#145—Ryan Hamilton: Growing and Managing Customer Segments Successfully

Ryan Hamilton is an associate professor of marketing at Emory University's Goizueta Business School and co-author of The Growth Dilemma: Managing Your Brand When Different Customers Want Different Things. He is also co-host of the podcast The Intuitive Customer, and author of a book by the same name. He has consulted on branding with companies like Walmart, FedEx, Home Depot, Caterpillar, ConAgra, Cigna, Visa, and Ipsos, among others.  

To start a successful brand, you usually need to focus in on a specific, often niche, customer. But to grow the brand, you need to expand your customer base. A few brands have done this well (e.g., Starbucks or Apple) which have this loyal passionate base of fans that stick with them as the brands become ubiquitous. But, more often, brands fail to scale because the new customer they need in order to scale are too different from those core customers. They have different values or needs or beliefs. 

In this episode, we dive into this dilemma, discussing how to predict, preempt, and manage the conflicts that will arise between a brand’s initial customers and the more varied customer segments it must attract in order to scale.  

In this episode we cover: 

• This concept of “CSRM”—customer segment relationship management”  
• Examples of companies who have managed the growth dilemma well and those that have not—and what insights we can draw 
• A practical framework outlining the four types of customer relationship scenarios you may be facing, and what strategies to deploy for each one 
• How brands must be intentional about the type of value they offer

Episode Timeline:
00:00—Highlight from today's episode
01:14—Introducing Ryan + the topic of today’s episode
03:44—If you really know me, you know that...
05:12—What's your definition of strategy?
05:52—The basis for Ryan's second book, The Growth Dilemma
08:34—Breaking down an "identity of culture," within a brand
11:07—Have brands moved from functional to identity-based culture?
15:30—The concept of CSRM: Customer Segment Relationships Management (and the 2 x 2 matrix)
25:25—Breaking down the different types of customer segment conflicts
38:07—How do you know when you need to "fire" a customer segment?
41:19—How do the principles talked about in this episode apply to the employee segments?
43:30—How does the age of hyper-customization affect customer relationship management?
46:02—How can people continue learning from you?______________________________________________________________
Additional Resources:
LinkedIn: https://www.linkedin.com/in/ryan-hamilton-49b3321/
Book website: https://www.growthdilemmabook.com/

Thank you to our executive producer Zach Ness, our producer Nazanin Homayoun Jam and our editor James Pearce. If you enjoyed this episode, please follow, download, and subscribe. I’m your host, Kaihan Krippendorff—thank you for listening.

Follow us at outthinker.com/podcast

Transcript

Kaihan: Ryan, thank you so much for being here with us. I have really enjoyed preparing for this podcast and listening to your amazing podcast and reading your book and other work, and it really is a gift to be able to sit here with you today. Thank you.

Ryan: I'm so pleased to be here. Thank you.

Kaihan: So I have so much to cover, and we won't be able to cover all of it. I do wanna dig into one question, and then another question that I ask all of our guests And the first is just for us to get to know you a little bit more personally. Could have nothing to do with all of your work. Could you complete the sentence for me? If you really know me, you know that.

Ryan: You know that? I believe there is power and humor. So I I think that and there's research to back all this up, but I think that humor is a powerful way of getting people's attention and of encouraging them to remember things to facilitate learning. It can be a persuasive device. It can diffuse tension.

I think that humor is just a powerful, powerful rhetorical tool that we maybe don't use as often as we could.

Kaihan: So I know that you have been on stage, and you have you you you you are a comedian or there's a sort there's a sort of aspect of you. Have you done that as a tool to make you a more effective teacher, or is there an intrinsic motivation for you to explore humor?

Ryan: Oh, no. It's it's all mercenary and cutthroat. There's no harm actually that. Work. No work.

It's both. Yeah. I I enjoy consuming comedy, enjoy producing comedy. But, yeah, whatever modest success I've had in my career, some significant portion of that can be attributed to the fact that I try to be funny when I teach and and when I communicate with other scholars, and I just I believe in it. I think that it makes life better,

Kaihan: impressive. Second question. What's your definition of strategy?

Ryan: So I I've got kind of two, and I think that they're they're related. From a practical standpoint, strategy is what connects your goals to your topics. So we've got somewhere that we wanna go. We've got all these things we need to do on the ground. Our strategy should coordinate those things.

I think more conceptually, strategy is your vision for where you want your your company or your organization or yourself to go.

Kaihan: Yep. Got it. Great. The and and and so much of where you want to go depends on the set of people. Depends on customers, comes on employees.

And, you know, I I got to listen to several episodes, and I've started listening to regularly your intuitive customer podcast, which I think is outstanding. You get to jump across many different topics. And I did notice that, you know, the topic of your latest book, the growth dilemma, managing your brand when different customers want different things, was one of many topics in your list of of, like, it looks like every month that you're releasing a podcast. What was it about that topic that had you and Annie Wilson decide to dedicate yourself to writing this book?

