Annie Wilson is a Senior Lecturer of Marketing at the Wharton School of the University of Pennsylvania. Ryan Hamilton is an Associate Professor of Marketing at Emory University’s Goizueta Business School. They have both served as consultants to top brands across all manner of industries.
What’s the big idea?
The Growth Dilemma is about how to manage relationships between customer segments. As brands grow and attract new customers, they serve a wider variety of groups who tend to want different things from the brand. Almost inevitably, as brands get bigger and bigger, this leads to conflict or disagreement between groups of customers who don’t necessarily agree on who the brand is supposed to serve, what it stands for, or how it should be used.
Below, co-authors Annie Wilson and Ryan Hamilton share five key insights from their new book, The Growth Dilemma: Managing Your Brand When Different Customers Want Different Things. Listen to the audio version—read by Annie and Ryan—in the Next Big Idea App.
1. Segments of people relate to each other in predictable ways.
We’ve identified four different relationship types when it comes to customer segments.
The first type of relationship is separate communities. Some brands serve different segments of customers in such a way that they don’t step on each other’s toes much. Customer segments may want different things from the brand, but it doesn’t tend to cause problems. For example, Lego still serves its traditional customer segment of children who are looking for an interactive toy, but it also has a large and growing segment of what it refers to as “adult friends” of Lego. These are adults who purchase Legos as collectibles or models to display in their homes. Lego serves both customer segments without much problem.
The second type of relationship is connected communities. These are offerings that become more valuable when more people use them. This includes offerings like social media platforms or shared platforms like Venmo. Software platforms like Microsoft Office are another example because the more popular Microsoft Office becomes, the easier it is to transfer files between people.
The third relationship type is leader follower segments. This occurs when one segment is cooler, aspirational, or expert in some way, and because they use the brand, there is another segment of followers who like the brand because of those leaders. One example of this is Crocs. Crocs became cool a few years ago, in large part, because a group of trendsetters decided they were cool. Once they started using the brand, that gave everyone else social permission to also start wearing them without being embarrassed.
The fourth relationship type is incompatible segments. This is when brands try forcing segments together that want dramatically different things. They have different values or different preferences, and trying to serve them simultaneously causes a lot of heat and friction between these groups of customers. This can blow up in the face of the brand.
2. Growth itself can cause problems.
Growth tends to be seen as just a good thing: We’re going to get more customers in, get more revenue, and that’s going to mean more profit. The big argument that we make is that some of the relationship types can lead to sustainable, profitable growth. However, other types of growth can be dangerous for a brand and cost the brand money in pursuit of that growth.
3. There are four main sources of conflict between customer segments.
The first source of conflict is functional. This is when one segment of customers can’t use the brand’s offerings the way they want to because another segment is using it in an incompatible way.
Think of Starbucks. Somebody who wants to go to Starbucks to hang out and read the newspaper with a cup of coffee comes into conflict with the mobile order segment who wants to quickly get their coffee and leave. The piling up of mobile orders and the masses of people rushing in to grab their drinks in a hurry ruins the experience of a lot of third-placers. Starbucks has managed this functional conflict in various ways throughout much of its corporate history and continues to grapple with it today.
“Some types of growth can be dangerous for a brand and cost the brand money in pursuit of that growth.”
The second source of conflict is brand image. This is the idea that because one group of customers is using the brand, the image of the brand comes into question for another group of customers. In the 1990s, Tiffany & Co. began selling a large number of more affordable silver products to less affluent customers, mostly teenagers trying to profess their love to high school sweethearts. This created a brand image conflict for wealthier customers who thought, Is this really Audrey Hepburn’s Tiffany if I have teenagers buying cheap silver jewelry from them? Tiffany had to figure out how to manage that brand image conflict before the brand became too diluted or eroded.
The next source of conflict is user identity. This is the idea that because one group of customers uses the brand, another group can no longer use it as a signal of their identity. For a lot of its history, wearing Vans signaled that you are a skateboarder. As Vans has become more fashionable and people who don’t know how to skateboard wear Vans, it has created user identity conflict for the skaters who feel like wearing Vans no longer strongly or clearly signals their skater identity. Vans has to figure out how to protect that skater identity for the skater audience while still inviting in these more fashionable audiences.
Lastly, we have ideological conflict. If a brand aligns itself with a certain group of customers, it can create ideological conflict with another group of customers. Target has gone back and forth on whether it will support LGBTQ+ customers through its products and messaging. It has created and recreated ideological conflict between groups of customers who either want Target to support LGBTQ+ rights or those who don’t want Target to take that stance. These different sources of conflict can either be managed or avoided by building fences, ladders, or planks.
4. You can manage segment relationships using fences, ladders, and planks.
Fences is the idea that you want to create separation between segments that might otherwise come into conflict. Carhartt, famous for its workwear, has a segment of customers who are blue-collar workers who wear Carhartt because it is durable and good for working in. Carhartt also has a segment of customers who like Carhartt because their clothes have become fashionable—even on the red carpet. To prevent conflict between these groups, Carhartt keeps them separate. They market different products to them and use different messaging. Carhartt even has different stores for them, and that keeps both segments happy because they can get what they want without interacting with each other.
Another way you can manage these relationships is by creating ladders. This is when you make one group of customers clearly higher status or more important than another group of customers. You’re making it explicit or implicit that one group of customers are leaders and the others are followers. Tiffany & Co. offers various lines of jewelry, each with a distinct price tag that clearly signals the leaders (who pay millions of dollars for Tiffany jewelry) and the followers (who pay hundreds or thousands). It creates a hierarchy that keeps segments happy because it allows them to give customers what they want without eroding the brand image.
The last thing you can do is create planks. You’re essentially showing some group of customers the door. Another way of saying this is firing customer segments. There are times when two customer segments are in conflict, and the smartest thing to do is let one of them go or force one of them away from the brand.
There was a time when Six Flags offered various pricing discounts and incentives. Many teenagers would buy tickets to Six Flags because they were cheap or discounted, and then they would visit the parks, enjoy the all-you-can-eat benefits, and act like teenagers. It ruined the experience for many other customers who wanted to enjoy Six Flags or potentially bring their families. Six Flags essentially showed those teenagers the door by changing the pricing incentives so that those customers didn’t get as much access to the park. They implicitly fired those customer segments. Ridership overall did drop, but the park made more money from other customer segments that wanted to return because they had restored the park’s experience for them.
5. You are never done managing customer segment relationships.
Managing customer segments isn’t something that can be applied once to permanently solve problems. A different set of conflicts is bound to come up later. This is just the evolving nature of markets: new segments emerge, old segments fade, and brands change their positioning over time. We are proposing a discipline for managing growth and customers over time, which is that you constantly have to manage these relationships to avoid conflict.
“You need to constantly think of different ways to prevent or mitigate that conflict.”
Any time you bring different groups of people together, they can come into conflict. You need to constantly think of different ways to prevent or mitigate that conflict. For example, at a country club that I went to growing up, new members wanted different things from the club than what old members wanted. Club managers had to figure out how to build fences, ladders, or planks between those customer segments. But these instances are everywhere, beyond brands, like that one friend who went on a family vacation and discovered that their in-laws had different expectations of the vacation than their own family.
We see this in politics when a candidate tries to expand their base and increase their popularity. They try to appeal to a broader audience with diverse values. They have to figure out how to keep people who want different things happy simultaneously. We even see this within organizations. As organizations hire more employees, you sometimes get factions that have different interests. Whether it’s in marketing and brand management or any other domain, this fundamental idea of managing the different things that different groups of people want from an entity requires constant monitoring and supervision.
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