Please learn from our mistakes

No-bullshit lessons in business and careers. One mail every day. 15k+ readers love it. Join in?

Oops! Something went wrong while submitting the form.
11 Mar

The Double Jeopardy Law

Article 20(2) of the Indian Constitution states:

“No person shall be prosecuted and punished for the same offence more than once.”

This is called the Double Jeopardy Law.

Marketing, too, has its own version of Double Jeopardy.

It is when the lower-market-share brands in a market have both far fewer buyers in a time period and also lower brand loyalty.

It is in the likeliness of the double jeopardy because in a market where goods are broadly substitutable with each other and catering to the same set of people, having fewer buyers and lower brand loyalty aren't two mutually exclusive phenomena. One leads to the other.

So, brand managers of a smaller market share brand should not be penalized twice, once for lower market share and the second time for lower customer loyalty metrics.

In such markets, building customer loyalty isn't likely without substantially increasing the brand's market penetration.

But before I go into the reasons behind why this is the case, let me contextualize this with an example.

Here's a graph showing the market share of different smartphone brands in India.

Once you look at the graphs for the four quarters of 2022, you'll notice that

  • Samsung’s market share fluctuated only in two quarters.
  • Xiaomi and Vivo had a rise and fall pattern across the four quarters.
  • Oppo’s market share increased gradually and
  • realme’s market share declined significantly.

The double jeopardy law worsens realme’s position because, with a small customer base, it is also a brand with little brand loyalty, unlike Samsung.

A smaller brand like realme gets hit twice: now only are their sales lower because of lower market share, but this also means that an even smaller percentage will go on to buy realme again.

To understand why, you need to first understand that the smartphone, although a technological marvel, is a mass-market product. It caters to both young and old and all urban as well as rural audiences, regardless of their tech know-how.

When tech know-how is limited, all smartphones more or less start looking quite similar, considering all the differentiation on the level of the technology is quite hard to understand for the lay consumer, especially the older generation.

And when most smartphones start looking similar, people categorize them in their head using pricing tiers like

"tikau/kaam chalau",
"budget/value for money",
"mid-range/flagship killer", and

They get attracted to raw numbers over more nuanced technical details as that is what they understand.

This is also why the budget smartphone manufacturers have over-indexed on all sorts of numbers for marketing purposes: larger screens, more cameras, higher megapixel counts, and larger batteries (although none of these even remotely tell you the whole story).

But most importantly, they go with a smartphone most other people they know are buying. They're more likely to buy a brand with an already high market share due to trust and social proof.

It is common sense then, that in such a market where products are easily substitutable, brand loyalty is an indirect outcome of higher market penetration and consequently, higher market share.

So, if increasing brand loyalty was the goal, the double jeopardy law suggests that increasing market penetration is realme's only best bet. This is, of course, besides gaining more share in the existing market simply by building highly differentiated and better smartphones.

Not to mention that decreasing market share while having fixed costs of business to bear means that profit margins start going down. Consequently, customer support and service go down, investment in product R&D goes down, the customers get fewer OS upgrades and security patches, and this reduces the company's market share even further.

The Matthew Principle just keeps Matthewing harder.

Again, according to the Double Jeopardy Law, "Increase market penetration" seems to be the best advice for such businesses.

There are obviously some exceptions to the rule.

A niche brand has both low penetration and market share in a segment but enjoys high loyalty due to its unique differentiation.

A retailer with a physical store has low market penetration as the store's reach is limited to its vicinity, but enjoys high customer loyalty due to the same reason.

TV channels in local languages have low market share and penetration with a small audience but are watched for a high number of hours every day.

In short, the Double Jeopardy Law only applies to products that are easily substitutable for their competitors, i.e, there's little-to-no perceived differentiation in the eyes of their consumers.

In such a scenario, the best chance of increasing brand loyalty is simply by either re-imagining the core of your product offerings or devising strategies to reach out to an underserved audience.

Feeling Lucky?
Subscribe to get new posts emailed to you, daily. No spam.
Oops! Something went wrong while submitting the form.
15k+ business professionals act on our advice every day. You should too.
Subscribe to get new posts emailed to you, daily. No spam.
Oops! Something went wrong while submitting the form.
15k+ business professionals act on our advice every day. You should too.