The Key to Identifying Your Most Valuable Customers

HANNAH BATES: Welcome to HBR On Strategy, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business. Do you know who your “super consumers” are – and why they’re so important for your strategy decisions? They’re your most passionate, most valuable customers — not just because they spend more than average, but because their insight can help you improve your products and services. Growth strategy expert Eddie Yoon is the author of the book, Superconsumers: A Simple, Speedy, and Sustainable Path to Superior Growth.  In this episode, you’ll learn how to define your super consumers and use their insight to attract new users to your products and services – with plenty of real world examples, from Velveeta cheese to vitamins and video games. This episode originally aired on HBR IdeaCast in December 2016. Here it is.

SARAH GREEN CARMICHAEL: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Sarah Green Carmichael. I really love hiking, and that means I buy a lot of hiking gear. I’m always interested in new boots, and new backpacks, and I have a lot of opinions about what makes a really good rain jacket, and what makes a bad one. Almost every product, category, or brand has some super fans, those die-hard consumers that are extremely knowledgeable about what they love. These aren’t average consumers. They’re superconsumers. They’re small in number, but spend more. Still, that’s not their biggest impact on the bottom line. Because they’re so engaged and passionate, they can offer invaluable advice to managers looking to improve their products, change their business models, and attract new customers. Here to talk about how companies can find their most passionate customers and learn how to tailor decisions to meet their needs is Eddie Yoon. He’s a growth strategy expert, and he’s the author of a new book, Superconsumers– A Simple, Speedy, and Sustainable Path to Superior Growth. Eddie, thank you so much for coming on the HBR IdeaCast.

EDDIE YOON: Pleased to be here. Thank you, Sarah.

SARAH GREEN CARMICHAEL: So in your book, and in your HBR articles over the years, you’ve often written about this phenomenon of superconsumers. But who are these folks? How do you define them?

EDDIE YOON: Yeah so a superconsumer is someone who has a lot of passion, and has a lot of profitability in a certain category. So they kind of love a category and buy a lot of it at the same time. And part of– I mean there’s a lot of work that’s been done with consumers. But part of the impetus for why I think this idea has been important to me is over the years, I’ve seen a lot of companies try to build out their growth and their growth strategies. And oftentimes I’ve realized that they were doing it the wrong way. That by and large, the most of the ways that companies are trying to grow is what I call pie splitting. So they’ve assume the pie, the category, is fixed. And I see Sarah’s slice, and dice want that slice, and I’m going to take it from you by lowering my prices, or upping my advertising, or copying your innovation. And that can work in the short term. But usually what happens is the pie gets smaller and smaller after a period of time.

What I’ve realized is that the better way to do it is to actually try to make the pie bigger. So you grow the category either by bringing in new consumers, you increase the number of units per consumer that they buy, or the price per unit. And that’s hard to do with someone who is kind of mildly interested in a category. And so you really need someone who has a great deal of passion and is quite knowledgeable, because they buy a lot of it. And it’s their insights that can help you figure out not only how to make your pie bigger, but to actually create a new one at times too.

SARAH GREEN CARMICHAEL: So maybe an example would be helpful here. Because I’m sort of thinking like, well, are they just wealthier. Do they just buy a lot of stuff in general? Could you give us an example of a category that has superconsumers?

EDDIE YOON: Sure. So one of the examples I can give you is– so take vitamins as an example. So I don’t know if you consume vitamins, and I occasionally do. I forget. But there are people who are just very diligent about doing that, be it one-a-days or vitamin Cs, or a whole bunch of them, or gummy vitamins. There’s a whole variety that are out there. And a small subset buy a pretty significant amount of them. One of the things that I find interesting about them, they’re not wealthier. They’re not like these monster eight-person households. They just care quite a bit about both the rational and emotional benefit of what vitamins means for them. In that it’s a little bit like an insurance policy. It doesn’t cost me much. It’s easy to do. And, hey, if it helps my health somehow some way down the road, then I’m going to do that. And what I found about them that’s kind of fascinating is these types of people, they exist in virtually every category that’s out there. And there’s nothing unusual about them other than they’ve figured out how to use a category to suit their needs. Or said differently, if a regular consumer, to quote Clay Christensen, hires a brand for a job, a superconsumer hires a category for multiple jobs to serve a larger end benefit that they’re trying to solve for, this kind of life quest there.

