Drewbot • Loyal Customer Myopia

Loyal Customer Myopia

What happens when you’re obsessed with appeasing your current, insanely loyal customer base? You end up adding features requested by superusers and end up with this:

The Age of the $600 TiVo is Nearly Upon Us (via Gizmodo)
BlackBerry Bold-ly Gambles with High Cost Handsets (via GigaOm)

Who needs a TiVo with four HD tuners and storage for nearly two weeks of HD content? I’ll bet you $600 it’s a person who already owns a TiVo, if not several. Same for BlackBerry: are accolades like “best keyboard ever” relevant to anyone who doesn’t own a BlackBerry?

High-end BlackBerrys and TiVos are short-term business boosts, at beast. They extract profits from passionate consumers with little regard for growing their base. Such pricey products that pander to loyal users are an appealing option when companies need to show the market profits now. These companies are scared to go back to the drawing board and invest in R&D while abandoning the requests of core customers who seem to be the only people still rooting for them.

This move is the beginning of a death spiral: it appeals to the most valuable, existing customers while your mass market base shrinks. No one enters your funnel because—honestly–-who the hell is going to take a risk on $600 TiVo when Comcast is spotting you a DVR for a few bucks a month.

Josh Nguyen wrote about about Yahoo’s downturn a bit ago and reminded me of this phenomenon. Personally, I can’t help thinking that this ‘loyal customer myopia’ plagued Jerry Yang and contributed to the downfall of Yahoo.

As Yahoo faltered, the overwhelming passion of the core fans was always held up as proof the company was on the right track. While Yahoo stagnated, innovative programs were often evaluated by whether or not the “Yahoos” would love them. They never considered that their core user base was a shrinking minority within the larger, evolving web. Making decisions based on loyal feedback and enthusiasm guaranteed stagnation. New users weren’t coming into the funnel because they weren’t being addressed. The only way Yahoo could go was down.

Take note: you can always lose existing users, but you can never add existing users.

TiVo and BlackBerry have two of the most passionate groups of users among stagnant companies. I fear that they’re listening too closely to these people, prioritizing their feature requests, and selling products that are only valued by the users they already own. With this strategy, they can only go down. New users will balk at the prices and never earn the experiences needed to justify the cost. It’s a catch-22 that will eat away at their base.