[TL;DR: Byron Sharp's research across 130+ brands proves growth comes from reaching new buyers, not deepening loyalty. Most SMEs have their marketing priorities backwards, and it's costing them real growth. Here's what the data says and what to do about it.]

Why Your Loyal Customers Won't Grow Your Business

If you have ever sat in a planning session and heard someone say "it costs five times more to acquire a new customer than retain an existing one," you have heard one of the most repeated, least supported claims in business. No serious empirical research backs that number. It circulates because it feels intuitively right, not because anyone has proven it.

Byron Sharp, director of the Ehrenberg-Bass Institute at the University of South Australia, spent forty years and studied 130+ brands across 13 product categories to find out what actually drives brand growth. His conclusion is one of the most counter-intuitive findings in the history of marketing research: brands grow by reaching more people, not by getting more from the people they already have.

That single finding has significant implications for how a small business in Adelaide should be spending its marketing budget.

The Retention Myth Has No Clothes

The loyalty-first idea sounds sensible on the surface. Your existing customers already know you. They trust you. They have already overcome the friction of choosing you once. Surely it is cheaper and easier to sell to them again?

The problem is that this reasoning describes what feels true, not what is true. When Sharp and the Ehrenberg-Bass Institute analysed actual purchase data across hundreds of brands, they found that loyalty metrics barely move as a brand grows. What moves is penetration: the number of people who buy from you at all.

Here is what the data shows across a consistent pattern in the research, using washing powder brands in the UK as an illustration:

• Persil: 22% market share, 41% penetration, 3.9 purchases per buyer per year
• Ariel: 14% market share, 26% penetration, 3.9 purchases per buyer per year
• Bold: 10% market share, 19% penetration, 3.8 purchases per buyer per year

Sharp calls this the Double Jeopardy Law. Smaller brands suffer twice: they have fewer buyers, and those buyers are slightly less loyal. Both problems stem from the same root cause: too few people thinking of the brand when the need arises.

What This Means for Your Marketing Budget

The IPA (the UK's advertising effectiveness body) analysed 880 award-winning campaigns and looked at what actually drove growth. The breakdown:

• 82% of winning campaigns succeeded primarily by growing penetration (reaching new buyers)
• 2% succeeded primarily through loyalty strategies

This does not mean existing customers are worthless. It means the obsession with retention, loyalty programs, and win-back campaigns tends to consume resources that would compound harder if pointed at the much larger pool of people who have never bought from you at all.

For a typical SME in Adelaide with, say, 150 active clients over the past two years, the maths gets clarifying quickly. There are tens of thousands of businesses in this city who have never heard of you. The 150 who know you already have an opinion. Many will keep buying if you do good work. But they are not going to double your revenue. The growth is in the people who do not know you yet.

The Light Buyer Problem Nobody Talks About

Sharp's research introduces another concept that upends conventional thinking: light buyers matter more than heavy buyers in aggregate.

Most businesses have a mental model of the customer pyramid. The top 20% of buyers drive the majority of revenue, so that is where to focus. The logic seems sound.

Here is the problem. Sharp found that heavy buyers naturally moderate over time. The top 20% this year will not all remain the top 20% next year. Behaviour regresses toward the mean. People change jobs, move suburbs, go through life events that alter their purchasing patterns.

Meanwhile, non-buyers and occasional buyers sit as a vast, largely untapped pool. Sharp's data shows that buyers who did not purchase in Year 1 still contributed 14% of a brand's Year 2 sales. The category keeps refreshing. People who were not in the market last year enter it this year.

Practically speaking: if you are a plumbing company and a homeowner bought from you last year, there is only so many times they are going to need a plumber. But there are suburbs full of homeowners who have never called you, who will need a plumber this year, and who will go to whoever is easiest to think of and find when that moment arrives.

Mental Availability: The Actual Growth Lever

Sharp's proposed mechanism for growth is called mental availability. It is the probability that your brand comes to mind when a buyer enters the category. Not general brand awareness, which is binary (have you heard of us?), but multidimensional memory: do you think of us across the range of situations that trigger a buying decision?

