In an earlier nugget I warned of the dangers from the “Icarus Paradox” and how that causes the demise of once-great businesses.[Use search box for “Icarus Paradox”] In this nugget we focus on damage it can do to BRANDS. There is great benefit to leveraging a strong brand into other market segments, but there is also a great danger of losing the base that built that strong brand.
The danger arises when the brand extension, the leveraging process, collides with the key success factors that once built the brand. By shifting your focus to bringing in new customers from new segments, you may create issues for your key customer segment and thereby drive away key customers while attracting new customers. At some point you can create a dangerous crossover during which the loss of your good, loyal, long-time customers becomes costlier, even a hidden cost, while your attention is focused on what appears to be great success with the newer strategies. Are you witnessing a successful new strategy or merely customers who are fascinated with the novelty and are merely “test driving” but may never return a second or third time?
For a strategy to be deemed successful, one must allow sufficient time for the novelty phenomenon to wear off. Repeat business is what counts. Are the customers from the new strategy becoming loyal, long-time customers? If so, the next question you must face is that of: Of those customers who are becoming loyal, are there sufficient numbers of them to replace the once-loyal customers who are now inconvenienced by the new strategy? Can you retain sufficient numbers of the original loyal customers or will you lose more customers than you will gain?
One way to discover the likely outcome is to learn to observe and to watch for early-warning indicators. Watch, observe, carefully study, the impact on your original customers who are credited with having built your brand, your original business model. Any change will have costs, among which will be the loss of some customers who prefer your original business model. Those customers loyal to the original business model may not transition to the new business model. If you lose too many of them, you may severely and irreversibly endanger your brand causing both strategies, the old and the new, to collapse and with it your business enterprise.
A strong brand evolves from a strong business concept that is popularized and entrenched into a core segment which is large enough to generate sufficient profitability to sustain the venture. In other words, first comes outstanding success then comes a positive reputation. Over a period of time word gets out and the good reputation and useful business model becomes the brand.
The danger comes when businesses lose sight of their core elements which made their business models successful–the most important element is the original customer.
Expanding and diversifying the business model too far from the original can often result in risk and costs. I’ve seen plenty of failed examples of businesses moving beyond their core strength and then stumbling when they ignored, or minimized, the important role played by the original customer in supporting the brand, and thereby, the business model. Here are a couple of current examples.
I’m watching with interest one very successful coffee chain that is “evolving” beyond its successful offering of coffee and donuts into specialty coffees and more. Some customers who wait in line have spontaneously turned to me to complain about their wait times, one of the new variables introduced into the original paradigm. A very attractive feature of the original paradigm was speed of service. Customers who valued speed of service and limited choices that permitted that speedy service, will be forced to adapt to the newer paradigm of waiting longer for their original cup of coffee. They may not tolerate that if that becomes the norm. A similar issue arises when broadening food menus. Customers seeking the original cup of coffee or a very limited menu, may lose patience and take their business elsewhere. But by observing deeply enough and early enough, systems can be implement to serve both the customers of the original business model and the newer customers who are being attracted by the newer strategies. For example, chasing the newer strategy while protecting those loyal, original customers, may suggest a need for two or three streams of traffic. One lane dedicated to the originals. A second lane dedicated to the more generous food menu orders. A third lane dedicated to the new and more time-consuming, complex coffee offerings. But failing to observe and address the impact on the original customer is inexcusable and is often the first steps which result in the fulfillment of the “Icarus Paradox”.
Here’s another story about a strong brand. This is a true story.
A hamburger chain with a play area is credited with helping to save the life of a young anorexic child. The child loved the excitement of the play area that once was offered by the hamburger chain. As a young child he had been subjected to long periods of failed medical treatments, medically forced IVs and forced feedings. Doctors and psychiatrists were baffled and the child was suffering trauma from the treatments. Out of sheer desperation, the child’s parents began to visit that burger store and let the child play on the equipment, but only if the child agreed to what amounts to a “bribe”. “Eat a few French fries and we let you play on the equipment at the burger restaurant.” It didn’t take long for the child to wolf down a few fries. Weeks later a few fries had become an entire serving and then bites of a hamburger. In a very short time the child was eating full meals at that hamburger store and the foundation was firmly set for his transition into meals at home. Today the child has grown into a successful adult. This was made possible because of the ORIGINAL brand strategy that captivated the mind of a child. Since then that hamburger chain has been evolving into new niches, a much more expansive menu, and so on.
Every business must continue to evolve, some more than others. There is no need to consider the evolution to be exclusive of the old guard. Both the original customers and the new customers can co-exist if the business carefully observes the impact to the original customers. Remember that it is the original customer that made the business model succeed and the brand great.
Learn to OBSERVE INTENTLY and to address the impact your new strategy has on your “foundational” customers. Failing to do so can damage your business model and, in turn, kill your brand. [Use search field for: “Solve Tough Business Problems: Observe”.]