One of the typical questions marketing people ask themselves is, What’s the lifetime value of a customer?
Presumably a company benefits by keeping its customers satisfied over an extended period of time. Nice idea in theory, but this kind of thinking often leads a company down the wrong path.
Take Saturn, for example. Here was a brand built on the ultimate in customer satisfaction. Comfortable showrooms, no high-pressure sales people, no haggling over prices. ‘A different kind of company. A different kind of car.’
The first Saturn model, the S series, was wildly successful. For a number of years, the average Saturn dealer sold more cars than the average dealer of any other brand. (In 1996, for example, the average Saturn dealer sold 776 cars versus 684 for Honda and 606 for Toyota. The average Chevrolet/Geo dealer that year sold only 237 cars.)
But what would happen when a Saturn customer got older and made more money? The S series, after all, was a relatively inexpensive compact car. No problem, decided Saturn management, We’ll take care of our customers by introducing the L series, a larger, more expensive car. ‘The next big thing from Saturn.’
Not a good move. Sales of the S series fell because the model was ‘long in the tooth.’ Sales of the L series suffered because prospective customers thought ‘it was a little too expensive for a Saturn.’
(Years ago I had the same argument with Peugeot management in Paris over the introduction of their 404 model in the U.S. The 403 was selling well, so why bring in a new, more expensive car? They did anyway, and sold both models in the same showrooms. As predicted, total sales declined.)
Today, Saturn is the latest entry in the big book of failed brands.
Saturn was a great car for young, single people just getting started in life. But when you grew up, got promoted and made more money did you want to buy a more expensive Saturn?
Most young people, including my daughter, wanted a BMW. When you move up the ladder of life, you want your brand to reflect your new status.
What happened when you got married and had kids? Did you want to pile the family into an SUV, the Saturn Vue?
Most young people preferred a Volvo, the car that says you care about your family’s safety.
Then in the normal course of events, you got divorced. What happened next? The wife kept the kids and the Volvo and you purchased a Ferrari.
What should Saturn have done? Our advice would have been to keeps its focus on ‘entry-level’ vehicles. Instead of complementing the S series with the L series, they should have replaced the S series with an up-dated model. And done so frequently.
The grass might be greener on the other side of the highway, but you can usually build a more powerful brand if you constantly fertilize the plot that you already own. Let your customers go. Let them move up the ladder of life.
What happens in cars also happens in clothing, cosmetics, beer, liquor, watches and many other consumer categories. You know you are getting ahead in life when you can leave your old brands behind.
In some cases, it would pay a company to actively discourage customers to grow old with its brand. One of Levi Strauss’ problems is that older people wear the brand. No kid wants to wear what their parents wear.
We would have restricted Levi’s jeans to waist sizes no larger than 32 inches. Let those big old butts walk around wearing Wrangler’s.
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4 comments
VB
November 2, 2009 at 2:18 am
Great insight. So many brand managers / companies make this mistake because they wont let go of their customer as they age. On similar lines, many companies make jr. versions of their products hoping to get kids of their existing customers. But kids dont want their brands same as those of their parent’s.
Akash Sharma
November 2, 2009 at 7:21 am
Nice informative piece of work, So what should be a Brand’s strategy to expand is it that, the only way now is to take feedback from people and upgrade your current products.That means the possibility of being the big guy is very small you can explore micro markets and capture them.
Jay
November 2, 2009 at 10:20 am
It’s interesting to see how automakers are always quick to opt for breadth over focus. Nowadays, everyone thinks they need a compact, a sedan, a minivan, a big SUV, a small SUV, and a crossover. Sometimes, companies would be better served focusing on a small demographic rather than making products for everyone (are you listening, Crocs?).
Nice throwaway line at the end about Levi’s…except that it’s totally incorrect. In addition to being an American design classic, Levi’s are the pinnacle of hipsterism at the moment. Walk into your local Urban Outfitters and see for yourself.
Tessa Carroll
November 10, 2009 at 9:33 am
As marketers, we constantly talk about repeat purchasers and customer retention. But when you step back and think about it, most brands don’t need to actively seek customers of the lifetime variety. Instead of brands growing with their customers, sometimes it is better if they let their customers grow up without them.
Tessa Carroll
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