Focus on the core customer

In this article we start with the example of Nokia. Nokia’s ascendancy to leadership in the Indian market has been swift and systematic, with the result that millions of people in thousands of towns and villages today use its mobile phones in India— the world’s fastest growing market for wireless handsets. This success has seen the company’s market share rise to more than 70 percent currently from 46 percent in March 2003. So how did Nokia do it?

One key reason was its ability to obtain fast and accurate customer insights, which is the new basis for true and lasting competitive advantage. This focus on understanding customer desires has been the staging ground for Nokia’s successful expansion into a host of adjacent markets: By selling more than 100 phone models across the globe, the Finnish multinational gained new patrons that went way beyond the core of mobile phone users.

In India, it has followed a similar path, rapidly expanding a huge and diverse market. Today, Nokia offers over 45 models, ranging from $33 to $1,442 in the Indian market.

Nokia’s success underscores a primary finding in our research: More than 80 percent of the best adjacency ideas in successful companies come from looking deep within the core customer.

Companies can uncover new growth opportunities by identifying new customer segments to attack, or by taking an existing segment and subdividing it to achieve greater customer focus. Here, Nokia has excelled. Consider its expansion in India.

In addition to the premium urban segment, Nokia concentrated on India’s largely untapped rural market, as well as the lower-end urban market whose consumers eventually upgrade their phones. This customer segmentation allowed Nokia to penetrate the market’s wide range of customer preferences, income disparities, regional differences and language requirements.

One winning result: the creation of a global best-seller, the low-cost and hardy Nokia 1100 that came with an alarm clock, calculator and torch. Nokia has clearly understood that as long as a company grows, it can continuously segment large groups of customers to tailor its products more precisely to their needs.
Selling highly related products to customers is one of the most successful adjacency moves. American Express has mastered this art by building an effective and repeatable process to seek out, test, and execute new adjacencies from its card base such as its Platinum Card and Membership Rewards program.

This strategy has allowed it to turn a couple of card products with no add on services into a sophisticated family of targeted financial offerings for consumers, small businesses, and large corporations, varying by interest rate, terms, credit limit, associated services and reward programs.

Companies can create a whole range of sub-brands or close-up adjacencies from their core products by using detailed customer insights. This involves having products all along the core brand’s chain of use.

Procter & Gamble is a master in consistently finding new growth opportunities from its core products through deeper knowledge of its core customers. For more than two decades, for instance, P&G relentlessly built a regimen of product adjacencies from its core Tide brand, ranging from Tide Liquid to Tide with Bleach to product upgrades with enzymatic stain removers.

In India, the brand is also marketed in the form of detergent bars and single-use sachets to cater to Indian customer needs. This is not true adjacency expansion since it focuses on the core business, but it illustrates the power of understanding customer needs in finding new pockets of growth.

Customer insights come in other flavors, as well. Consider Olam International, launched in 1989 as an exporter of Nigerian cashews. Today, it is a supplier to big food processors such as Mars, Nestle and Planters. Focusing on its core customers, Olam systematically moved into geographic and product adjacencies , shaping itself from a supplier of products from one country Nigeria to a large, successful and complex business nearly two decades later that spans many countries as well as commodities.

The Singapore-based company started operations at a time when most agricultural commodity trade in producing countries was controlled by government boards or state monopolies but was in the process of being restructured at IMF insistence.

The young company was quick to recognise that these changes were fundamentally altering the game. It swiftly established a strong presence in its core market by increasing investment in infrastructure in producing countries, which allowed it to source a number of products from the same region. Through repeated adjacency moves into other producing countries such as Ghana and Cameroon, Olam rapidly became a leading supplier of cocoa beans and products.
Olam began supplying robusta coffees from India to various roasters in Europe. Once it developed a critical mass of roasters for its Indian coffee, the company entered other robusta growing countries to serve the varying needs of its customer base. Today, it is one of the world’s largest suppliers of robusta coffee.

Not all of Olam’s moves worked out. The company had to exit the unfamiliar black pepper and rubber markets. Yet today, Olam is the leading global supplier of cashews, its original core business, and ranks among the top suppliers worldwide in other key products like rice, cotton and spices. By staying close to its core customers, the company continues to grow strongly: it reported a year-on-year 38.5% rise in third quarter net profit ending March 2008 to $40 million.

The odds of success for customer led adjacencies are higher than for other types of growth moves, as Olam and Nokia demonstrate. When in doubt, focus on the core customer. The best ideas often come from studying their behavior. With differences between product offerings becoming ever smaller, the ability to find micro-segment opportunities and gain insight faster may be the ultimate competitive advantage.

  • meghna gupta

    Its a good article regarding the core customers and gives a good idea regarding it.