Core vs New Customers

In a recent HBR Case Study, a fictional company called Mendoza had a difficult business decision to take: focus on their core customers or try to grow the new customer base. The case study goes on to drafting a potential solution that might help Core customers maintain their support for the brand whilst allowing new customers to still enjoy the usual service.

Mendoza Case Study, HBR

After reviewing the information and data in the Case Study, my personal opinion was that Mendoza should go back to the drawing board and find a different way to give those ‘maniacs’ a better, more tailored registration experience without necessarily asking for a VIP fee.

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Considerations:

– Extreme sports/products rely on ‘maniacs’ to push the brand and to act as catalyser for the product;

– The important brand tipping points can hardly be reached without the recurrence of those ‘maniacs’; which are thus a large part of the revenue (multiple races/ year)

– Important to show support for the ‘maniacs’; and try to increase their Share of Habit rather than squeezing fees.

Solution:

– A points system where ‘maniacs’ get preferential early bird tickets to events: if they have attended X numbers of events in the prior 12 months, they get access to those early bird tickets for the following event.

– Run the program on a 12-month calendar basis so that ‘maniacs’ have a strong incentive to ensure that they race X number of events in 12 months in order to keep their preferential access (which could also be combined with discounts on gear and other perks);

– That way the increase in revenue comes from the continued, long-term recurrence of the ‘maniacs’ and not from the fixed, arbitrary fee proposed under the Mendoza Access plan;

– This recurrence and increase in Share of Habit will grow the brand substantially without driving ‘maniacs’ away and thus providing a win-win solution for both the users and the brand.

 

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