Andrew Ehrenberg is credited with being the first social scientist to apply scientific methodology to any commercial endeavour.
Andrew Ehrenberg was a statistician who was born in Germany with the intention of escaping the dictatorship of Hitler. He eventually found asylum in England. Andrew Ehrenberg was doing research to determine the amount of money that households in the United Kingdom spent.
Cadburry chocolate drink was a popular product in England during the final years of the 1950s. The people in charge of the brand requested that Andrew Ehrenberg examine the data from the consumer panel.
When it came to marketing Cadburry, brand managers intended to target homes that were comparable to those that were purchasing the most of the product.
Over the course of those years, there was a widespread belief that the growth of best-selling companies was due to heavy users. In addition, advertisers were concentrating their efforts on selling the brand to a certain subset of consumers who were able to purchase the product (the target audience).
Many consumers make sporadic purchases, which contributes to the growth of brands.
In the course of his investigation of the data collected from consumer panels, Andrew Ehrenberg made a startling discovery.
Extremely occasional purchases of this beverage were made by the vast majority of homes who consume Cadbury. There was a very limited number of households that made significant purchases of Cadburry cereal.
High sales of Cadbury were achieved as a result of a huge number of families purchasing little quantities of the product. Many people have the misconception that this is due to the fact that a small number of households buy a great quantity of something.
Ehrenberg initiated an investigation to determine whether or if this unexpected discovery was also true in other fields. Over the course of the subsequent years, Ehrenberg and his colleagues carried out over a hundred such research.
Across all product categories, business-to-business (B2B) and business-to-consumer (B2C) sectors, they observed the same pattern of behaviour in every country in the world.
Not by a specific target audience purchasing a great deal, but rather by wide audiences purchasing a small amount on a regular basis, brands were expanding.
Ehrenberg discovered that the purchasing behaviour of individuals occurs according to a Negative Binomial Distribution (NBV) after experimenting with a number of different statistical models.
After conducting household surveys, Ehrenberg was able to acquire information on the penetration of a product category, the average purchase frequency of brands, and the market shares of brands.
With this knowledge, he was able to begin predicting the results that companies that competed in this category would achieve at the end of the time.