What makes some products more valuable as their customer base grows? How can businesses create a cycle of growth and value?
Hamilton Helmer explains how businesses can transform their increasing customer base into a powerful competitive advantage. When more customers use a product or service, it becomes inherently more valuable through enhanced user experiences and third-party contributions.
Keep reading to discover five methods that can help you build and maintain a thriving customer community.
Grow Your Customer Base
To grow your customer base, develop products or services that become more valuable as more customers use them. This strategy allows you to charge premium prices and achieve market dominance in two ways:
1) An increasing customer base increases benefits for individual users. For example, as more people use your plant-based meat substitutes and contribute to your blog, customers gain access to a wider variety of recipes and tips, enhancing the overall value of your products.
2) A growing customer base attracts third-party contributors. For example, your expanding plant-based community might attract partnerships with nutritionists or kitchen appliance manufacturers, further enhancing your product ecosystem’s functionality and value.
According to Helmer, this increased value draws even more customers, creating a self-reinforcing cycle that not only drives your success but also prevents competitors from luring away your customers. He explains that competitors with smaller customer bases can’t match the value provided by extensive user communities—and customers accustomed to community benefits are unwilling to switch to competitors offering less valuable alternatives.
(Shortform note: The two value-increasing advantages Helmer describes are commonly referred to as network effects. Business experts add that acquiring more customers can trigger another network effect that further increases value: data network effects. This type of effect occurs when a product or service becomes smarter and more personalized as it collects more data from customers. For example, a fitness app becomes more effective the more workout and health data it collects from its users because it can provide more personalized training regimens. This implies that businesses can create a virtuous cycle of value and growth by expanding their customer bases and leveraging user data.)
How to Grow Your Customer Base
Helmer says you can grow your customer base by practicing five methods:
1) Prioritize quality: Perfect your core product or service before launching new product lines. This helps you satisfy early adopters, laying the groundwork for sustainable growth. For example, ensure your first plant-based meat substitute product is of high enough quality to attract and retain early adopters before introducing additional flavors.
(Shortform note: According to Ash Maurya (Running Lean), the most effective way to perfect your core product or service and satisfy early adopters is to request feedback. This feedback should include early adopters’ overall impression of your offer, its effectiveness in addressing their needs, and their willingness to pay the price you set for it. Then, refine your offer until you’re confident that it includes the essential features your early adopters want, and that your pricing aligns with their expectations and willingness to pay.)
2) Target a single market: Focus your efforts on penetrating your primary customer group instead of wasting resources competing for customers in adjacent markets. For example, instead of dispersing resources to engage broader vegetarian or health food markets, concentrate on developing a strong following within the flexitarian market.
(Shortform note: Osterwalder and Pigneur (Business Model Generation) suggest an approach for identifying and targeting a primary customer group: Define the customers you intend to target before you work on developing your offer. This way, instead of developing an offer and hoping you’ll find interested customers, you can design your offer around customers with specific needs and simultaneously develop your marketing and sales strategies to effectively target them.)
3) Encourage market adoption: Develop partnerships and marketing campaigns to accelerate awareness and acquire customers. For example, form alliances with popular plant-based chefs or influencers to increase your company’s visibility and appeal.
(Shortform note: Everett Rogers (Diffusion of Innovations) suggests focusing on early adopters to accelerate market adoption. These individuals, comprising about 13.5% of any given market, are often opinion leaders who influence others’ purchasing decisions through their social networks. To target early adopters, emphasize your product’s advantage over existing alternatives and make sure it aligns with their values and needs. For example, appeal to early adopters by highlighting how your plant-based products are not only healthier but also more environmentally friendly than traditional options.)
4) Foster customer participation: Encourage active participation and build a community around your offerings. Engaged customers bring their own insights and experiences to your business, adding value. For example, encouraging customers to share recipes and cooking techniques promotes product usage and fosters a supportive community that boosts customer loyalty.
(Shortform note: According to C.K. Prahalad and Venkat Ramaswamy (The Future of Competition), you can encourage active participation by inviting customers to contribute ideas for new products or improvements to existing ones. This approach makes them feel like active partners in your business, increasing both their engagement and loyalty to your brand. For example, you could create an online platform where customers can suggest and vote on new plant-based product flavors or packaging designs.)
5) Expand your ecosystem: Introduce complementary products, services, and third-party integrations to make your offerings more useful and convenient for your customers. For example, develop partnerships with plant-based ingredient suppliers or kitchen appliance manufacturers to offer packages and discounts that increase the appeal and accessibility of plant-based cooking methods.
(Shortform note: Geoffrey Moore (Crossing the Chasm) offers advice for creating an ecosystem that makes your offerings more useful and convenient: Provide a whole product for your customers. He explains that core offers typically only provide part of the whole solution that customers need—for instance, when a business sells printers (the core offer) without the peripherals or ink cartridges. To identify your whole product, Moore suggests that you consider everything that your offer depends on or has to interact with to solve your target customer’s problem. Then, either provide the whole product yourself or form alliances with other companies that can provide the missing pieces.)
