A customer driven standard can prevent companies from achieving success and hamper their growth. Often, companies spend too much resources on trying to enhance the customer experience and customer service, but do not take into account how it affects the company.
Working hard to get more customers is an essential part of every business, as it is vital to growing the company. One pitfall of the customer driven standard is identifying the next customer. Too often companies get caught up in looking for a new type of customer instead of retaining their existing customer base.
In the hunt for growth, companies often widen their scope and target new customer segments far off from their core customers. This is a very expensive strategy, as it requires revisions of the very fundamentals of the business model. When this strategy is not done right, it can alienate the core customers as they experience the loss of focus.
Companies should aim to keep their core customers and executives should be made aware of who constitutes these core customers. Rather than concerning themselves on what potential customers could buy from them, they should focus on what valuable, existing customers do buy.
On the other end of the spectrum of identifying customers, over-segmentation is another pitfall of the customer driven standard. This occurs when far too many and overly specific profiles are created to identify customers.
Over-segmentation leads companies to address a customer base that is much smaller than the one actually likely to participate in the category. Additionally, this fragments their messaging to address a multitude of segments with different approaches at the expense of overall marketing efficiency.
What should be done is to address their largest possible segment, or segments. This can be done by looking for commonalities instead of differences which can then be used as the base for marketing strategies. This approach will be far more efficient and actionable to customer segmentation.
The challenge is that companies chasing differentiation through abstract positions can forget to communicate and deliver on the basics. In industries with little brand loyalty, it takes little effort from competitors to move customers on basic parameters, while time is wasted on building marginal concepts for marginal customer segments.
To avoid these pitfalls, companies need to consider their industry’s maturity, core customer base, customer dynamics and other factors. Considering all the above factors gives companies a method to understand customers and potential for growth.
