A restaurant owner who has read a few marketing blogs usually believes some version of this: the regulars are the business. Treat them well, reward their loyalty, and they'll keep the lights on while word of mouth brings in the rest. It's a reasonable story. It's also, according to one of the most data-heavy bodies of research in marketing, mostly backwards.
The research is associated with Andrew Ehrenberg and, more recently, Byron Sharp, whose 2010 book How Brands Grow turned decades of purchase-panel data into an argument that unsettled a lot of marketing orthodoxy. Sharp didn't expect much from the book. As one account of its publishing history notes, Oxford University Press printed only 1,000 copies in the first run, and it sold out on day one, despite Sharp telling an interviewer he never thought people in ad agencies would buy a book he saw as written for CEOs. It turned out plenty of people in the industry wanted to hear it.
The core finding, and why it surprises people.
Sharp's data, drawn from purchase records across roughly a dozen global brands, found something that cuts against the instinct to court your best customers harder. As one summary of the book puts it, most customers bounce between competing brands rather than sticking to one: 72% of Coke drinkers also drink Pepsi. People don't pick a brand and stay faithful to it the way loyalty programs assume. They buy a rotating cast of options, and the brand they buy most often just happens to be the one that's easiest to think of and easiest to get.
The same summary reports an even sharper number: 89% of brand users don't think their brand is different from competitors. People buy out of habit, not conviction. That's the opposite of what most loyalty marketing assumes, which is that if you can just deepen the emotional bond, customers will choose you more often out of preference.
The practical version of this is what researchers call the Double Jeopardy Law: smaller brands face a double problem, fewer customers, and those customers buying somewhat less often. Formalised by Ehrenberg, Goodhardt and Barwise in 1990, it's one of the most repeated patterns in marketing research. Loyalty, in this framing, isn't something you build with better service or a punch card. It's mostly a byproduct of how many customers you have in the first place.
Loyalty isn't the cause of growth. It's mostly what growth leaves behind. So before you chase reach or frequency, the ad you run still has to carry its own weight, and Knowing is built for that moment, after the ad is made and before it runs.
Why the punch card doesn't do what you think.
Picture a coffee shop that launches a loyalty app: buy nine, get the tenth free. The owner's theory is that this will make regulars more regular, and maybe pull in some new ones through word of mouth. Six months later, the redemption data shows exactly what the research would predict: the people hitting ten stamps a month were already coming in five days a week. The app rewarded behavior that already existed. It didn't create any.
Here's the pattern researchers call the Law of Buyer Moderation: people who buy a lot one year tend to buy less the next year, just by random chance, the same way an unusually hot streak tends to cool off. Your five-day-a-week regular isn't going to become a seven-day-a-week regular no matter how good the app is, because there's a ceiling on how much coffee one person drinks. Meanwhile the much larger group of people who come in once a month has far more room to grow, and far more total revenue sitting in it, simply because there are so many more of them.
Sharp's own math on this is blunt. One account of the book summarizes it this way: getting many light buyers to purchase one additional time a year beats trying to get heavy buyers to increase frequency, purely due to the much larger population of light buyers. It's not a sentiment about fairness or inclusivity. It's arithmetic. A small gain multiplied across a large group beats a large gain multiplied across a small one.
If 80 percent of a shop's customer list visits once or twice a year, moving even a fifth of them to a third visit adds more total visits than doubling the frequency of the 20 percent who already come weekly. The math favors reach over depth almost every time the group sizes are this lopsided.
The segmentation instinct, and why the research pushes back on it.
A lot of small business marketing advice still leans on an old idea: find your niche, define your ideal customer, speak directly to them. It feels precise and efficient. The buyer-theory research pushes back: broad, visible presence tends to beat narrow targeting, because most people just buy from whoever's easiest to remember and find. As one summary of the theory puts it, narrow targeting and deep relationship-building are intuitively appealing to managers but less scalable than broad reach and availability.
