Editorial
The Gist
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Segment conflicts matter. Customer segments interact in complex ways, and failing to manage their relationships can lead to brand conflicts and lost loyalty.
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Compatibility drives growth. Using tools like the Segment Compatibility Matrix helps brands identify which customer segments can coexist or support one another for sustainable growth.
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Ongoing segment management. Managing customer segments is a continuous process that requires balancing, monitoring and sometimes letting go of segments that harm brand equity.
While pursuing a second master’s degree in business strategy, I had the opportunity to take a marketing strategy course at UCLA. The textbook for the course was “Strategic Market Planning” by Derek Abell, who was then a professor at Harvard Business School. I still remember a key question from the final exam: What is the distinction between business differentiation and segmentation, and how do they relate to each other?
Abell argued that differentiation is a double-edged sword. He said that product differentiation between competing suppliers tends to diminish over time due to imitation, while differentiation across customer segments increases as companies better serve specific segment needs. However, Abell noted, segmentation comes with costs and benefits, making the critical issue determining how many segments a firm should target.
Abell left one question unresolved. How should marketing leaders manage segmentation? This is the challenge Annie Wilson and Ryan Hamilton tackle in their new book, “The Growth Dilemma.”
Table of Contents
- Challenges in Managing Customer Segments for Growth
- Tools to Assess Customer Segment Relationships
- Community Advantages and Disadvantages
- Common Causes of Tension Between Customer Segments
- How Brand Identity Influences Segment Harmony
- Approaches for Managing Tensions
- Ongoing Practices for Managing Customer Segments
- Balancing Growth with Customer Segment Dynamics
Challenges in Managing Customer Segments for Growth
What CMOs Get Wrong About Customer Growth
Wilson and Hamilton find that brands often err in pursuing new customer segments without evaluating their impact on existing customers. Too often, they treat customers as isolated targets, and they fail to consider the dynamic and interdependent relationships that form between segments. This oversight, the authors contend, leads brands to overlook the ecosystem-like nature of a customer base, where the value each customer derives from a brand can depend, in part, on who else is also buying.
Clearly, CMOs and their leadership teams are under constant pressure to deliver growth, leading to what Wilson and Hamilton describe as a treadmill of acquisition. This is the addiction to finding any customer that can help move the needle. But this obsession can backfire.
When brands neglect the relational dynamics between their customer groups, they risk alienating loyal customers in the process of wooing new ones. Marketing leaders often underestimate or fail to consider how the influx of new segments can negatively affect existing brand perceptions and customer loyalty.
Why Segment Harmony Beats Segment Expansion
Today’s brands can no longer afford to view customer segments as discrete, bolt-on units. That’s because of four major marketplace shifts, including rising customer expectations, increasingly porous communication channels, the use of brands for self-expression and the accelerating pace of consumerism. These forces heighten the visibility of any brand changes, and they increase the likelihood of segment conflict. While changes designed to attract a new segment may strengthen a brand’s appeal in one direction, they can dilute or even offend the sensibilities of other segments. Failing to think through those effects is a recipe for conflict.
Throughout their book, Wilson and Hamilton illustrate these dynamics with compelling examples from brands like Crocs, LinkedIn, Lands’ End, Lego, Apple and Beats. Each case study highlights the unintended consequences that arise when brands prioritize growth without understanding the complex interplay between their customer communities.
Wilson and Hamilton's message is clear. In the age of hyper-connected consumers, managing segment relationships is not a side consideration. It’s central to sustainable growth.
Related Article: The Customer Segmentation Playbook Just Changed. Here's How
Tools to Assess Customer Segment Relationships
Understanding the Segment Compatibility Matrix
To help assess the potential for segment conflict, Wilson and Hamilton introduce a tool called the Segment Compatibility Matrix. It’s designed to help brands manage their customer bases as they grow. This matrix guides marketing leaders in determining which new segments to target (and which to avoid) by examining what each segment values and how segments interact with and influence one another.
The matrix focuses on two key aspects. One is the value each customer segment receives from the brand. The other is the way segments influence, or are influenced by, others that engage with the same brand. This lens allows brands to anticipate whether new customer segments will harmonize with or disrupt existing customer dynamics.