A tradie might search for a new supplier when their current one lets them down, when they see a competitor using a different product, when they get a referral at a job site, when they walk past a trade display at a hardware store. Mental availability means being in the consideration set across all of those entry points, not just one.

What builds mental availability? Broad reach advertising that repeatedly refreshes your brand's presence across the full category of buyers, rather than narrow targeting that concentrates spend on people already familiar with you. Distinctive assets: a consistent name, visual style, and tone that makes you recognisable and memorable. And showing up consistently over time rather than in campaign bursts.

This is where the Sharp framework directly contradicts how many SMEs use Google Ads and Facebook Ads.

The Practical Implication for Digital Advertising

Most SMEs, left to their own instincts, configure their digital advertising to go narrow and deep. Retargeting campaigns aimed at website visitors who did not convert. Lookalike audiences built from their best existing customers. Email sequences designed to pull existing leads further down the funnel.

None of that is wrong exactly. But if it is consuming the majority of the budget, the allocation is probably backwards.

Sharp's research suggests the higher-leverage investment is in broad, consistent reach: getting your brand in front of people who are in the category but have not engaged with you yet. In Google Ads terms, that often means investing in category-level search terms rather than just your own brand terms. In Facebook terms, it means running top-of-funnel campaigns to cold audiences at meaningful frequency, not just retargeting the warm ones.

The nuance here is that Sharp's framework is most applicable to awareness and consideration. Google Search Ads are a different animal: they capture demand that already exists. A plumber running Search Ads for "emergency plumber Adelaide" is fulfilling demand, not building it. Both functions are necessary. The mistake is when an SME is spending all of their budget on demand fulfilment (Search, retargeting) while investing nothing in demand creation (the broad-reach activity that builds mental availability over time).

Sam Tomlinson, one of the sharpest thinkers in performance marketing, frames it this way: paid media is a catalyst. If the right conditions are present (offer, brand, reach, mental availability), paid media accelerates growth. If those conditions are absent, the ads just make the absence more expensive.

What to Actually Do

FAQ

Is customer retention completely unimportant?

Retention matters, and doing good work for existing clients is how any service business survives. The point Sharp makes is not that retention is worthless but that it cannot be the primary growth strategy. Loyalty is largely a function of brand size: as you grow, retention naturally improves because more people have positive associations with you. The causality runs from growth to loyalty, not the other way around. For most SMEs, the biggest opportunity is in the pool of people who have never bought from them, and the budget allocation should reflect that.

Does this apply to a local service business, or only to big consumer brands?

Sharp's research is heavily drawn from FMCG and large-scale consumer data, which is worth acknowledging. The precise ratios do not necessarily transfer to a local plumber or a B2B supplier in Adelaide. But the underlying mechanism, that growth requires reaching people who do not currently think of you, holds in virtually every market. A local business has a defined geographic catchment. Within that catchment, the people who already use it are a small fraction of the total potential buyers. The rest are accessible through advertising, and they represent the growth.

How does this change how I should think about Google Ads?

Google Search Ads are primarily a demand fulfilment channel. They work by intercepting people who are already looking for what you offer. They are essential for capturing buyers who are in-market now. But they do not build mental availability with people who are not yet in market. That is why a balanced strategy pairs Search (for in-market buyers) with broader reach channels, whether Display, YouTube, or Facebook, to build the brand's presence with the larger pool of future buyers. If your entire budget is in Search, you are only ever talking to the people already looking. The people who will be looking in three months are not seeing you yet.

What are "distinctive brand assets" and why do they matter?

Sharp's colleague Jenni Romaniuk at the Ehrenberg-Bass Institute developed the concept of distinctive brand assets: the specific colours, shapes, characters, taglines, and sounds that buyers associate uniquely with your brand. Think of the golden arches, the Intel chime, or the Cadbury purple. These cues help buyers recognise and retrieve the brand from memory quickly and consistently across contexts. For a small business, this means having a consistent visual identity, a consistent tone of voice, and showing up the same way across every touchpoint. Every time you change your logo, rewrite your tagline, or reinvent your advertising style, you erode the memory structures you have already built.