Growing your Company- When Every Customer Is a New Customer- Practitioner

The article "Every Customer Is a New Customer",  the authors want managers to not be as narrow minded in only thinking about growth rates when evaluating potential new businesses.  Managers should consider other factors to avoid missing out on real opportunities that can lead to growth.  One of these factors is customer turnover.

A factor to consider when analyzing potential new business is customer turnover.  Though some markets are slow growing or even experiencing negative growth, their customer turnover rates can be high or low (depending on the market).  Customer turnover rates are another factor in the dynamics of a market.

The author supports the findings by using several case studies in different markets.  The scenarios being:

1. Markets with high customer turnover rates.  In the smoking cessation aids market, the high customer turnover rate allowed for new products to gain large market share at the expensive of the establish (and former market leaders) products. The established, leading brands Nicorette and NicoDerm saw their market shares cut by almost half.  

Using Nintendo as another example, huge gains can be made at the expense of well established and dominant market leaders.  In the high customer turnover market of video games, Sony dethroned Nintendo in the mid 1990s with the introduction of its PlayStation console.  A decade later, Nintendo's Wii console overtook Sony's PlayStation market lead.

2. Markets with low customer turnover rates.  Longtime leaders such as Marlboro and Camel have held onto their market share in the cigarette industry because the market was not dynamic.  The low customer turnover rate meant that established leaders had loyal and long time consumers of their products.  These consumers remained loyal to their brands and as a result, new products or companies entering into the market did not fare very well nor did they make any large gains in market share.

When participating in a high turnover market, the practicing manager should not assume that the high turnover customers are easy game.  The costs associated with pursuing them may be large and they may be unusually risk averse. Practicing managers should consider different strategies in order to break into high turnover markets.

Customer turnover is dynamic and is not static.  As markets change, so do the turnover rates.  Opportunities will change as the markets change.  Practicing managers should take that into consideration and when evaluating potential new business, they should not concentrating solely on how fast a particular market is growing.  Even markets with slow growth can present opportunities which can lead to large victories.

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Cool, Karel, and Petros Paranikas. "When Every Customer Is A New Customer." Harvard Business Review 89.5 (2011): 29-31. Business Source Complete. Web. 25 June 2012 .