When Listening to Your Customers Can be a Bad Thing

One of the articles read for Tuesday's class is "Market Segmentation: a Strategic Management Tool" by Richard M. Johnson. It made a lot of great points about perceptual mapping and how that knowledge can lead to effective positioning or repositioning, but I fundamentally disagree with one of the points made toward the end of the article.

Johnson describes three main strategies for increasing market share by repositioning: positioning closer to companies that have achieved substantial market share (imitators), positioning farther away from all competitors (innovators), and determining positioning strategy almost exclusively by consumer preferences. The first two are certainly legitimate, successful innovators achieve huge amounts of market share and other companies make up lost ground by adapting to whatever competitive advantage the innovator established early on. But if a company were to position themselves according to their market research of consumers, I think they would find it increasingly difficult to survive.

The photography company Kodak is a perfect examples that illustrates this. Kodak's bread and butter was always film-based photography, and thrived on this specialty for a while. However, as always seems to happen in any market, a disrupting factor came about eventually. That disrupting factor was digital photography, and ironically enough it was Kodak that invented it. However, senior management's reaction went something like this: "That's great and all, but we're a great company because our consumers love our high quality film-based pictures. Don't tell anyone about this" (http://onforb.es/1T6bfTw).

This is why in my opinion, Johnson's third repositioning option is flawed. When Kodak examined a potential repositioning moment, their conclusion was to listen to their customers for direction: they loved what Kodak was offering them. This is such a flawed decision making structure because consumers can only ever know about what's currently on the market when they provide feedback on their wants and needs. Companies always have to be keeping a watchful eye on market trends, because digital photography did get developed elsewhere. As companies realized the overall trend of digitization, it eventually became an industry standard. By this point, the vast majority of consumers would now be indicating that their desire for the photography industry was a high-performing digital camera. But at that point, it's too late for Kodak.

Companies should always listen to their customers, that kind of feedback is critical for understanding what they do well and what they could improve upon. But when you focus your offerings and positioning strategies solely based on that feedback, you're stifling any potential of innovation your company may have. And by doing that, as new technology develops and market needs eventually shift, you're bound to have your Kodak moment at some point in the future.