SARAH GREEN CARMICHAEL: That’s interesting. Well, I was startled to see in your HBR article on this topic, there was an extended example based on Velveeta cheese. And I was like, really there are superconsumers of Velveeta cheese? That startled me.

EDDIE YOON: You know, it’s funny. There’s a lot of categories, be it that one or brands that may seem very niche at some level, or at some very polarizing. But what we find is that the reason why those categories are niche is that those super consumers of that category or that brand, they figured out, wow, this brand not only solves a certain job again that you would normally think about so– in the case of Velveeta cheese, party dips for Super Bowl. But those consumers, what’s interesting about them, they’ve figured out a way to use the product for other jobs in their lives. So think about, as a parent, I have three children, getting them to eat vegetables is always a challenge at some times. And putting a little bit of melted cheese on any vegetable kind of makes the medicine go down a lot easier. It’s a really clever way of figuring out how to apply what would seem like a very narrow product to a much broader set of life solutions. And the reason why they’re valuable is not just because you have a person who’s buying it and using a lot of it in different occasions is that someone who might not use that product for a Super Bowl party dip, might have the same need, of boy, I wish my children ate more vegetables. And that brand might be a way of doing that, and I hadn’t thought of that before.

SARAH GREEN CARMICHAEL: You know, when you start talking about some of these more niche products and how this exists in every category, I could imagine a sort of skeptical person saying, well, I sell washing machines or something. People buy those once every 10 years. I don’t have a superconsumer in my category. Or similarly, think about something like soy milk. Is there a soy milk superconsumer, or is it just lactose intolerant people and vegans? How do you think about products like that?

EDDIE YOON: So I’ll take soy milk as an example. So in the early days of soy milk, it started out as a very kind of very missional kind of crunchy granola consumers who were really going after it. And it was really about the health benefits that they were getting at. And eventually what people figured out, and actually Steve Hughes, who was the former Chief Marketing Officer at WhiteWave, one of the bigger players in the plant-based food category, kind of figured out at the time that there were multiple uses beyond just traditional drinking milk. That you could put it into your coffee, you could put it into cereal, you could put into a lot of different uses that these people were using it for. And the common denominator versus drinking it straight was that in your coffee, in your cereal, it changed the flavor profile. And so it led them to add flavoring to it, led them to chill it in the refrigerated section. And then I think it began to attract other people who they may not have been all-in on the 1.0 version of soy milk. But on the subsequent versions, as they have been improved via superconsumers, they were like, oh, I like that. It’s an excuse to drink chocolate milk that I wasn’t able to do beforehand. Now I can do it now. And so that’s how the category expands through the course of the superconsumer there.

SARAH GREEN CARMICHAEL: The heart of the argument, as I understand it, is not just selling more stuff to these superconsumers, but really using them as a lens to understand a way to sell to all consumers more efficiently.

EDDIE YOON: Yes. That’s the great beauty, I think, of this concept is that when you run into someone who is a superconsumer, their passion is really infectious. And so one of the chapters in the book we talk about is American Girl. So I have two daughters. And if there was ever a category or brand that had superconsumers, American Girl was it. And I would always say, the best way to sell more American Girl products is to have your daughter play with someone else who has more American Girl stuff than she does. And that it’s almost this– it’s not quite peer pressure. But you see someone who has more, you see how they’re playing with it, you see the engagement that they have, the connection between grandma and the granddaughter, or the books and the educational aspect. And you’re like, wow, I never thought of using it that way in those different applications. And so that passion that a superconsumer has can spread like a virus in a way to someone who may have had those feelings and emotions, but it hadn’t been awakened yet or expressed. Or they realized they could apply it in a certain way that I think would make a lot of sense. And so I’ll give you another example that’s a little bit more extreme. Because you can imagine how girls playing together can want to buy more dolls.