Ryan: Yeah. So Annie and I have worked together. She teaches at at Wharton, and I'm at Emory. But we have worked together on developing teaching materials. Obviously, you teach a lot of the same classes across business goals.

Yeah. And so cases, examples, kind of structure for courses. And we ran up against this this problem where we noticed that So, like, in in your introductory classes, a lot of times it's like that first physics class you took in high school where it's like, okay. This is a frictionless table, and this is a massless poly, and we're gonna ignore all these other forces. You get that in a lot of introductory courses.

And one of those conceits is we're gonna treat it as if you have one target custom. So you get you're gonna try to figure out how to make this one group of people happy, and that's hard. Like, that is just a hard thing to do. But I would explicitly tell my students, like, we're we're not gonna worry about multiple targets yet because that's advanced. And at some point, I realized Andy and I both realized that that actually wasn't being addressed in electives.

Like, nobody was talking about how you coordinate these multiple groups of of customers together. It's not enough when you're dealing with multiple segments. It's not enough to make each of them happy in individually. Now you also need to worry about how they interact with each other. So you're not just managing your relationships with the customers.

You now need to manage the relationships between those segments. And we thought that was a really interesting idea and something that hadn't been explored yet And so that was the the genesis of the book because we started thinking about, well, what are the opportunities there from the the customer segment relationship side? How they interact with each other? And then what are the what are the perils? What are the risks associated with that?

Kaihan: Yes. Yes. Two two places I'd love to just explore with that. I think it's easy because when a company is small, the scale challenges, how do I scale more? When a company is big, it is how do I continue to scale or maintain that scale And, you know, I think that, you know, some of the examples that you've talked about, Apple, I think, is like a great example of that.

It has a very unique brand, and yet it has scale. And early on, I kind of thought, well, eventually, it's gonna run out of Apple people. And it has avoided that. I think Patagonia as well is a good example of that. But that's where we're gonna go.

But can you talk to me a little bit more about this segment to segment association? And we had Marcus Collins on the podcast, who I know that you have also you've you've spoken with at a at a conference before. And this idea of, like, an identity or culture brand as opposed to whatever the other thing is a functional brand, just talk just a little bit about if if you don't mind a little bit about what is identity or culture.

Ryan: Sure. So we so there's this idea in in marketing has been around for a while of of, like, the brand ladder or the brand hierarchy where there are different types of benefits a brand can offer to its customer. And so the the lowest kind of most concrete level is a brand could be associated certain functional benefits. So, like, Hain's t shirts, for example, would promote itself on a lot of functional benefits. Like, it has these lay flat colors and they removed the tag from the back, so it wouldn't scratch you.

But a lot of people were buying Hain's were buying because it was cheap and because it functioned very well. And that is a brand value. And you associate that with the brand, and that can be a a very valuable kind of relationship with customers. But then you can scale up and get a little bit more abstract. So their emotional benefits, their self identity benefits, They're kind of, like like, lifestyle or ideological benefits.

And so in the book part of what we talk about is the risk of conflict between segments across each of these different dimensions. And so Marcus is very big on ideology. Recommend his book. I'm sure I recommend your conversation with him because it Mark is just a really fun guy. And and those those conflicts are very complex around ideology and self image can be very hot conflicts.

Those can can generate a lot of of heat, a lot of friction. Functional conflicts are going to tend to be a little bit cooler. You know, one of the examples we talk about is Starbucks serves many different customer segments. Some of whom want to, like, just hang out in this third place and read a newspaper, assuming there still exists, and just gonna deal with friends. And other people are there to get their coffee and go, it's just practically difficult to serve those two types of customers well in the same physical retail space because one wants a lounge and one wants a speedway.

And so designing a single store to serve both of those is just it's functionally challenging. Not because those segments hate each other, but just because they want different things. So that that's what we talk about when we we talk about these different types of conflict, and and they do it do align kind of with this brand ladder.

Kaihan: Great. Okay. Got it. And we do wanna focus on these types of conflicts, and I wanna go into the matrix of your of your of your framework. Just wanna kind of just double click a little bit more on this identity piece.

Do you think and this is just my perception as a consumer that brands have moved I don't know, last twenty years or so from more functional to more emotional identity culture or is that just me getting older?

Ryan: No. No. Not at all. I think that whether or not brands have actually moved in that direction, I think brands and people care about brands talk about it more in those terms. I I think that there are still a lot of very successful brands that rely mostly on functional positioning.

