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A new book, “The Growth Dilemma,” offers a number of solutions to avoid conflicts when brands’ investing in acquiring new kinds of customers turn off their loyal bases, including “firing” the newer customer segment.
The book was written by marketing professors Ryan Hamilton and Annie Wilson of Emory University’s Goizueta Business School and Wharton School of the University of Pennsylvania, respectively.
In a Harvard Business Review article, the co-authors suggested that the risks around such conflicts are particularly high where introducing a new customer segment challenges the brand’s perceived meaning — or makes it seem less exclusive. However, reaching new customers that may have different needs, values, and preferences than older ones always carries risks.
“Anytime a brand grows—or tries to grow—by attracting new segments, it risks creating conflict with the old ones,” wrote the authors. “And the larger a brand gets, the more heterogeneous its customers will become, increasing the likelihood that tensions will arise.”
Three solutions were offered to avoid or reduce such conflicts.
Building Walls Can Help Resolve Conflict Between New Customers and Existing Ones
The most common approach for resolving conflicts is to create separate communities that can court each new segment independently, although the authors note that doing so is more costly.
One method involves employing different communications to different audiences, such as The North Face having its main Instagram account geared toward its core outdoor enthusiasts, while other accounts focus on specific outdoor sports — such as climbing and snow sports — and still others on the brand’s fashion fans.
Sub-brands can also reduce customer conflicts. The authors note that Timberland developed the sub-brand, Timberland Pro, for blue collar workers to reduce friction in messaging to fashionistas. On the distribution front, an example cited was Starbucks opening drive-through locations to cater to its newer on-the-go commuter customers. In doing so, the company reduced long lines at standard stores which irritated its traditional customers, many of whom valued the relaxed “third place” proposition.
Creating Hierarchies Also Key
Establishing hierarchies, whether by developing sub-brands or through pricing and availability, can help overcome conflicts within “leader-follower segments,” or where higher-status segments — whether because they’re “cooler, more expert, or more authentic” — attract followers “who want to emulate them.”
An example offered was Levi’s, which serves core customers under its flagship Levi’s brand iconic red tab on waistbands and pockets, but also offers more-affordable jeans without the red tab — as well as premium Japanese selvedge denims with blue tabs on the pocket for even higher aspirational status.
Firing a Segment May Be Necessary
Some customers segments are “incompatible,” wherein each segment influences each other and derives different kinds of value from the brand that make them “prone to conflict.”
Examples given of incompatible customer groups included Kohl’s losing much of its core customer base -- it removed many of the “low-priced items they wanted” as Sephora shops and products, as well as other trendy items, were added to attract younger and less price-sensitive customers.
The study also cited Tiffany’s move in the '90s to raise prices on silver jewelry after it became known as “the go-to brand for gifts of silver baubles by high school sweethearts,” threatening its relationship with upscale customers.
The authors wrote, “If the continued use of a brand by one segment makes it difficult for the brand to attract or retain other, more-valuable customers, it’s often wise to nudge that segment toward the door.”