The matrix reveals four types of segment relationships. These are separate segment communities, collaborative segment communities, leader-follower segments and incompatible segments. Separate communities may seek different values from the brand but coexist peacefully because they are unbothered by each other’s preferences. In contrast, collaborative communities benefit from mutual use, and they’re often driven by network effects where the brand becomes more valuable as more people engage with it.
Types of Segment Relationships
How different customer segments interact within a brand ecosystem.
| Type | Description | Impact on Growth |
|---|---|---|
| Separate Communities | Coexist independently with different values from the brand | Allow diversification without conflict |
| Collaborative Communities | Mutually benefit from shared brand engagement | Boost loyalty and create network effects |
| Leader-Follower | One segment influences another’s adoption of the brand | Enables efficient growth through status signaling |
| Incompatible Segments | Desire conflicting things from the brand and cannot coexist | Risk alienating core users and diluting brand equity |
How Leader-Follower Dynamics Drive Adoption
In leader-follower relationships, segments look to others as trusted authorities, and they adopt the brand based on their perceived expertise or status as a leader group. These dynamics can be highly efficient for growth, especially when brands intentionally cultivate influential early adopters. At the other end of the spectrum are incompatible segments that want divergent things from the brand but also struggle to coexist. Attempting these creates tension and undermines brand equity.
To navigate these complexities, Wilson and Hamilton argue for deliberate segment relationship management. This goes beyond traditional segmentation and considers how customer groups relate to and perceive one another.
CMOs must be able to answer two key questions. First, do different customer segments derive significantly unique or non-overlapping value from the brand? Second, are there groups for whom value is created jointly, in conjunction with other segments?
Ultimately, marketing leaders must also evaluate whether customer segments are affected by who else is using the brand. In a world where customers see themselves as part of brand communities, managing these relationships thoughtfully is not optional; it’s a strategic imperative.
Community Advantages and Disadvantages
Separate communities can be a strategic asset by allowing brands to diversify their customer base and reduce risk if one segment shifts its loyalty elsewhere. However, as Abell noted, catering to separate communities often comes at a cost, particularly when it requires managing distinct marketing mixes to serve each group effectively.
On the flip side, connected communities offer scalability. They reduce marginal costs by using user-generated content, peer relationships and community-driven expertise. Once established, they become self-reinforcing, as users generate content and experiences that attract and engage others like them.
Leader-follower segments introduce another efficient growth dynamic. When cultivated correctly, leader segments can bestow credibility, coolness or authenticity on the brand. It requires investing in the right leader group and providing compelling evidence that reinforces their belief in the brand. This is no small feat, especially for newer brands.
In contrast, incompatible segments are a minefield. Wilson and Hamilton liken them to "bringing up politics at Thanksgiving dinner." These segments not only want different things but can actively impede each other’s experience of the brand. That is why brands must make clear-eyed decisions about who to serve and, just as importantly, who not to serve.
Related Article: Are Brand Communities Your Shortcut to Customer Love?
Common Causes of Tension Between Customer Segments
When Customer Communities Clash
The Segment Compatibility Matrix identifies four common sources of conflict that brands must navigate to maintain harmony across their customer ecosystem. Functional conflict occurs when different customer segments seek conflicting benefits from the same brand. Serving one group can diminish the brand's value for another. This clash happens when one segment’s presence or behavior interferes with another’s experience, which leads to feelings of alienation and drives customers to seek better-aligned alternatives.
Starbucks illustrates this well. In trying to attract new audiences, it diluted the experience for its original base of coffee aficionados and those seeking a relaxed café atmosphere. As a result, some longtime customers drifted away even as the brand continued to grow.
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Brand image conflict occurs when one group threatens the perceived authenticity, personality or emotional meaning of a brand. User identity conflict emerges when new users undermine a brand’s ability to serve as a social signal. Brands are often badges of identity, and their power erodes if they stop aligning with the values or self-image of key segments.