But I do think that and I think in part, it was the problem of this latter that became a metaphor. So latter was initially it seen as, like, just increasingly abstract values or benefits that a brand offers, and I think a lot of people have interpreted that as, oh, no. Top of the ladder, more abstract benefits, ideology, lifestyle, that's clearly better and aspirational, and that's where we should all be trying to go with our brand. And I I disagree with that strongly. I had a research paper that came out, I don't know, ten years ago or so, where we we looked at lifestyle branding.

And the idea is that if that's a more defensible position. If you move up in your lifestyle brand, you can fulfill these emotional needs. It's harder for other brands to sell you. But the reality is that now you're just competing against an entirely different set of brands because people have, like, a limited need to identify themselves, to express themselves, And if they can fulfill that with other brands, then now you're just you're competing with the big boys at that point. And so the idea that you can, like, move your brand up to lifestyle and not you know, there are advantages to that, but there's also disadvantages.

You're you're not competing against all the ways you're competing for a share of the identity, and that's a very competitive space.

Kaihan: It's a bigger it's a bigger ocean, but you're competing with bigger fish too. This is not planned here at all, but one company that I've been I haven't seen you right about them, but maybe you know something about this Deluth trading company?

Ryan: I know a little bit about them. I certainly see their ads, which are amazing.

Kaihan: Yeah. Amazing. I went into a store in North Carolina. They only have a few stores, and then I got they they also sell a coffee table book. Which is just about how they built their brand over the last thirty or forty or fifty years.

And they're very functional. Like, they're famous for this t shirt that allows you to, like it's a little bit longer so that it covers up the the the plumber butt crack phenomenon. But that plumber buttcom phenomenon also speaks to a very specific type of customer. They they they're for the working man, then they eventually kind of expand to the working woman as well. But it's like people are out there.

Fixing on construction sites and and fixing cars and things. But each of their products are very have very functional attributes. So I can imagine that they can mirror together the functional and and the identity.

Ryan: Yeah. I mean, there there's this real interesting So we're used to the luxury positioning of brands, which is we've got these elites that are using this luxury brand, and then there's a bunch of the rest of us followers who, you know, want we'll buy the cheaper versions of it or buy smaller versions of it. So, like, I can't, you know, dress head to toe in Louis Vuitton, but maybe I can afford one handbag, and that allows me some access to that brand. There there's this interesting phenomenon where we've got brands that are now kind of reversing who the elites are in that category. So Deluth is a great example.

Car Hart is another one where the leader segment is actually blue collar workers. And then there are a lot of people who who start using those brands as fashion accessories in part because they want access to that kind of authenticity that that that realism. And so that becomes valuable. And and Duluth and Harhad both made sure to manage those relationships between those two customer segments by prioritizing that blue collar segment. They've never lost sight of the fact that, you know, who we are and these these followers, these fashion, and people are interested in in it from a fashion perspective.

They're a secondary customer, and they're great, and we love for them to come along what we know who we are, and we're gonna stick to that. And I think that that has been them successfully managing the relationship between those two segments, and we've got a strand.

Kaihan: Okay. Alright. So you're describing that leader follower segment connection. Before we go there, I want to just I hadn't heard this term before. That's probably just because I'm not as well read as I should be in the space.

I know what CRM is, but I had never heard of SRM.

Ryan: Yeah. That's because we made it on us.

Kaihan: Oh, great. Here we go. So it's not just me. Okay. Good.

Good.

Ryan: You have heard of this. It's because you were, like, bugging our phones or something, it would've been. Yeah. So we argue in the book for a a new discipline around growth. So as we're growing, the the assumption often is, like, oh, we've got our customer base.

Let's grow by adding more customers, and then it the current customer base will be fine. It'll be fine. We'll just add these new customers in and everybody we have. And what we're arguing is that when you have a growth mindset, when you're trying to grow your company, you need to be managing the relationships between the segments. So CSRM is customer segment relationship management.

So you gotta still manage the relationship between the brand and the customers. So CRM, that's still a thing. But now you also have this additional problem of managing the relationships between those customer segments. So that's that's the CSRM, and that's that's the term that we coined that you have no responsibility to have heard.

Kaihan: Okay. Fair enough. Yes. Okay. Good.

Well, soon, everyone will know this term. At least walk us through the matrix. So, you know, I think it was really helpful because that that can be sort of conceptual. You know you know, customers have relationships and sort of like an ecosystem of different people of relate but you were able to break this down of these two different dimensions the value segments get from the offering being divergent or collaborative, and the orientation toward other segments being either influenced or indifferent. If you don't mind just for breaking that down for us.

Yes.

Ryan: Yeah. So the intersection of those two dimensions, we get two by two. We get a a nice, McKinsey framework there, these four different quadrants. Some of the relationships, when people are indifferent to other segments and they're seeking diversion values, We call that quadrant separate communities. So you may have several different customer segments, and they they're probably aware of each other.

