THE LOYALTY ILLUSION

The Exception Problem

We hear far more about businesses that succeed against the odds than those that follow ordinary paths to growth and it is tempting to treat these stories as lessons for everyone else. The small cafe that thrives beside Starbucks, the niche brand sustained by devoted customers, or the startup that succeeds with only “a thousand true fans” (Kelly, 2008) become models to imitate. Yet these businesses stand out precisely because they are unusual. Their success may reveal what is possible, but it does not necessarily reveal how markets typically work. The challenge in marketing is not finding exceptional success stories, but distinguishing between what is generally true and what is merely an interesting exception.

The pattern was first named by William McPhee in 1963, describing radio and media audiences, and later generalized to brands by Andrew Ehrenberg and colleagues. DOUBLE JEOPARDY states that small brands suffer two major disadvantages simultaneously: they have fewer buyers and those buyers are somewhat less loyal. This pattern has been observed repeatedly across product categories, countries and decades. Large brands don’t just attract more customers, they also enjoy customers who buy them more frequently. The theory didn’t produce the evidence rather it was developed because the evidence already existed.

Marketing has already shown that Double Jeopardy exists. The harder question is why it keeps showing up. Part of the answer is statistical: given brands of unequal size and consumers choosing largely out of habit, the pattern is close to a mathematical inevitability. But that only pushes the question back a step. It explains what loyalty looks like once brands differ in size; it does not explain why they differ so persistently in the first place. That second question is an economic one.

Marketing Observations to Economic Explanation

Double Jeopardy seems to be about loyalty but it may actually be about markets. No one intends for large brands to become larger or for small brands to struggle. Consumers simply buy what they know, what they notice, and what they can easily find. Out of millions of these ordinary decisions, the same pattern keeps appearing. Economists have seen this before. Wealth distribution, city population or internet traffic, all tend to concentrate around a few large winners without anyone planning the outcome.

Double Jeopardy may simply reflect this broader economic reality. Loyalty is often an outcome of market penetration rather than its cause. If that is true, then the marketer’s challenge is no longer to build loyalty before growth, but to achieve growth that makes loyalty possible. In most markets, loyalty follows scale far more often than scale follows loyalty.

Economies of Scale

The story begins with Economies of Scale.

Producing more lowers the average cost of production, giving larger firms resources that smaller rivals rarely have. They can advertise more, secure better shelf space, expand distribution, and invest in their brands.

Thus, economies of scale do not simply lead to cheaper production costs, they also lead to Visibility.

Consumers find larger brands more frequently because they can afford to be everywhere.

Marketing calls this mental and physical availability. Economics explains why those advantages emerge.

Scale does more than reduce costs. It makes brands easier to notice, easier to find, and easier to buy.

Boundedly Rational Consumers

In a fast-paced world, consumers rarely weigh every available option. Time is limited, information is incomplete, and attention is scarce. Faced with more choices than one can reasonably evaluate, they rely on shortcuts by choose brands they recognize, brands they remember, and brands they can easily find.

Large brands benefit because choosing them minimises search costs. Their apparent loyalty often reflects convenience rather than devotion. What looks like loyalty is often the by-product of efficient decision-making.

Information asymmetry

Consumers face another problem beyond limited attention, they rarely know a product’s true quality before buying it. Economists call this information asymmetry. Because quality cannot be observed in advance, consumers rely on signals instead. They look for familiar brands, trusted retailers, recommendations from others, advertising, and increasingly, online ratings and reviews.

A product chosen by millions simply feels less risky than one chosen by only a few. Popularity becomes a signal of quality when quality cannot be judged directly. As market share grows, so does the credibility of that signal, making the brand more attractive to future buyers. Market share is therefore both an outcome of consumer choice and one of the forces that shapes it.

Digitalization has undoubtedly reduced information asymmetry. Consumers can now compare products, read reviews, watch demonstrations, and evaluate quality before making a purchase. These changes have made it easier for small and niche brands to gain credibility and reach consumers without relying entirely on traditional advertising or retail distribution.

Yet something equally important has changed. Marketing is no longer scarce, attention is. Digital platforms have made powerful marketing tools accessible to almost every business. Search advertising, social media, influencer collaborations, and content marketing are no longer reserved for large corporations. But when everyone has access to the same tools, visibility once again becomes the scarce resource. Every brand competes for the same limited consumer attention, and only a few consistently rise above the noise. Larger brands continue to hold an advantage, not because marketing has become exclusive, but because they can invest more, optimize faster, and remain visible for longer. The internet did not eliminate the importance of visibility. It simply changed how visibility is earned.

Success rarely arrives all at once. It builds on itself. A brand that gains a few more customers earns a little more revenue. That additional revenue funds more advertising, expands distribution, and increases visibility. As consumers encounter the brand more often, they become more likely to buy it. Those purchases further increase market share, generating even more revenue. What began as a small advantage gradually becomes a much larger one. The loop does not run forever. Category penetration is finite, eventually there is no one left to add, and the returns to further advertising and distribution flatten well before a single brand takes everything. This is why large brands are large and stable rather than large and still growing.

Economists describe this as a positive feedback loop, where early advantages reinforce themselves over time. Success creates the conditions for even greater success. Double Jeopardy is therefore not simply a relationship between brand size and customer loyalty. It is the visible outcome of an invisible system that continuously rewards brands that are already ahead.

Now, the obvious question is, how does any small brand ever become large if it has fewer buyers with lower loyalty? The answer lies in understanding what Double Jeopardy is and more importantly, what it isn’t. It is not a theory of how brands grow over time. Rather, it is a picture of how markets are structured at a particular moment. A photograph captures a single moment. A movie reveals the movement behind it. Double Jeopardy is the photograph. Economics explains the movie.

Economics explains that the market is less like a ladder and more like a moving river. Brands are constantly entering, growing, being acquired, or disappearing altogether. Some small firms eventually become large, but countless others never do. As older firms leave, new ones take their place, continually renewing the population of small brands. The players change, yet the pattern remains. Double Jeopardy therefore does not describe the destiny of individual firms. It describes a market pattern that survives even as the firms within it continually change.

Conclusion

I think calling Double Jeopardy “marketing’s closest thing to a law of nature” may actually be an understatement. It is not just a story about why small brands struggle or why large brands succeed. It is a story about how millions of independent decisions, made by consumers, retailers, and firms, settle into the same pattern over and over again. Individual companies come and go. Brands rise, fall, merge, and disappear. Yet the pattern remains. What first appears to be a law of marketing may actually reflect something much broader: the way competitive markets organize themselves.