Here is an interesting article from Adrian Slywotzky.
Keeping Up With Your Customers No Matter How Often They Change: The Incredible Power of Knowledge Intensity
By Adrian J. Slywotzky, author of The Upside
Have you ever been blindsided by changes in your customers? Have
you ever felt that half or more of your marketing dollars are wasted?
Were the surprises and the waste really unavoidable?
Perhaps the most insidious strategic risk companies today face is
decimation of the customer base by shifts in behavior, preferences, and
demographics. These shifts may happen gradually or literally overnight.
Either way, they can destroy a business design.
Customers are people—unpredictable, irrational, emotional, curious,
and highly prone to change. Customers can’t keep still. They resegment
themselves from “product buyers” to “value buyers” to “price buyers”
and then back again. Their priorities change from “quality” to “price”
to “solutions” to “style” to “brand.” They get richer. They get poorer.
They get excited by and attracted to different styles, different
offerings, different ways to buy.
They get better informed. They get more demanding. They decide to
shop at different places; they start buying shirts through catalogs,
jewelry from a TV network, vacations online. They want bigger cars.
Then smaller. Then really bigger. Then really fuel-efficient. They
pledge allegiance to product brands. Then store brands. Then no brands.
They want carbohydrates, then they don’t. They want big cars; then
small, thrifty ones; then humongous ones—then decide they value
fuel-efficiency and ecological virtue after all.
Every time customer priorities shift, our business design is at
risk. Our value proposition gets a little fuzzier, a little out of
focus. We lose a little business from a few customers; they decide to
peel away once in a while and buy a couple of items from another
supplier. Then we start losing customers altogether. (That’s a little
more worrisome. But at least we’ve still got our old reliables.) Then
we start losing our most profitable customers, the 20% that generate
more than 80% of the income. A trickle of tiny changes turns into a
torrent of departures. And a 1% loss of revenue turns into a 6% loss of
Customer risk is the most subtle and perhaps the most widespread
strategic risk that any company faces. It’s also the most unnecessary.
How can you take action to prevent customer risk? You can’t force
people to buy from you. As Yogi Berra once said, “If the people don’t
want to come to the ballpark, you can’t stop them.”
No, you can’t, but you can reduce the risk of losing customers by
reducing the uncertainty that creates the risk in the first place.
After all, that’s what risk is about—not knowing what’s going to
happen, what your customers are thinking, what they want, what they
will do, what will they respond to. If you could know those things, you
could react appropriately with the kinds of pricing, marketing, and
service offerings that would motivate them to stay.
This is why the first countermeasure for defeating customer risk is
creating and applying continuous proprietary information about your
customers. It’s about answering the question: What do we know about
customers that others don’t? And then using that knowledge to make and
keep profitable customers for life.