But the video game category has actually expanded quite a bit so. I think about 2008 to 2011, there were about 50 million gamers worldwide. That expanded to about 135 or so. And when you think of video games, kind of the classic stereotype that people come to mind is a teenage boy in a dark basement with an expensive console playing kind of a military-style shoot ’em up game. And ironically, the growth of video games has really been driven by casual games. And this whole idea of the way that a superconsumer kind of helps convert other people, if I go back to the jobs theory, one of the things that we’ve come across with one of my colleagues, Taddy Hall, is this idea of if a consumer hires a brand for a job, there are multiple types of jobs out there. There is an entry-level job, there’s a middle management job, and there’s an executive-level job. And if you think about the video gaming industry beforehand, the cost was high to enter it. You really needed to be engaged. You only imagined teenage boys were this kind of executive-level job. There’s not many of them. They’re really into it, and it’s not for everybody else. But starting with the Nintendo Wii, which really started to open it up to women, older and younger kids as well. But also with Bejeweled Blitz. I don’t know if you have that on your phone.

SARAH GREEN CARMICHAEL: I have heard of it. I have not been tempted fate by downloading that. It’s pretty addictive from what I hear.

EDDIE YOON: Here’s what’s fascinating about it is that a game like Call of Duty is about 92% male, the vast majority are under 35, so kind of your classic idea. Bejeweled Blitz is 78% female. And the spike age-wise is 35 to 55, with a healthy spike above 65. And so completely different job. That’s that casual game where it’s free, a lot more people are playing it, just kind of here and there. The engagement is not quite as high as a regular video game. But it’s somewhere in between. But it’s a much wider audience. That’s that entry-level job that I think the video gaming industry has really figured out through the combination of smartphones and wireless speeds going up where someone who was really hard core identified a need in a different circumstance that might be applicable to a wider audience that was slightly different than beforehand. And I think you see that over and over again, where the passionate core of a category has an insight that’s using this category to solve and make their life better in some way, shape, or form. Those insights can be expanded more broadly. And when certain things come together in a new way that that opportunity can expand to a lot more people. And that’s how you bring in people who would have never played a video game or never would have associated themselves with video games. But a lot more women into the category have really driven that category.

SARAH GREEN CARMICHAEL: So how do you figure out which elements of something that the superconsumer likes would apply to then a new set of consumers?

EDDIE YOON: Yeah, so I think it’s the– the first step is empathy, I think. And so when you come across this idea, the natural inclination is to think you are somehow just different, maybe a little odd than the average person that’s out there. But if you have empathy and just say, look, I’m a superconsumer of a lot of things. Everybody is a superconsumer of something. And there’s a logical reason why you do that. So I go back to the vitamin example there. Is you have people– there is a rational benefit why they do that. It’s this kind of mini insurance policy that I do. And the end emotional benefit of I want this proactive protection in my life, just in case, for the worst case scenario. I value that quite a bit. Is you see that behavior manifest itself in a lot of different categories. And so one of the findings that we have from the data that we have from Nielsen, our parent company, is if you’re a superconsumer in one category you’re a super in nine others, some of which are obvious, some of which are not. And so in the vitamin scenario, people who buy lots of vitamins tend to have more than multiple refrigerators and freezers in their homes. Because they value food storage, just in case of the worst case scenario. And you ladder that up to they have more life insurance than the average person, as well as even a very niche category like standby generators. So Generac is one of the leading providers of generators there. That’s how we had helped them find consumers that were interested in paying $7,500-10,000 for a standby generator for a weather event that may never happen, was finding people that thread of proactive protection, category by category. And then looking for it in ways– they hang together, those categories. Because of that overarching emotional benefit there.

SARAH GREEN CARMICHAEL: So that makes sense to me from a sort of cross-category perspective. You see there how– figuring out– OK, well, if we’re a life insurance company, and we want to figure out life insurance, what’s sort of like that? Well, vitamins and generators, and then maybe you can sort of target those people. With something like the video game example, how do you get from Call of Duty for young dudes to Bejeweled Blitz for grandma? How do you learn from Call of Duty superconsumers, and then apply it to older female gamers?

EDDIE YOON: Yeah. So I think if you start with that empathy for the superconsumer, there’s a logical reason why they’re doing it. They are using a category for many more uses or jobs than I realize. And secondly, you start with this idea that category growth is the better way to build my growth strategy. So I’m not going to just steal your slice of the pie, Sarah. But let’s make the pie bigger for everyone. And actually our research has found that for categories that grow faster than inflation, 1% of the brands capture 80% of the category growth upside. So it’s actually quite a good strategy for them.

