Don’t buy into these common customer fallacies

Customer fallacies

Five everyday misconceptions we hear about customers

By Sam Puchala
with contributions from Mark Healy

In an increasingly complex and competitive world, business executives are focused on improving their understanding of their customers. Organizations today are fortunate to have a wealth of customer information at their fingertips. Hours are spent conducting surveys and focus groups, and in analyzing transactional, demographic and other data in an attempt to optimize the way they segment their customers and drive them to behavior.

In our work, we have observed some commonly held, but often incorrect, views about customers. We call them the customer fallacies.

1. The choice fallacy

Customers want more choices

No, they don’t. This sounds true because, after all, who doesn’t like choice? Most people, actually. In a famous study conducted at Columbia University, three per cent of shoppers at a supermarket purchased jam when given 24 choices, but 30 per cent walked out with a jar when faced with only six choices.

Reality: Too many choices diffuse a company’s efforts and dilute the strength of the marketing mix. They also make customers confused or anxious and paralyze them just at the point when you need them to be decisive.

What you should do about it: Invest the time to figure out the small set of choices that consumers will value most, then focus your marketing mix on selling that selection with a focused and confident message.

2. The product fallacy

The best product always wins

No it doesn’t. Not unless you really understand what “best” means. In a world awash in tech gadgets, we’re often driven by specs, but specs don’t always win. Last year’s thin and light Excite 10-inch tablet from Toshiba easily won the spec battle, yet sales were lackluster. iPad Airs flew off the shelves, even though Apple’s product scored seventh in a ranking of specs.

Reality: Apple understands what customers actually want and how to make them happy, proving sales come from delivering customer experience, not from designing to a feature list.

What you should do about it: Recognize that “best” is a relative term, and that your best should be the one that connects with your target from an emotional and experiential perspective. Design products and services that deliver the “best” for your target segments and use product specs only to strengthen that value offering.

3. The North American fallacy

Canadian customers are just like American customers

No we aren’t. Expecting Canadians to want the same products in the same way as Americans can result in a lot of red ink. Both Wal-Mart and Target suffered when they initially entered the Canadian market because they ignored customer differences.

Reality: Canadians tend to be more conservative, more passive aggressive (not necessarily more polite), more diverse and more resistant to change. Conversely, exposure to American advertising has conditioned Canadians to have similar brand expectations, even though the buying behavior can be different.

What you should do about it: Consider a differentiated product and marketing mix for different geographies. Ensure your offering can win against regional players, rather than just against big global competitors.

4. The ethnic fallacy

The ethnic market in Canada is small, fragmented and poor

No, it isn’t. The foreign-born population accounts for more than 20 per cent of Canada’s population, with 91 per cent living in metropolitan areas and 57 per cent coming from China and Southeast Asia alone, according to recent Statistics Canada numbers. Many in the so-called ethnic demographic have higher education levels and more disposable income than the average domestic-born Canadian, and a recent SATOV survey revealed ethnic customers are much less loyal to their current retailers.

Reality: Canadians are not one people, but are comprised of diverse cultures that behave differently. Ethnic markets can offer plenty of opportunity, but the diversity can also pose a challenge.

What you should do about it: Consider specific marketing channels that cater to ethnicities. Ensure you have marketing support that has experience in ethnic marketing. Test and learn a variety of strategies, recognizing that different tactics may be successful for different groups.

5. The engagement fallacy

The most engaged customers are the best customers

No, they’re not. Not necessarily, anyway. Engagement alone does not build or signify economic value. The truth is simpler: the most profitable customers are those who spend a lot on your products, refer you to others and don’t cost a lot to serve. What many companies value – a multi-level relationship with their customers – is not what customers value. A recent Harvard study showed only 23 per cent of consumers say they have a relationship with a brand; the remaining 77 per cent reserve relationships for friends and family.

Reality: Engagement only matters when it is tied to profitable behavior. The social media landscape is littered with bloggers and survey respondents who have time on their hands to love or hate your product, but not necessarily the need or money to buy it.

What you should do about it: Make sure you know what level of engagement your customers (the profitable ones) actually want and then prioritize your efforts there.

It is easy to believe something about your customers that seems like it ought to be true. Be sure to understand them at a deep level, to avoid these potentially costly mistakes.