Byron Sharp pushed this further, arguing that most brands don't really have distinct customer segments at all, they're mostly competing for the same mass market of people who buy from several similar options depending on convenience and memory. The Mars Chief Marketing Officer, cited in the same account, put the mass-marketing version of this plainly: "our target is about seven billion people," and "our task is to reach as many people as we can; to get them to notice us and remember us". That's an extreme statement from a company selling candy worldwide, and a one-location business obviously isn't marketing to seven billion people. But the underlying instruction scales down fine: your job is to be noticed and remembered by everyone within driving distance, not to carve out a tight psychographic profile of your ideal customer and talk only to them.
A separate, older line of research by Andrew Ehrenberg gets at why this works. The theory holds that your ads aren't mainly trying to convince someone to switch from a competitor. They're trying to make sure your name is the one that comes to mind when someone wants what you sell. The authors note this claim was controversial when introduced but has become widely, if not universally, accepted. That reframes what a one-location business's ad should be doing: not making the case for why you're better, but making sure you're the name that comes to mind.
Where the theory needs a gut check for a small, local business.
The honest caveat is that this research was built on enormous consumer brands in mature, saturated categories. One summary of the book's reach notes Sharp's framework is grounded mainly in CPG brands in mature categories, raising an open question of applicability to startups, and the same question applies to a single restaurant or salon competing in a five-mile radius rather than a national grocery aisle.
A peer-reviewed study gives a useful, narrower test case. Researchers studying the European wine retail market analyzed a 25,000-customer panel over a year across independent wine retailers, and found that the double jeopardy pattern held for most of the top 20 brands studied. The exceptions were telling: a few individual brands, one wine region, and the Sauvignon blanc grape variety had their own loyal following that broke from the pattern. In plain terms: the broad rule works for most businesses, but if you have one thing that genuinely creates a devoted following, that's worth protecting. A one-location business should read that as permission to apply the general lesson, reach matters more than depth, while staying alert to the one or two things that genuinely do create a loyal niche in their own case: a dietary specialty, a cult following for one dish, a service nobody else in town offers.
One more academic treatment of the theory frames the stakes directly. It argues the Double Jeopardy Law is a direct challenge to the standard playbook of segmenting a market, targeting a slice of it, and positioning against competitors, because it reframes loyalty from something you build with attitude and effort into something that simply tracks market share. Loyalty isn't a feeling you build with great service. It's mostly a side effect of having a lot of customers in the first place.
What this changes about the next ad you run.
None of this means stop being nice to regulars or kill the loyalty app. It means stop expecting that spend to be where the growth comes from. If the marketing budget and the marketing attention are mostly going toward deepening relationships with people who already show up every week, the research says that money is chasing a group that has almost no room left to grow.
The better question for a one-location business isn't "how do I get my best customers to come back more." It's "am I easy enough to remember and easy enough to find for the much larger group of people who think about me once or twice a year." That's a question about a sign that's visible from the road, a name that's easy to spell and search, hours that are posted correctly everywhere, and an ad that shows up again when someone's half-forgotten you exist. It's less flattering work than building a loyalty program. It's also where the actual growth is sitting.
Frequently asked
Common questions.
Does Ehrenberg-Bass theory apply to a small business with only one location?
The underlying research was built on large global brands, but the core mechanism, that most growth comes from occasional buyers rather than loyal regulars, holds at small scale too. A one-location business should weight marketing toward staying visible to lapsed and occasional customers, not just rewarding its regulars.
Should a small business still run a loyalty program?
Loyalty programs aren't wasted, but research suggests they mostly reward customers who were already loyal rather than creating new loyalty. If growth is the goal, advertising aimed at occasional or lapsed customers usually adds more revenue than deepening rewards for existing regulars.
What is the Double Jeopardy Law in marketing?
Formalized by Ehrenberg, Goodhardt and Barwise in 1990, it states that smaller brands suffer two penalties at once: fewer customers, and those customers buying somewhat less often than customers of bigger competitors. It's one of the most replicated patterns in marketing research.