your competitors' names appear more often for the searches that matter.

The higher-leverage play is making sure your brand appears prominently when someone searches your category for the first time. That's a cold buyer entering the market. Byron Sharp's research calls this a Category Entry Point: the specific moment when someone decides they need what you offer.

For a roofing business, it's the search after a storm. For an accountant, it's the search in February. For a conveyancer, it's the search the week someone signs a contract.

If you're not visible at that moment, you don't exist for that buyer. No amount of retargeting catches them if you never got to them first.

This doesn't mean retargeting is useless. It means the 80/20 should lean toward prospecting, not the reverse. Sam Tomlinson's analysis of high-performing Meta accounts, which this principle applies equally to Google, found that healthy accounts typically direct 80% of spend toward new audience prospecting and 20% toward demand capture and remarketing. Many SME accounts I audit are running this backwards.

What This Means for Your Facebook Ads

Facebook and Instagram advertising is the clearest expression of demand creation. You're reaching people who weren't searching for you. You're building the mental association that means, when they do enter the category, your name comes to mind.

This is exactly what Sharp's mental availability concept describes: the probability that a buyer thinks of your brand in a buying situation. You build it by reaching more people, more often, across more of the situations that trigger purchasing in your category.

Laser targeting your Facebook ads toward people who already know you, bought from you, or look exactly like your existing customers feels precise. In practice, it's expensive reach to a small pool, and it does very little to expand your brand's presence in the market.

Broad prospecting, building awareness with people who are in your category but not yet your customers, is where the compounding happens. It's slower, harder to measure week to week, and produces results you won't see on a dashboard until months later. That's exactly why most businesses underinvest in it.

The Practical Reframe for Adelaide SMEs

Here's how I use Sharp's research when reviewing a client's marketing strategy.

First question: what percentage of this budget is going toward people who already know us? If the answer is more than 30%, something is probably misaligned.

Second question: what is the reach of this activity, meaning how many people in our target category are actually being exposed to this brand? Reach matters more than frequency for most SMEs, who tend to have the opposite problem to big brands: they over-target their core audience and under-reach the broader category.

Third question: are we showing up at the moments when someone is entering this category for the first time? Those moments are worth more per impression than any retargeting campaign.

None of this means ignore your existing customers. A bad experience drives negative word of mouth. Follow-up matters. Good service matters. But service is not marketing. Serving existing customers well is baseline expectation, not growth strategy.

Growth comes from new buyers. Sharp proved it across 40 years and 130 brands. The data is not ambiguous.

The question is whether you're building a marketing strategy around the evidence, or around the story you prefer.

FAQ

Isn't customer retention more profitable than acquisition for service businesses?

Retention absolutely has economic value, particularly in subscription or repeat-service models where LTV is high. The nuance Sharp's research introduces is that retention strategies (loyalty programs, VIP offers, re-engagement campaigns) tend to return marginal gains for the cost, while doing almost nothing to expand the total number of buyers. For a mature business already holding strong market share, retention matters more. For a growing SME with low market share, almost all of the growth opportunity is in the untapped pool of category buyers who haven't chosen you yet. The two strategies are not equivalent in their growth leverage, and most SMEs allocate far too much toward retention and far too little toward reach.

Does this mean I should stop running retargeting campaigns?

No. Retargeting serves a genuine purpose: it recaptures demand that you already paid to create. If someone clicked your ad, visited your landing page, and didn't convert, showing them a reminder is efficient. The problem is when retargeting becomes the primary or dominant strategy. The pool of people who've already interacted with your brand is finite and gets more expensive to reach over time. The pool of people who've never heard of you and are in your category is many times larger. Sharp's research suggests the right balance for most brands is heavy investment in broad prospecting to build mental availability, with retargeting as a supporting layer, not the other way around.

How does Byron Sharp's research apply to B2B businesses?

Sharp's research was primarily conducted across FMCG and consumer categories, but the Ehrenberg-Bass Institute has since extended the findings to B2B and services markets with consistent results. The Double Jeopardy Law holds in B2B: larger suppliers have more clients and more loyal ones. The penetration imperative applies: B2B growth comes overwhelmingly from winning new accounts, not expanding existing ones. The mental availability concept is arguably more important in B2B, where buying decisions are infrequent and the brand that comes to mind first has a significant advantage. For trade and professional services businesses in Adelaide, the implication is clear: being visible and credible before someone enters a buying situation is worth far more than perfectly targeting people who are already in market.

What does "mental availability" actually mean and how do you build it?

Mental availability is Byron Sharp's term for how easily your brand comes to mind in a buying situation. It's not the same as general awareness (have you heard of this brand?). It's category-specific: when someone needs a plumber, does your company surface? When someone needs a digital marketing agency, does Dream Outcome come to mind? You build mental availability through consistent reach and consistent use of distinctive assets: your name, your visual identity, your tone, anything that makes you instantly recognisable. This means showing up in the channels where your category buyers spend time, using consistent branding, and doing it over time with enough frequency that the association sticks. It's the opposite of campaign-based thinking where you spend heavily for a month and then go quiet. Sharp's research shows that memory structures fade without refreshment, which is why always-on presence outperforms burst campaigns for building mental availability.