Regularly, the same question arises: should the brand aim at its existing customers or at its future buyers? Should it try to maximise its present customers’ satisfaction or should it think of the new generation?
For sure, the global mantra of management today is to focus on existing customers. They are the most profitable source of cashflow. This is why all companies and brands invest in building up large customer databases, CRM software, and undertake in-depth surveys on customer satisfaction with the product or service.
This leads to necessary improvements, and in theory it increases customer loyalty. We write ‘in theory’, for all automobile surveys show that 60 per cent of the consumers who did not buy the same brand on their next purchase were very satisfied with their former brand. Why then did they change? Because consumption is situational. New situations create new expectations: this is called ‘value migration’. New generations too develop a new set of values and expectations.
Existing customers are essential for short and medium-term growth and profitability, but listening too much to existing customers is the main reason companies do not innovate enough. Professor Christensen has shown that the main reason companies disappear is that disruptive innovations transform the market and rapidly make their products or services obsolete.
What prevents these companies, which are often adjudged to be excellent, from innovating? Arguably they are too well managed (Christensen, 1997). Wellmanaged companies select the innovations that please their clients and that provide good profitability forecasts with a high degree of certainty. Disruptive innovations are just the contrary: they are not well perceived by current customers, and nothing can be said with certainty about their profitability. But disrupting the market is how the minicomputer made mainframe companies obsolete, then the PC did the same for the minicomputer and so on.
Collins and Porras (1994) have reminded us of the power of the ‘and’. Most of us keep on asking questions about alternatives: should the brand do this or do that? It is a mistake. We must do both. Brands must think of their present clients as the immediate source of growth, but they must also look to the future generation.
At present Smirnoff has 60 per cent of the UK vodka market. For most managers, this would be a good reason to be satisfied. Instead, the management of Smirnoff innovated to react to new entrants such as Absolut and Finlandia. Most importantly, it invented a vodka for the new generation, who were not interested in drinking vodka as their parents did, but could be persuaded to drink it outside pubs, not from a glass but straight from the bottle, like a beer.
This is called dual management: already thinking of the emerging trends, new behaviours and customers, those who will be dominant tomorrow. Brands have targets: when their customers do not fit the target any more, they should be transferred to another brand. If not the brand will be expanded but also diluted.