Attract New Customers Without Alienating Your Old Ones

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Anytime a brand grows—or tries to grow—by attracting new segments, it risks creating conflict with the old ones. And the larger a brand gets, the more heterogeneous its customers will become, increasing the likelihood that tensions will arise.  

Avoiding that problem—or solving it when it does emerge—requires a deeper understanding of the relationships between customer segments.

The authors suggest, based on their research and consultancy, four basic ways that customer segments relate to each other. We need to understand these types of relationships, see how conflict arises from them in predictable ways, and then learn how to identify and eliminate that conflict. These tactics work whether your company is proactively seeking to avoid clashes or is already waist-deep in them and needs a way out of the morass.

Two key factors govern the nature of the relationship between segments. The first is whether the value each segment seeks from the brand is unique and independent (what we call divergent value) or depends on the use of the brand by another segment (what we call collaborative value).  The second factor is the sensitivity of the segments to other types of customers. Some are indifferent but some brand users are influenced by each other—for good or ill.

These two factors combine in four ways to create the basic relationship types in our framework: 

1. Separate communities.  These segments value disparate things in a brand and its offerings, and each can seek its respective value without stepping on the toes of the other.  A growth strategy built on separate communities has the advantage of compartmentalization: Brands can grow simply by courting each new segment independently, in a serial fashion, since each is self-contained and has minimal influence on the others. The disadvantage is that growing in this way can be relatively costly, since each segment requires its own marketing mix (though not necessarily its own product line), and the potential for organic growth beyond each community is limited.
2. Connected communities.  In this type of relationship, the brand becomes more valuable as more customers use it, even when those additional users come from other segments.  Connected community relationships offer brands the opportunity to multiply their growth as users attract more users. But they can also lead to catastrophic collapse when one or more segments start abandoning the brand.
3. Leader-follower segments.  This relationship is hierarchical. Leader segments have higher status than follower segments—whether they’re cooler, more expert, or more authentic. (They don’t need to be more numerous, however. Sometimes the follower segment vastly outnumbers and outspends the leader segment.) When leaders use a brand’s offerings, it attracts people who want to emulate them.  A leader-follower strategy can be a cost-efficient way to acquire multiple segments: When leaders become customers, followers often find their own way to the brand. Leaders can serve as evidence of a brand’s credibility, quality, trendiness, or cachet.  The risk with a leader-follower strategy is that a leader segment could abandon the brand, since followers tend to go out the door right after them. Consequently, when brands serve leader-follower segments, it’s crucial that they maintain their association with the leader segment and not become too focused on followers.
4. Incompatible segments.  This is the relationship most prone to conflict. Incompatible segments derive different kinds of value from a brand’s offerings, but because they influence each other, they’re unable to comfortably coexist.   Intersegment conflict wreaks havoc on brands. Brands should steer clear of trying to serve customer segments that are incompatible.

To avoid or resolve a conflict, strategists and brand managers must first understand where it comes from.  

1. Functional conflict.   This occurs when one customer segment impedes another segment’s ability to enjoy a brand’s products or services.
2. Brand-image conflict.  People buy a brand’s offerings for more than just their utility; the brand’s image also is a source of value and self-expression. When a brand attracts a new segment or makes changes to try to do so, it can threaten the authenticity, credibility, or purpose of the brand for other customers.
3. User-identity conflict.  Brands frequently become associated with specific groups of users. Sometimes this happens because of a brand’s functional properties, sometimes it happens for more-symbolic reasons. Once these associations are established, brands often become symbols of consumers’ identification (or nonidentification) with certain groups.  User-identity conflict arises if people in one customer segment think they can no longer use the brand to reliably signal their affiliation with a particular group because another segment has become associated with the brand.
4. Ideological conflict.  This occurs when a segment has values or beliefs that differ from or clash with those of another segment. Not all brand purchases are ideologically motivated, of course.

Escaping conflicts between customer segments most often requires nudging them into either a separate-communities relationship or a leader-follower relationship. Occasionally, it requires the difficult decision to jettison one of the segments completely. (Forward-looking brands can use these same strategies to tamp down conflicts before they ignite.) The right approach often depends on the source of the conflict.

1. Separate the segments.  This is the most common approach for resolving conflicts. It can give each segment the space it needs to get what it wants from the brand without rubbing other segments the wrong way. Brand managers can create that distance by employing several tactics— perhaps simultaneously if the conflict is severe.  Brands can also turn down the heat through product development and differentiation.  Sometimes the design of physical spaces or websites can create barriers between segments.
2. Define leaders and followers.  Creating or reestablishing a hierarchy among consumers can turn a previously incompatible relationship into a leader-follower relationship.  One way to do this is through subbrands, which can demarcate the status between customer groups.  Subbrand hierarchies can also reduce the risk of user-identity conflict.  Pricing and availability can also establish a hierarchy.
3. Fire a segment.  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.

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