Wrong customer, or, the perils of dog food marketing
by Josh Bernoff
I used to work for a textbook company. The CEO explained to me that we used "dog food marketing." "Our buyers are students, but the decision makers are professors. So we market to profs based on the idea that their students will benefit. Like selling dog food -- you convince the owner that the dog will like it."
Look where the textbook business is now. It tried to keep those profs happy, but the students, powerless as dogs, had to deal with bloated, $120 or $300 books they'll use once. So they rebelled, creating a burgeoning used book market. The textbook guys are scrambling to create electronic versions, but those clever students with their digital skills have the edge. This is not going to end well for the textbook companies.
Most companies have at least two kinds of customers, the ones who use their products or services, and other ones that are buyers, distributors, advertisers, or other types of partners. Often those other customers, like the professors, seem more important, since they make decisions that affect hundreds of sales or thousands of dollars.
If you make macaroni, that "other customer" may be Walmart. If you make TV shows, it may be an advertiser. If you sell software, it may be the CIO. If you are a non-profit, it's the donors that support you.
Chris Anderson's new book Free is filled with models where people who use products don't pay for them. Most of these models generate some other type of customer, like an advertiser.
Dog food marketers: beware. The more time you spend on the needs of the non-user customer, the less you are focusing on the user of your products, and the more vulnerable you become. If you empower that other customer to persuade you to make decisions not in the best interests of the the people who use your products, you are striding down the path to ruin.
Where would the movie business be if it had thought its customers were theater owners, not viewers with VCRs, HBO, and iPods?
Where would the music business be if it ignored its customers' desires for electronic singles over its retailers' desires for CDs in 1999? Oh yeah, they did. They got it, but way too late. Screwed.
This applies in government and non-profits, too. If you're a non-profit that helps kids with cancer, concentrate on the kids, not the donors. If you're in government, concentrate on the people who use your highways or collect your unemployment payments. They are your customers, even if they don't pay you.
It doesn't matter if you sell insurance, shoes, or web searches. If you always worry first about the one who uses your products, she will lead you into new business models, new features, and loyalty. Social technology means you can form a relationship with that customer, even if you send your invoices to someone else.
If you worry too much about that "other" customer, he'll go into competition with you, insist on more discounts, drag you down as he goes out of business, or distract you, opening up room for competitors. User customers may have loyalty. Those other customers rarely do.
Complex distribution chains, powerful partners, and advertising subsidies are great. Just don't lose track of who is eating the dog food.