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Welcome About Lehman Associates Services Presentations and Articles Our Customers Home Call Us Today 1-888-221-0081 Or Send an Email Tlehman@ansible.com		Are you listening too much to your best members and customers? © Tom Lehman, 2007 Without a doubt it is important to listen to your customers. And it is particularly important to identify and listen carefully to your best customers. However, the future success of your organization is likely to be dependent on those who today are not your best customers, or perhaps, not even customers at all. Listening too intently to your best customers may yield success in the near term, but actually lead to failure over time. While this is particularly true in the most dynamic professions and industries, it is a critical factor for every organization. How can listening too much to our best customers translate into future failure? Simply put, the answer is that in doing so, you may well miss important opportunities to take advantage of future changes in the marketplace and remain unaware of emerging trends that may render your existing products and services less valuable or even obsolete. If you knew that your current best customers would be your best customers in the future, then listening and responding primarily to their needs would be a strategy for success. Unfortunately that is unlikely to be the case. In a dynamic marketplace, your best customers of the future are likely to come from small and emerging segments in today's market. To take advantage of those opportunities, you need to be prepared to meet the needs of those segments. Chances are you are not listening enough to some your smaller, but fast growing market segments, nor to those who are seeking solutions to emerging, but still relatively small needs. There are many examples of this type of failure in both the corporate and association environments. In the 1980's, most of the major computer manufactures listened intently to their large Fortune 500 mainframe customers long after it was clear that newer, individual user markets were growing most rapidly. Clayton Christensen of Harvard University, in several books talks about the impact of disruptive innovation on the computer disk drive industry of the 80's and 90's. At nearly every point of major technology innovation, the then dominant suppliers failed to understand and embrace the implications of those new technologies, and as a result, lost market share. How does this apply to associations? In the same period of the 80's and 90's, the practice of medicine was undergoing rapid change. The major association representing doctors listened most intently to their most established member doctors, and not so intently to some of the fastest growing segments of their medical marketplace - young, minority, women, foreign trained, and health provider employee doctors. As a result, that association now counts less than 40% of doctors as members. They are not alone. The lack of attention to emerging segments, in some cases, has been the catalyst for the formation of new associations to serve their needs, or for existing associations to embrace new segments resulting in new competition for member loyalties. The IEEE (Institute of Electrical and Electronics Engineers) is one organization that has embraced new segments by providing the opportunity for individuals to join engineering societies operated under the IEEE umbrella. The challenge is not confined simply to new entrants. It is equally important to understand how current members are shifting into new segments. The banking industry continues to be characterized by rapid consolidation through merger and acquisition, resulting in fewer and larger banks. An important part of the banking industry is the community bank, traditionally defined as smaller, locally owned institutions with roots going back to small town agricultural banks. While community banks remain small as compared to mega-banks, a fast growing segment is that of community banks with $1B or more in assets, again as the result of acquisition and merger. This is large when compared to an average community bank of $100-200M. Many of the needs of these larger community banks are more like those of larger national banks than of the typical community bank. Noting this trend, one of the trade associations most known for its representation of large, national banks has concentrated efforts to attract these larger community banks. Community banking associations with a membership dominated by smaller banks may have been listening too intently to these best members and been slower to recognize and respond to the needs of these larger community banks. As a result, an important portion of their market may be at risk. Some questions to ask yourself. Given the dynamics of the professions and industries that make up our markets, what are likely to be the major segments in three to five years? In ten years? Are we listening enough to those segments today? What is our current penetration rates across segments? How does that line up where we expect to see the majority of our business in the future? In many cases, solid overall penetration rates mask dangerously low rates for key emerging segments. Are there signs that current practices and business models within our industry or profession may be changing? Are we paying enough attention to small and emerging patterns that may well define our industry and profession in the future? Do we structure our marketing goals and incentives to reward strategic accomplishment, not just numerical goals? Do we encourage our marketing and sales people to focus too exclusively on those segments where we already have the most success? Are we missing current opportunities to reach under-served segments and / or not positioning the organization for the future? Balancing the need to satisfy today's best members and customers with attention to the needs of critical future segments is challenging. It requires a commitment to look beyond current conditions to try to understand future landscapes. There are many smaller market segments; identifying the most important of these is difficult. Luckily there are research, analysis, and strategy tools that can help organizations identify and tap into critical future segments. It takes a commitment of resources, but far fewer than will be required if the association is unprepared to engage and meet the needs of future members. Tom Lehman is president of Lehman Associates, LLC, a management consulting firm that partners with association executives to improve organizational performance through insight, strategy, and the application of information technology.

