Why unhappy customers are a good thing

Don’t feel that you have to delight every customer out there, because it’s bad strategy.

This post is about my thoughts on strategic trade-offs; what they are, how they will make some customers unhappy, and why that matters.

Essentially, trade offs are decisions – big strategic ones – where the beneficial effects of a decision have to be weighed against the expected negative side effects and consequences. The nature of the choices like this mean it’s one, or the other. So far, so obvious.

They commonly arise because of basic product feature incompatibility – buyers are looking for different things. Also there might be trade-offs in the business activities themselves – a configuration that delivers one kind of value cannot easily deliver another. Luxury and low cost brands can also be incompatible in everything from their image, positioning, channels and customer groups.

Trade-offs at the product level are the easiest to spot – Apple could choose longer battery life for mobile phones, instead of selling expensive replacement charging cables. The tradeoffs for this enhanced feature range from economic (higher R&D, manufacturing, distribution and packaging costs) to customer (less attractiveness for market segments who prize a lightweight, slim phone) and of course an opportunity for competitors. Some customers are surely going to be unhappy here (although I might buy one).

Ever wandered around an IKEA store looking for a sales person in their blue shirt, wondering if anyone is working today? The reason you put up with this lack of service is that when you reach the checkout, the price is reasonable and the car is later packed to ridiculous levels. IKEA have traded off customer service for lower operational costs. The customers who wanted individual service, choice and customisation didn’t bother to come to the store. But many others did.

I think that understanding trade-offs, and how that makes some customers unhappy, is relatively straight forward. What is more fascinating for me is actually why are they important, which is far less obvious. I think there are three reasons:

The first reason why they are essential is that they are a barrier to imitation – they sustain competitive advantage over time. Companies can try to copy superficial marketing and product features, but when they copy big trade-offs, they pay a big economic price.

I run a specialist B2B publisher, and our advantage lies in our sharp focus on our core market verticals, and our deep differentiation from other players in the ecosystem. I am trading off scale for lower competition and the greater returns from these differentiated offerings. That trade-off gives my business protection against larger firms entering our space; people tend to regard companies that just do one thing as being superior than those that try to do many. (Think of Google’s simple search home page versus a busy portal like Yahoo)

Secondly, trade-offs make strategy work by creating the need for customers to choose. This goes back to the subject of my last post about the dangers of competition to be the best. Being different makes customers actively choose you over something else, and in that act superior returns are created.

The last benefit of trade-offs sounds simple, but I would argue that it’s the most important of all. Focus. Strength applied to weakness or opportunity. You need to focus your time, attention, energies, people, resources and creativity on delivering one clearly communicated strategy to make it work. All in. Strategies without focus, that don't make hard trade-offs, are looking to make all customers happy. And we know that’s not a good thing.