They're aware that these other customers are buying also from your brand, but they're just, you know, unfussed about it. It doesn't doesn't affect them. So for example, PDALight has pulled off something pretty remarkable, which is that they sell as a a children's medicinal. It's it's a a hydrating solution. Mhmm.

Kids. Kids. Kids. Kids. Kids.

Immunicated as a stomach bug and is is just not keeping fluids down, this is really good at keeping them hydrated. And that's what they were for decades. And then someone probably college students realize that this worked well as a kangover cure. And so there was this now they did not seek out this growth. This was organic that came to them.

And for a long time, they were resistant to it because they were worried that this might drive off their primary customer base. But they managed it very well

Kaihan: because I'm I'm I'm feeding, like, kid this thing that my that, you know, that that teenagers are using to to cure hangovers and that and and and and these these segments are just Exactly.

Ryan: You could see where it could turn them off. Like, this is one thing I want that has to be gentle and it has to be effective. And I think that the brand has managed it very well. The stats we found is something around half of all PDLite sales are now to adults or adults purposes. And so but they they've been very careful to treat those segments differently.

They've got different communications for each of them. They've been careful to not change the core product to make it feel more to adults in a way that would drive off the the children's market. And so they're they're separate communities. They're aware of each other now at this point, but it they're they're not popular.

Kaihan: They're just cool. I interesting. Yeah. Yeah. Maybe they don't live in the same house.

Everything they live in the same house, the product still looks the same, but this other second segment is buying it, and it's got a little picture of a baby on it. But I know I'm kind of using it for different function, but I I got you. I like that. I like separate communities.

Ryan: And they're fine with that. And, again, it this isn't a state of nature necessarily. The brand manages those relationships in such a way that they are kept apart. So that's separate communities. Connected communities is where the you would have brands that benefit from network effects.

So the more customers we get in, then the more valuable it is for everybody in such a way that the customers kind of also don't care who the other customers are. So all social media networks, those tend to benefit from that. My one of my favorite examples though is Microsoft Office. So before the Microsoft Office suite came out, everybody who's using different word processing programs and different spreadsheet programs, and they couldn't connect to each other. They couldn't talk to each other.

And so if I sent you a word perfect file and you were using a different software, like, you couldn't edit my document. As as Office became the standard, became more valuable to everyone. Even if you were using a Mac, as long as you had office, we could still send those files back in. So that's a connected community. We don't care who's on there as long as there's more people.

Kaihan: Yeah. Like, if if it were pediolite, which is not, you know, like, somehow the fact that more teenagers are drinking or adults are drinking it would somehow be of benefit to or preferred by the parents. That's not the case there, but here are the the two support each other, though, you know, the adoption ones.

Ryan: Exactly. Yeah. So classic network effect story. Third one we've already mentioned, which is leader follower, where you've got segments in kind of a vertical hierarchy, where one segment is a leader segment and the follower segment get something out of the fact that the leaders are there. So we talked about how for Duluth and Car Hart, the fact that these blue collar workers are there, it gives credibility to the brand in such a way that the followers were buying it for fashion purposes.

Kaihan: Okay. So, Luisa, I was gonna break it down. So here we have there is the network effect. The value segments get from the offering is collaborative. But on the other dimension, orientation towards other segments is influence.

So that means that, hey, I don't really know how to fix a sink, but I'm wearing a shirt that someone who knows how to fix a sink wears. So that's gonna you know, that's that's makes it makes me feel good or look good or whatever that is. Yep. Got it.

Ryan: My shirt would allow me to fix a sink if I chose to. And then the last quadrants, these are still influenced by each other. But in a negative way. So Negative effect in effect. Yeah.

So this is the incompatible segments. You and I want different things and the and it's hard for us to get what we want without stepping on each other's toes in some way. Right? And so This is the segment where the grow where the conflict happens. The other three segments that we already talked about, it's possible to grow successfully, sustainably.

They each have their pros and cons. There's not a lot of pros for incompatible segments. And, unfortunately, there's just lots and lots of examples of brands that try to grow by pulling in new segments, not realizing or or not appreciating that that's gonna cause conflict with their current customer base. To who they are in order to attract this new segment, and those changes are gonna upset their current customers. And pulling these segments together under the same brand is gonna just create a lot of heat and tension.

And sometimes, instead of growing, it can actually cause the company to shrink.

Kaihan: Interesting. Is there an example of that you have of when that has happened? Or where it might happen?

Ryan: Yeah. It's like it's most of the book. It's just all this happens over. So recent examples, Kohl's has been through three CEOs in the last couple of years. Their stock prices dropped by something like 50 percent, and it was this story.

Right? Koh's had a a customer base, and they said, let's grow. And so they said, well, why don't we move up scale? So let's take some of our stuff out that is is lower margin, and we're gonna pull in, like, Sephora and Babies RS. And their current customers are like, we we don't want that.

