This post is part of a series discussing the small signs of disruption. Rather than creating a single lengthy post, the blog is creating focused discussions of each of these questions. The first post revolves around evaluating the average age of your customers.
Time marches on. We all age. Time provides a metric for the future viability of your company – the average age of the customer base. This question gets to the long-term viability of the business. Leaders do not succumb to the signs of age disruption. They find ways to either maintain their average age or constantly refresh the industry and their position in it.
Relevant companies either stay the same or grow younger over time. Weakening and disrupted companies grow older as they play in the past rather than forge relationships with future growth. They avoid the maturity trap epitomized by the phrase “turn 68 and you renegotiate,” a lyric from John Mayer’s song Stop This Train.
The average age of customers is relative and relevant
Age as a sign of disruption applies in just about every market category. The measure of age is relative rather than absolute. Customers and markets form around various life events and levels of economic success. A company with an average customer age of 50 does not have to suddenly market to the under-25 market. Rather over time that company should look to hold that average age or even bring it down slightly.
Go back 10 years and calculate the average age of your customers. Now look at the average age of your customers today. If the average age is stable or growing then chances are you are being disrupted as people find and choose alternatives to your products, offerings and channels. A sign of a healthy company is one that gets younger over time—say three years younger over a ten-year period.
If your company holds a customer conference, look at the audience, are there many familiar faces, their average age, their energy etc. If you are seasoned executive and it does not feel like you are meeting new customers who could be your grown children, then you have to ask, where did all the younger people go? Or more importantly where are they going if they are not coming to us?
Fundamental needs do not change much
The basic needs of customers do not change that much, even in the face of new and disruptive digital technologies. However, the means they use to fulfill those needs and the resulting market structures they create do change. Companies that remain relevant to customer needs replace older customers with younger ones - no matter what the average age of their customers. An aging customer base is a symptom of disruption as older customers remain and future customers choose alternatives. Their choices lead to disruption.
It’s not your fathers…
These words telegraph a company’s age and changing relevance. In these cases time and customer choice have disrupted the company’s value and potency, slowly and over time. Past success and brand equity easily blind executives to the underlying disruption going on.
Rationalizing an aging customer base is easy. After all older customers tend to be more affluent, already value the brand, have more pressing needs, etc. Moves to engage mature customers and move away from the youth market is a classic example of companies creating their own “Innovators Dilemma” as they make the right decision in the short-term for all the wrong long-term reasons.
Age is a sign of disruption because it focuses the company on answering the question of where are the customers of the future coming from? Those are the customers with a larger lifetime value, the ones who vote on the future of the company with their dollars.
Age is one of the signs of disruption
Time is the only certainty in life. Time passes. Time creates new markets and represents a source of customer churn as we all exit some markets and enter others simply by changes in our age. Staying relevant to each generation is more than engaging in a marketing ‘youth movement’ or corporate mid-life crisis. Relevance requires seeking to understand every market including the younger customers who may not be currently the best fit for your most profitable products, but who are definitely the sole source of future customers. That is what makes the average age of a customer base a measure of disruption as each generation chooses for themselves. Are you the object of that choice?