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Are you listening too much to your best members and customers?

Without a doubt it is important to listen to your customers. And it is particularly important to identify and listen carefully to your best customers. However, the future success of your organization is likely to be dependent on those who today are not your best customers, or perhaps, not even customers at all. Listening too intently to your best customers may yield success in the near term, but actually lead to failure over time. While this is particularly true in the most dynamic professions and industries, it is a critical factor for every organization.

How can listening too much to our best customers translate into future failure? Simply put, the answer is that in doing so, you may well miss important opportunities to take advantage of future changes in the marketplace and remain unaware of emerging trends that may render your existing products and services less valuable or even obsolete.

If you knew that your current best customers would be your best customers in the future, then listening and responding primarily to their needs would be a strategy for success. Unfortunately that is unlikely to be the case. In a dynamic marketplace, your best customers of the future are likely to come from small and emerging segments in today's market. To take advantage of those opportunities, you need to be prepared to meet the needs of those segments. Chances are you are not listening enough to some your smaller, but fast growing market segments, nor to those who are seeking solutions to emerging, but still relatively small needs.

There are many examples of this type of failure in both the corporate and association environments. In the 1980's, most of the major computer manufactures listened intently to their large Fortune 500 mainframe customers long after it was clear that newer, individual user markets were growing most rapidly. Clayton Christensen of Harvard University, in several books talks about the impact of disruptive innovation on the computer disk drive industry of the 80's and 90's. At nearly every point of major technology innovation, the then dominant suppliers failed to understand and embrace the implications of those new technologies, and as a result, lost market share.

How does this apply to associations? In the same period of the 80's and 90's, the practice of medicine was undergoing rapid change. The major association representing doctors listened most intently to their most established member doctors, and not so intently to some of the fastest growing segments of their medical marketplace - young, minority, women, foreign trained, and health provider employee doctors. As a result, that association now counts less than 40% of doctors as members. They are not alone. The lack of attention to emerging segments, in some cases, has been the catalyst for the formation of new associations to serve their needs, or for existing associations to embrace new segments resulting in new competition for member loyalties.

The IEEE (Institute of Electrical and Electronics Engineers) is one organization that has embraced new segments by providing the opportunity for individuals to join engineering societies operated under the IEEE umbrella.

The challenge is not confined simply to new entrants. It is equally important to understand how current members are shifting into new segments. The banking industry continues to be characterized by rapid consolidation through merger and acquisition, resulting in fewer and larger banks. An important part of the banking industry is the community bank, traditionally defined as smaller, locally owned institutions with roots going back to small town agricultural banks. While community banks remain small as compared to mega-banks, a fast growing segment is that of community banks with $1B or more in assets, again as the result of acquisition and merger. This is large when compared to an average community bank of $100-200M. Many of the needs of these larger community banks are more like those of larger national banks than of the typical community bank. Noting this trend, one of the trade associations most known for its representation of large, national banks has concentrated efforts to attract these larger community banks. Community banking associations with a membership dominated by smaller banks may have been listening too intently to these best members and been slower to recognize and respond to the needs of these larger community banks. As a result, an important portion of their market may be at risk.

Some questions to ask yourself.

Given the dynamics of the professions and industries that make up our markets, what are likely to be the major segments in three to five years? In ten years? Are we listening enough to those segments today?
What is our current penetration rates across segments? How does that line up where we expect to see the majority of our business in the future? In many cases, solid overall penetration rates mask dangerously low rates for key emerging segments.
Are there signs that current practices and business models within our industry or profession may be changing? Are we paying enough attention to small and emerging patterns that may well define our industry and profession in the future?
Do we structure our marketing goals and incentives to reward strategic accomplishment, not just numerical goals? Do we encourage our marketing and sales people to focus too exclusively on those segments where we already have the most success? Are we missing current opportunities to reach under-served segments and / or not positioning the organization for the future?

Balancing the need to satisfy today's best members and customers with attention to the needs of critical future segments is challenging. It requires a commitment to look beyond current conditions to try to understand future landscapes. There are many smaller market segments; identifying the most important of these is difficult. Luckily there are research, analysis, and strategy tools that can help organizations identify and tap into critical future segments. It takes a commitment of resources, but far fewer than will be required if the association is unprepared to engage and meet the needs of future members.

Tom Lehman is president of Lehman Associates, LLC, a management consulting firm that partners with association executives to improve organizational performance through insight, strategy, and the application of information technology.

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Are you listening too much to your best members and customers?