Tuesday, August 18, 2009

Aging Customer Base

Reader's Digest has announced that it will file for bankruptcy protection. The magazine failed, in part, because of the advertising downturn in this recession and the high amount of debt on its books. However, Reader's Digest also failed because of a more significant long term decline in its business, as its customer base aged over the years. The magazine's demise provides a lesson for many firms who face a similar risk.

Companies need to be acutely aware of trends that may be leading to a substantial long term increase in the average age of its customers. It's one thing to target older consumers specifically; it's quite another to see your average customer age rise because you become less and less attractive to younger consumers who used to be part of your target market. Talbots has faced this problem in recent years, as it became less relevant to younger women. Harley Davidson must have some concern too as its average customer age has risen from the mid-30s to the late 40s.

Becoming relevant to young consumers again has its risks though, as Talbots learned a few years back. Attempts to attract younger consumers can, at times, turn off the older customers who have become a firm's core market. Thus, radical attempts to reshape a brand can backfire. Firms must be vigilant in monitoring long term trends regarding the age of their customers, so that they can gradually adapt, rather than waiting until a huge problem exists and then trying to dramatically overhaul the brand and target market.

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