SARAH GREEN CARMICHAEL: Wow.

EDDIE YOON: And then you think about, well, how do I grow, make the category, make the pie bigger its number of consumers? That you start to ask the question, as the first lever of number of consumers, what can I learn from a superconsumer? How do they use the category in a way that might be attractive to someone who is a light user or non-user of a category? And oftentimes those insights are right there. And just by listening and having empathy for it with the intention to grow the category, you can figure out, oh, had I known that I could bring in a whole new set of users that I hadn’t thought about beforehand.

SARAH GREEN CARMICHAEL: If you are trying to figure out how to figure out who your superconsumers are, how you can get some feedback from them, how should people proceed? It is a survey? Is it a focus group? Is it something else?

EDDIE YOON: So all of those methods are great. I would say just start with the data that you have already. And so be it data that you might get from a syndicated provider about your sales, or even frankly just look at where your product is going. And I think part of another fun fact about superconsumers are birds of a feather flock together. So they tend to coalesce in certain areas, where a bunch of super consumers are densely populated and sales really spike there. So one other example is there was an ice cream company that we knew a while back where their top-selling flavor, 50% of the sales went through 3,500 grocery stores out of 35,000.

SARAH GREEN CARMICHAEL: Wow.

EDDIE YOON: So 10% of the stores sold 50% of the units for this particular flavor. And once they saw that they said, well, we better make sure that flavor is is in stock in those stores. And what is it about that flavor that is so attractive there? And what if we thought about expanding it in kind of concentric circles around the geographic area? And maybe there is a way for it to catch fire there. And that’s what I’ve often found is that there’s a lot more data that people are sitting on than they realize. And so part of it is just where are your shipments and sales going. That’s probably going to tell you quite a bit about where those supers are. Social media is another great one. So if you bother to take the time to tweet about a plastic cup, more than likely you’re probably into that plastic cup category or whatever else it is. Most people don’t post things on social media about things they don’t care about. And so that’s another great tool for finding and learning about superconsumers that are there. I think the other best way, one of the more fun parts of the book that I hadn’t anticipated was look for the superconsumers in your company. There are people who work for you who love your category. Now you might not realize it, because they might be very junior. They might be in different functions that are away from, say, marketing or innovation. But invariably there’s a reasonable number of people that are there. And in fact, what we found is that there’s a number of companies that once they figured this out, they tap into it in a way that really energizes the culture of the workforce. So that you can move forward and tap into latent kind of energy, empathy, and creativity benefits by just figuring out who in my company right now is really into it. There is variance though. Not everybody’s into the category that you sell or work in, as everybody else.

SARAH GREEN CARMICHAEL: There might still be some people who are like, why should I spend time selling more to the people who are already buying so much? How can I activate non-consumers instead? Do you ever run into that kind of skepticism? And then if so, how do you respond to that?

EDDIE YOON: Yeah. That often comes up. And it’s not an either/or or it’s a both/and. And it’s a sequencing question more than anything else. You start with superconsumers because it’s the best use of your time and your resources. And ask them to help you figure out how to convert the unconverted. Ask them to help you figure out the people who use you occasionally, why they might buy more. Ask them to figure out what would need to be true for you to pay double the price of what I sell you now today. Which is a ridiculous question. If you ask any regular consumer, they’d say, no way would I let you do that. But a superconsumer would say, well, if you did this, this, and this; I would actually pay three times as much for it. The uninspired can’t help you figure out the unimagined. And that’s where you have to go. Start with the passionate core, and let them do your work for you.

SARAH GREEN CARMICHAEL: Well Eddie, this has been so interesting. Thank you for coming in today.

EDDIE YOON: Thank you for having me, Sarah.

HANNAH BATES: That was author and growth strategy expert Eddie Yoon – in conversation with Sarah Green Carmichael on the HBR IdeaCast. Yoon is the author of the book, Superconsumers: A Simple, Speedy, and Sustainable Path to Superior Growth. We’ll be back next Wednesday with another hand-picked conversation about business strategy from the Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. We’re a production of the Harvard Business Review. If you want more articles, case studies, books, and videos like this, find it all at HBR dot org. This episode was produced by Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Special thanks to Maureen Hoch, Adi Ignatius, Karen Player, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.