We wanted the discounted jewelry that you pull, and now here's Babies RS, which is more upscale than we want. So it's not clear that they attracted the new upscale customers that they wanted, but they did drive away some of their current customers. Land Zend did this several years before where they introduced, like, a high end fashion line as part of land Zend. And all their traditional customers who wanted, like, the chunky cable net sweaters were, like, who who what brand is this? We don't this is and so they they went from, like, $11,000,000 profit to $7,000,000 loss in, like, a year.

They're making obvious changes. So it's very, very common. Blood light, maybe the biggest marketing story of the last ten year. This was that story. They had a a customer base that was a little bit middle aged to older, pretty traditional, fairly conservative.

They wanted to reach out to new customers, and so they wanted to to make themselves more progressive, more inclusive. But light had been hot sponsoring pride trades for, like, twenty five years. Mhmm.

Kaihan: Well, I didn't realize it was and and it did some of her heritage. Interesting. Oh, quick. Because they were separate communities probably at that point.

Ryan: That's exactly right. Exactly right. How do you know that butterwhite is but light is sponsoring a pride parade? You go to a pride parade, which means you probably are supportive of that. It wasn't until they hired a trans influencer, and then that kind of jumped the track and became a story on its own that these two segments, which as you say, were separate communities collapsed into conflict, and they became incompatible.

Kaihan: Interesting. So the I guess the way I'm thinking of that is that if you can manage your brand so that you end up in something other than the incompatible segment quadrant, that's answer one, and then regardless of which one you end up in, you do have these three different strategies for reconciling them. But maybe before we go in there, maybe if you don't mind breaking down, I thought it was very helpful. The main types of issues, you know, functional conflict, brand image conflict, user identity, conflict, ideological conflict, maybe you could break those down for us.

Ryan: Happy to. Yeah. Yeah. So functional conflict we've already talked about is where just they want different functional things from a brand. There's not a lot of heat there usually, but it is it can be a big problem for the brand.

As I said, Starbucks has run into this. Starbucks has done some very clever things to try to manage that com functional conflict. In particular, we talk about the different store types that they have that try to channel their different segments to different places. Mhmm.

Kaihan: Just the examples of that just for people who maybe just be honest.

Ryan: So if it's you know, some Starbucks have just like a a kiosk standing on there, if you're one of these third placers, these people wants to hang out, you're not gonna go there. That doesn't that doesn't fit your needs at all. Starbucks has introduced some locations that are intentionally out of the way to focus more on kind of upscale, kind of culture of coffee experience, and it's designed for people who want kind of the old, sophisticated Starbucks in the old, third place environment. So, again, that that separates Yes. Segment.

Kaihan: And it it removes the operational complexity if we are focusing on more in one segment. Yes. Mhmm. Got it.

Ryan: Yeah. So each place can specialize. Yeah. So you raised Patagonia? That is an example of brand image conflict.

Patagonia had a very lucrative side segment of, you know, customers who worked at finance hedge fund tech firms. Yep. Mhmm. Edge funds. Who would buy these fleece vests in bulk and then have their logo on it.

There's a hilarious Instagram account called Midtown Unicorn, which is just pictures of these clusters of usually men looking like they're out at lunch, all wearing matching fleece vests. It's great. That's great. But the problem that I mean, that was a lot of money for Patagonia. That's great.

The problem is it created brand image conflict. Patagonia had a very strong environmental ethos, you know, done needed all kinds of money to environmental causes, and they had a a core customer base that really valued that. Can you maintain that brand image if your brand is now largely being associated with edge firms with finance firms. And so they took this step, you know, you talked briefly about, you know, you can move to a different quadrant. They took the step of firing that segment.

They said we're no longer doing this this corporate I

Kaihan: I do remember that. Yeah. Because I lived in I lived in Greenwich Connecticut, kind of, one of the capitals of the hedge fund world. And I remember, right, about then, it was you know, they they they would not take orders from well known financial brands that wanted to buy, you know, 50 or a 100 or 200 of them for their off-site. Right?

They just refused to go, yeah. Right. Right.

Ryan: And, yeah, they were wise enough to recognize this is actually a long term brand 

Kaihan: Interesting. Because of just living it back to your favor because they realize that these were incompatible segments. And if they pursued both of them, they would end up with this conflict, unreconcilable conflict. Right.

Ryan: So that's brand image. User identity is similar, but we thought there's enough difference that we wanted to distinguish them user identity, some brands are used to express a person's identity to signal that I belong to a group or a subculture. And when that brand starts inviting in other people, it can dilute the signal value there. So so we talked about in the book the example of the supreme the skateboard company. So this was, like, a legit skateboarder brand for a long time.

They would have, like, half pipes in their stores. They were just very core to to skater culture. And then it became a fashion brand, kind of a street wear fashion brand. And my coauthor, Annie, taught me the word hype beast, which I didn't know before. But yeah.

