Change Thy Customers
// December 6th, 2010
The Loyalty Guide (Wise Research Ltd) tells the tale of the owner of a small UK-based suburban supermarket who had twelve months’ notice that a large national supermarket would be opening right across the road from his much smaller store. He realised that without major changes his business would not survive. What this operator did was simple but smart. The suburb in which he was situated was mixed, comprised mainly of low-cost housing but also including a very exclusive area. Many of his customers were low earners who bought their basic requirements every day or two from him – in essence, what they could carry home in a couple of bags. He knew that they would migrate to the lower prices and bigger ranges of the big chain.
However, a considerable number of the more wealthy people would call in on their way home from work to pick up bread and milk and a few odds and ends. He started noting what they bought, and what they never bought. Over the months, he stopped ordering products that they never bought, and increased his range of things that they did buy. Over the year, his store slowly changed from a small supermarket to a very big delicatessen. His wealthy customers told their friends and the composition of his customer base changed from mainly low earners to mainly high earners. When the supermarket opened over the road, his low earners did migrate, but he hardly noticed the difference.
The example is retail-focussed but there are implications for all businesses. How well do you know your customers? What do they buy and (perhaps more importantly) what do they not purchase from you? Which customer segments are the most profitable and could/should your products or services evolve to better meet their needs?
“All things to all people” may have been a sound business strategy for a general store back in the day, but it’s not much of a plan if you’re competing with category killers, Everyday Low Pricing and the Long Tail of the Internet.