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 satisfie
d 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 is 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, the bloom is definitely off the Saturn rose. Once a hot brand, Saturn has struggled recently. Its chairman quit to sell boats and its long-time ad agency was fired.
Saturn was a great car for young, single people just getting started in life. But what happens when you grow up, get promoted and make more money? Do you want to buy a more expensive Saturn?
Most young people I know, including my daughter, would rather have a BMW. When you move up the ladder of life, you want your brand to reflect your new status.
What happens when you get married and have kids? Do you want to pile the family into an SUV, the Saturn Vue?
Most young people I know prefer a Volvo, the car that says you care about your family’s safety.
Then in the normal course of events, you get divorced. What happens next? The wife keeps the kids and the Volvo and you buy 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.