So it became very popular as a fashion brand. To the point that it started to crowd out the original skateboarders. Right? If I wore supreme to signal that I'm an actual skateboarder and now I start seeing it everywhere on people who are clearly not a part of my community, it no longer has that signal out.

Kaihan: Yes. And this is where we're touching on the the Marcus Cullen stuff about artifacts and behaviors. And and your stuff also, which is not so explicitly in this book, but I would you you talk about habit formation, how brands can build habits because I imagine habits are a physical kind of signal of a certain belonging to a to a culture.

Ryan: Yeah. Yeah. It it ties very much in with that. So, you know, being being a part of a tribe is really fundamentally important to us as as human beings. And so brands are one way that we signal that and and by growing a brand can erode that value.

So the last one is ideological conflict. This tends to be less common, although it's increasingly more common nowadays, but it's it's the idea that through using a certain brand, we might signal some of our core values or beliefs or that brands can become associated with with values or beliefs through who they serve. There are lots of different ideological groups that use the same brand without any problem. Right? Conservative's and liberal's both by Honda Accord.

It's not a thing. But when a brand becomes associated with one segment or one segment's values, then it can become a problem. So we've already talked about bud light. I think that that was an example of ideological comfort. So they're rare, but they can be explosive when they happen.

Kaihan: So I wanna go into these, like, the strategies reconcile. We've we've talked about firing customers and segmenting. But before I go there, I just I just what what's coming up for me is Tesla is because I think Tesla was kind of cool. And I'm looking at this, I'm kinda thinking Tesla starts with segmenting, and you feel more about this, and I do. But I maybe the EV's were targeting, say, green motivated people, and they started realizing that they could create this leader follower segment dynamic by targeting really, like, high-techy people who then people would wanna adopt And then at the time of this recording, we're coming off of Elon Musk being very involved in politics that are divisive where where wherever with whatever side you're on.

I don't know. Yeah. Have you looked at Tesla from these from these lessons?

Ryan: So I I think Tesla's brand, from my perspective, exists in two chapters. There's kind of a prepolitical Elon and post political Elon. From the perspective of our framework, the story is cleaner. Pre political because there, we're talking mostly about custom different customer segments as opposed to the the owner's personality. But I think that that Tesla was extremely clever when they launched in that they unlike Prius or the Honda Insight, or or some of these these early hybrid or electric cars, they didn't position around environmental friendliness as much.

That was kind of like a side benefit, but that, you know, they they launched with a Roadster. This was a high performance, high-tech, highly exclusive brand, and that became their leader segment when they added kind of more sensible sedans. It was cool. Right? So it wasn't that it was a green car.

It was a green car that was cool because they have this leader segment that was in it for because they were considering buying a Tesla or a Ferrari. That was the the playbook for those first models. Now afterwards, and and Elon complicates the story from the perspective of our segment. But, yes, now we're getting into ideological conflict around the the different kind of values of the company. And then

Kaihan: So it's, so it's, I guess, like, what I'm I'm I'm looking as people are listening here, they they they won't see us, but I I'm looking at your segment compatibility matrix, and I think it's really helpful with if anyone listens to this podcast, when they listen to it, if they can find an image that this really helps. I think that they what I'm hearing is it tell me, I'm I'm maybe completely wrong. But they but they're starting leader follower segment. That could work really well. They provide layers and layers of leader to follower to follower to follower.

But the political piece might be pushing them too much into the incompatible segments Right? And so how do they avoid that? Is is is Krishna

Ryan: It's exactly right. Yeah. Yeah. Yeah. So by kind of, you know, the the shifting of of Elon's political ideologies or at least the manifesting of them, it started to make the brand mean something different.

Now in in our book, we talk about how attracting new segments can make the brands feel like something different. I I think that there's there is you know, especially for the cyber truck, there is kind of a different segment of customers that started to get inter than Tesla. But I also think that that there's Elon had a huge sum on the scale in terms of of shifting that. So it's a little bit more complex of the story. But, yeah, in in general terms, that's exactly right.

They were leader follower, and then they through mismanagement, shifted over into incompatible.

Kaihan: Alright. So I'm gonna try to simplify this for myself. I take this metric matrix, and I'm growing my brand. I think am I gonna be separate community, Kinetic, community leader follower, or am I driving towards leading towards the incompatible segments. Now I recognize where the the the the the conflicts may be functional brand image, user identity, or ideological.

And now I think, okay. Well, so what do I do about it? And in your book, you lay out three strategies, kind of generic strategy segmenting, sometimes firing customers, defining leaders and follower segments, cultivating separate communities. I guess and just talk about those. I guess they they match two, the the three, but maybe just bring those to life for us if you don't mind.

