Some customer groups are growing faster than others

Symptom: Customer growth rates are diverging, some segments are growing faster than others.

Implications for the market:

This divergence of growth rates will alter the economic dynamics for all competitors.

  • The customer segments growing fast will pull their suppliers along with them — causing some competitors to gain share at the expense of others.

  • Often, though, the customer segments with the fastest growth are the least profitable for an industry competitor to serve–a situation that tends to worsen as hostility progresses.

No significant industry competitor can ignore the risk that this development presents.

  • To protect share, each competitor must either have a sizable presence in growing customer relationships or increase its penetration of its current customer base, at the expense of another competitor serving that same base.

  • To protect margins, each competitor must balance the low-profit customers with those providing better margins, even if the more profitable customers offer lower growth. The company that elects to serve only high growth or high profit customers is unlikely to prosper.

Recommended Reading
For a greater overall perspective on this subject, we recommend the following related items:


Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Finding the Open Door" Volatility is the movement of volume from one supplier to another. A company can not gain volume unless customers are willing to make a change in suppliers. Volatility has special rules in hostile markets.

  • "The Big Slice of the Pie" The head of one industry leader explains his company's insistence on being a key supplier to each of his customers: "The guy with the big slice of the pie doesn't go hungry." The workings of the typical hostile market provide solid support for this philosophy.

  • "Use Subtle Strategy in Tough Markets" A hostile market operates differently than a market with "normal" competitive conditions. But as difficult as a tough market can be, it can also present an astute management team with an unusual opportunity.

  • "Which Customers Matter Most?" Average customer profitability differs dramatically in non-hostile and hostile markets. Does the relative importance of one customer versus another change as well? The answer is less evident than many business leaders believe.