The Law of Diminishing Customer Returns
John Todor (author of “Addicted Customers: How to Get Them Addicted to Your Company”) was discussing an interesting notion — for a given value proposition, for every customer you add, the value of these incremental customers diminishes over time. He quotes author Merlin Stone, author of “The Law of Diminishing Customer Returns,” making the point that most companies do NOT adjust their acquisition or retention strategies for changing market conditions. See the post here.
This seems like a very basic fix but obviously one that has some complexity to it, else most companies would do this.
The problem seems to be two-fold. First, a company must recognize that its customer base (and potential customer base) are comprised of groups of people with very different attitudes and needs (the researchy word for this is “heterogeneity”). The second issue is finding a way to tell whether or not you’re being successful with customers. And, as we like to say here, one size does not fit all — companies need to find the right measure that works for their situation and not try to find a magic bullet.
Share This
Leave a Comment