Ryan: Yeah. So it's hard to move. So that that if you find yourself in an incompatible segment quadrant, that's just bad news. You should almost certainly get out of that. And so the strategies you can use to get out r two, we talked about building fences, which is, you know, trying to separate those groups to reduce the heat.

Sometimes you can do that through sub branding. So you create a special brand for one of these groups, and that kind of separates the metal a bit. You can use different communications channels. Sometimes, you know, in the case of Starbucks, they had different physical spaces for them to go. But people should feel that they are kind of taken care of as a segment within your your overall brand.

And so creating those distances between them can move them from incompatible up to separate communities. It's hard to move into connected communities because that involves, like, more of the structure of the marketplace.

Kaihan: So Mhmm. It's something you don't have less control

Ryan: of. Yeah. Because you do need those network effects. And so if you can find a way to create network effects, then you can move into there. Strategically, that's that's harder.

You can move into leader follower. That's like creating space. Between segments, but also it's it's about kind of moving people up in a hierarchy. So Levi's, for example, it just announced that they have they're introducing a new blue tab line, which is their first kind of premium or super premium denim brand in a long time. And, again, this is a sub brand that's going to elevate one group of customers, and it will make the whole brand seem more fashionable as a result.

Right? So these are, you know, $500 pair of of jeans made from Japanese, suede, denim, and, I don't know, hands sewn by nums and the Andy's. I don't whatever it is that they're doing to those jeans, but that means that that Levi's brand is going to be more fashionable and all of knee followers who don't buy those super expensive jeans, we're gonna feel a little bit cooler wearing our Levi's because those segments are out there. So we're moving from potential and compatibility where maybe the high fashion segment doesn't wanna be wearing the same jeans as everybody else who's wearing Levi's, and that could be a source of conflict. So now we're gonna elevate that segment, give them make them feel a little special, and then the process hopefully benefit everyone else.

The last one And Annie and I just developed this language after we we wrapped on the book, unfortunately. But the the last process we call so we talked about fences, ladders, and and Austen is planks, is then walking with blank. And that's where we when you fire a customer. Like, we just we can't serve you. Now you can fire the customer from that brands and then develop a new brands to try to serve them.

Right? You could create a Lexus if you're Toyota and say that we're we're not gonna try to attract this luxury segment. We're gonna create something entirely new to try to serve them. You don't need to give them on them entirely, but within a brand, sometimes you just can't serve those segments together.

Kaihan: Yes. Is there a point at which I don't have to get like, if you're going to fire or you realize you're gonna have to segment and either fire or serve with different brands. There's gotta be, like, a point at which there's a critical mass of the core brand that you know that it's because I think if you do it too soon. Right? So do you have I I don't have any thoughts on that.

How do you know it's time.

Ryan: So all of this should be done with a hardheaded look at the numbers. Right? So when when we say, like, you've got your core segment of customers and you're gonna track this new segment, and that's gonna create conflict maybe you need to let your core customers go. Right? Maybe the opportunity is with this new segment.

And in the process of pursuing them, you're not gonna be able to serve your current customers well, but you see that that's the that's the growth path of the brand. So there's nothing kind of sacred about your current core customers except for the fact that they're currently your customers in a source of revenue for you. And so you you shouldn't neglect them. You shouldn't assume that they should be there. But, you know, some there are rare cases very, very rare cases where a brand will insight conflict intentionally as a part of this growth path.

So we talk about the the Nike, Colin Capri neck story. So they hired Colin Capri neck as a spokesperson knowing it would be very device Siv knowing that they would anger some customers, and they did. They they made people very angry. But in the process, it was what sociologists call a costly signal. They showed that they were really committed to some set of brand values And the customers that stayed with them loved them for it.

And Nike's sales skyrocketed, highest ever, the the year that they hired Gong Capernac and their stock price and, like, all of these things despite the fact that they lost customers. So these even conflict can be used as a tool. Like, we have warnings all over that chapter. Like, this is really risky. Be very careful.

But to your question, it should always be driven by the numbers. Nike knew the size of these various segments, and they had good reason to believe they would end out in positive territory even taking this basically. So when should you fire a customer segment? When the numbers tell you you should, with the idea that, you know, Patagonia fired a very lucrative segment, because they were able to see into the future what this might be to their brand.

Kaihan: Yeah. No. I've been I've I've I've been reaching this out over time with you. But I imagine, like, CLV, customer lifetime value is probably a good tool for for for that. Right?

And, like, with your with your coauthor, Andy Wilson, I've been writing a book with Pete Fader who's also witten about CLD. And I think I could see the math there. Right? I could see Patagonia saying, okay. I'm gonna give up 30% of this market, but that's gonna create my 70% of my core customers they're gonna buy from you more frequently.

They're gonna pay, you know, you know, visit more often. And same thing with Nike. Interesting.

