Thursday, June 7, 2012

Whiteboard: The NBD fits

Just a little empirical marketing science. If we think of a fixed time period such as a month and a week, the number of people who buy a brand 0, 1, 2, 3 etc tend to look like what is given below.

What is important to note is that for both types of products (luxuries and necessities) there are never brands that have a "fat tail". A large brand (by market share or your own set of measures) differs from the small mostly in terms of the scale on the y-axis.

When you get big you have lots more light buyers than when you were small. Yes, your number of heavy buyers goes up too, but it's the light buyers that you get more of.

The shape is called the negative binomial distribution (NBD) and we've known about it for over fifty years.

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