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Market investment does always lead to more brand equity - right?

One would think that the amount of money you spend to build your brand, your share of spend, would equal how much your brand is worth, your brand equity, which in turn would equal your market share. Right? That is the most logical equation. But, after this study, we can tell you otherwise. We saw, on multiple occasions, that companies involved in the study put down heavy market investments but got very little value in terms of brand equity in return. For other companies, the outcome was the complete opposite. And for yet another group of companies, the outcome changed again. Their market investments were smaller in comparison to how much their brand was worth but still could see an increase in brand equity. Consequently, it is safe to say that the relationship between market investments and brand equity isn't linear. So, what then builds brand equity if not the size of your market investments?

The importance of positioning and differentiation

The energy companies that saw a good return on their market investment, that were able to build their brand equity, all had one thing in common. They all had established a clear market position. They all stood out. In one way or another. It is not, by any means, news that you need to take a distinct position to succeed with your marketing and increase market share. Everybody knows that you can’t be saying the same thing as everybody else. But it seems that the importance of positioning cannot be reemphasized enough. Especially since so many of the companies involved in the study underperformed in that particular department. 

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But how do you find a distinct position? By differentiating of course. Again, old news. But you can’t just be different for the sake of being different. And how do you differentiate yourself in the energy sector? There are only so many ways you can sell electricity. Well, to differentiate yourself successfully you need to understand your market and you need to understand your customers, and what’s important to them. You need to answer important questions like; what needs do they have, and what needs do they not yet know they have? With the data collected from our energy tracker, we could do just that. We were able to map out different customer needs driven by different trends, and from those needs, we could divide the electricity consumers into 5 different segments.

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Five customer segments in the energy sector

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“Convenience-oriented” customers

The data from our energy tracker showed us that there were 5 distinct consumer segments that had arisen in recent years. On the more conventional side, we have the “convenience-oriented customers”, who make up about 35% of the market. They want things to work as they always have. Without fuzz and surprises. They tend to be loyal to their electricity provider if things work smoothly. 

“Price hunters”

The counterpart to the convenience–oriented customers is the segment labeled “price hunters”, who make up around 28% of the market. In the light of the price on electricity skyrocketing in Sweden this segment has become a lot bigger. As the name suggests, the customers in this segment are motivated by low prices. They are prone to switch companies and are always on the lookout for the cheapest offers. 

“Locally oriented customers”

The third segment, who makes up 9% of the market, consists of locally oriented customers. They are concerned with buying locally produced electricity. They support their locals and are characterized by stronger collectivism in the sense that they put the group, or community, before the individual. 

“Sustainable customers”

Moving on to the fourth segment, we find the “sustainable customers”. In a sense, they are closely connected to the locally oriented customers in the way that they also could be characterized as collectivists. However, this is another form of collectivism. Instead of being protective and caring about their immediate community, they care about the larger community, specifically the environment. Consequently, they are looking to buy the greenest and most sustainable electricity. 

“The techies”

Last but not least, we have the fifth segment, “the techies”, which take up 11% of the market. Like the price hunter segment, this segment has also seen an increase in size during recent years. One probable explanation for this could be that companies like “Tibber” located this earlier considered white-space, and by well-thought-out marketing initiatives have managed to attract more customers to it. In any case, the techies are drawn to the latest technology. They are attracted to cutting-edge solutions and hold smart and, specifically, digital products and services in higher regard than anything else.  

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The key question for brands in the energy market is of course, which segments do I and should I attract?

Out of sight, out of mind? More like out of position, out of mind.

When scanning the data from Pulse, we can see that online ads produced in the energy sector on average receive about 33% human attention. That means that two people out of three never actually even see the add the advertiser paid for. That is interesting in itself, however, it is on average. Without regard to the size of the market investment, when comparing the companies with each other some are much better at dominating the conversation in their industry. So how then are some companies able to gain a higher effect on their market investments when building their brand equity?

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As we touched upon before, the relationship between market investments and brand equity is not linear. You don’t necessarily increase your brand equity by spending more money on marketing. To put in other, probably more famous words, size doesn't matter. What really matters is the position you are investing from. 

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Our Pulse data when combined with the data from the energy tracker tell us that the companies that get best effect of human attention were the ones that had a distinct market position. They had differentiated themselves to a point that their brands aligned with one of the five needs identified in the customer segments. Naturally, this made their market investments much more valuable as they got a greater return on brand equity than those who came from a more centralized position and said the same thing as everybody else. Hence, when trying to understand the brand dynamics of the energy sector it sure seems like the old saying “out of sight, out of mind” needs a little touch-up. Even though it is true, we need to understand that you first must come from a distinct position to get any visible effect when being in-sight. Out of sight, out of mind? Sure. But we would like to add, out of position, out of mind to the bank of of idioms.