Ryan: Yeah. It it when I talk about the size of the market, it's the size of the customer lifetime value. Right? So it could be a tiny segment, but they're just gonna keep buying from you and buying from you. And then we're gonna lose a larger segment by population that just has a much lower customer lifetime value.

Yeah. Those are the numbers

Kaihan: you're gonna engage the other customer and make that more value. Interesting. It's so fascinating. Oh my god. Okay.

We've reached the top of our time with you. I have two very, like, short questions to ask is kinda, like, pushing maybe a kind of a little bit more into the future here. And I know that you actually wrote half a chapter on this, but decided not to include it. It's probably a whole another topic. Maybe your next book is applying this to your employee because as Stephen Meyer in our podcast, he coined this term that your employee is the new customer.

Just gives us a little taste of what your thoughts are on applying this internally. Because a company we got so big, that now I start getting I I joined this company when I was number 100, and now we're at 5,000. The people that you're hiring aren't my kind of people. You know?

Ryan: That's exactly it. So this is a a strategy book and a marketing book or marketing professors is the way we think. The principles that drive this are not customer principles. They're human principles. We want to be parts of our tribe.

We want to, like, look up to other people. We want to seek value in various ways. All of those basic principles apply to any human interactions. I had I had a conversation recently about a guy a pastor about managing their his organ his flock. Right?

Managing his people who go to his church, And you see this in churches where you got a conservative faction and the liberal faction and, like, how do you manage those within a single conversation? Absolutely. Some of the same principles apply to employees. So do you have you know, you you talked about early hires and later hires. Do they fundamentally want different things out of the company?

Like, do they have different sources of value? Do they have different ideologies? Like, are there just different fundamental values, or is it more kind of differences in in functional benefits from the company? Absolutely need to to manage that. Yeah.

Any anytime you get a large enough group of people together where it creates factions. You know, I've I've also talked to people political consultants about managing a political party that is made up of factions. And are those factions, leader follower, or are they are they incompatible? And So anytime you get a large enough group of people together, this is going to potentially be an issue, look for those paths for sustainable growth, and look to manage those those sources of comfort.

Kaihan: We could spend a whole time a a whole episode on that. Last question, because I know that we're reaching this out for a time with you. We had David Edelman on our podcast. He talks about personalization. He used to be the chief market officer at CVS.

And kind of his premises, and you you certainly come across as well. Is that we can now take information, compress it, we can create content, so we can create more personalized experiences for does that what tells about that it seems to me that that opens up the separate communities opportunity for us because people can have different relationships with the same brand.

Ryan: I think it's a a double edged sword there that you speak to the the benefits of it, and I I think you're right. Like, I think that that the more customized the content, the greater the opportunity for kind of creating unique independent messaging for each group, potentially for each customer, and that should kind of separate things to a certain extent, reduce risk conflict. I think the flip side of that, which I haven't seen a lot of people talking about yet, is what is a brand? Like, what does it mean? And so to me, I I I define a brand as a a memory structure.

It's all these associations that people have. And I worry a little bit that in an era of hyper customization and and microtargeting, that the memory structure that I create for a brand could be entirely different from the memory structure you create for a brand, which serves each of us well functionally But there's gonna be less of that that kind of shared identity of the brand, and so you might lose things like identity value and brand image value, be and even ideological value, because your brand x is entirely different from my brand x, even if on an individual level our transactions make us both happy. And I think that that that is risky. Depending on the company, some companies can do fine without kind of large scale branding and shared meaning. But for a lot of companies, I think that there's this assumption that that will still be there even if everybody's getting a unique message.

Kaihan: Yeah. No. It's fascinating. I think it's sort of, like, if you've got a friend, and that friend is acting one way to one person, another way to another person. I just don't trust that person.

They become manipulative, calculating. Right? And and I saw some researcher says that people don't trust algorithms in part because they they they trust people who make decisions that are not logical. I am gonna hold on to you as a friend even though I you know, it it's it's not to my benefit. Right?

So fascinating. Alright. So much more and I know and I can see that you've got pockets of all kinds of other things that will hopefully be future books. For right now, we're gonna definitely encourage people to buy the growth dilemma and listen to your podcast. How else can people connect with you and continue to learn from you?

Ryan: I'm on LinkedIn. Do you wanna reach out? But, yeah, the the book is something we're very excited about, and we we did our best to make it entertaining too. Annie cut a lot of my jokes just in the the interest of good taste, which I respect her for, but some slipped through.

Kaihan: Good. Well, maybe you can have, like, a an an an appendum of just the joke version. Yeah. Exactly. Good.

Ryan, thank you so much for taking the time to outline for us briefly the work that you do, and I find it really fascinating. It's gonna be valuable in so many attributes and and and direction. So thank you for being here

Ryan: It was such a pleasure. Thank you so much.