Common Sources of Segment Conflict
Where customer segments typically clash and what it means for the brand.
| Conflict Type | Definition | Example |
|---|---|---|
| Functional Conflict | Segments seek benefits that interfere with each other | Starbucks expanding fast service diluted relaxed café experience |
| Brand Image Conflict | New groups threaten authenticity or emotional meaning | Fashion brands losing cachet when overexposed |
| User Identity Conflict | Segment growth harms social signaling function | Tech brands losing early adopter credibility |
| Ideological Conflict | Association with beliefs alienates core audiences | Tesla backlash due to Musk’s controversial statements |
Ideological Conflict: When Beliefs Split Your Base
Finally, ideological conflict surfaces when a brand’s association with specific beliefs alienates parts of its customer base. Think of the backlash around Elmo’s COVID shot or controversies involving YETI, New Balance and M&Ms. Tesla is the latest example of ideological brand conflict. Originally appealing to affluent, tech-savvy, eco-conscious consumers, Tesla offered a premium blend of innovation, performance and sustainability. But as Elon Musk’s public positions have increasingly clashed with the values of Tesla’s core audience, brand loyalty has eroded. The impact is showing. Auto revenue is down 20%, and even longtime fans are distancing themselves. As one owner put a bumper sticker on their car, “I bought this before Elon went crazy.”
How Brand Identity Influences Segment Harmony
Smart organizations recognize that to manage multiple customer segments, it’s important to understand the potential for conflict and the nuance behind it. Effective segment management requires a deep understanding of what each segment expects from the brand and how those expectations can clash. Without this insight, even seemingly minor marketing moves can backfire, creating brand crises that could have been avoided.
To avoid controversy, CMOs must master three essential dimensions. They must know thy customer, know thy brand and know thy marketplace. Understanding your customer means knowing what matters to each segment, how they use the brand and how their values interact with other segments. To start the process, organizations need to name their segments clearly, identify their defining traits and map out potential points of friction between them.
How to Evaluate Your Brand’s Stretchability
To know thy brand, an organization must understand its own identity, history and the emotional meaning it holds across segments. This involves answering questions like: What does the brand stand for? How far can it be stretched before it loses authenticity? What parts of the brand story are sacred to core customers? Evaluating a brand’s stretchability is key to determining how it can evolve without alienating loyal segments.
Knowing thy marketplace starts with recognizing that brands don’t operate in a vacuum. Competitive dynamics, economic shifts and broader societal forces all influence brand perception. Smart CMOs assess these factors proactively and consider how each move may resonate or backfire across the customer ecosystem. Segment strategy today is about more than growth; it’s about balance. Brands must be as deliberate in choosing who they serve as they are in how they serve them.
Approaches for Managing Tensions
Strategies for Resolving Segment Tension
Smart brands do not stumble into segment harmony; they design it. One effective approach is to cultivate separate communities through targeted messaging, distinct channels and even sub-brands. This can be as simple as delivering one message to older customers watching Matlock Reruns and another to younger, tech savvy audiences reading Wired.
Distribution can also serve this purpose. Starbucks diffused functional conflict by separating its café experience from high-throughput drive-through and exclusive reserve lines. Some brands take it further by creating separate sub-brands to keep audiences apart while still benefiting from shared infrastructure.
Another strategy is to clearly define leaders and followers. This starts by focusing on and investing in the leader segment. That’s the one that sets the tone and wields influence. Followers will often adopt what leaders embrace. In some cases, brands need to unlink followers by offering them distinct experiences or product lines, like Michael Kors did with MICHAEL by Michael Kors. If the leader group has eroded, brands may need to reconstruct a leader segment from the ground up to regain credibility and traction.
In situations of unavoidable tension, some brands choose to eschew or even fire incompatible segments. If a particular segment consistently creates friction or dilutes the brand's value, letting it go can preserve long-term equity and refocus the brand. Another, more drastic option is to build an entirely new brand to avoid conflict altogether. While this is costly and makes it impossible to use the equity of the original brand, it can be necessary, like Gallo launching a new label to build credibility in the fine wine market.
Approaches to Managing Segment Tension
Strategies brands use to avoid or manage customer conflict.
| Strategy | Purpose | Example |
|---|---|---|
| Fencing | Keep segments apart via channels or messages | Separate apps for runners and sneakerheads (Nike) |
| Bridging | Foster mutual benefit between segments | Collaborative user communities (LinkedIn) |
| Laddering | Link segments in a hierarchy | MICHAEL by Michael Kors for aspirational followers |
| Sub-branding | Create new brands to serve distinct needs | Gallo’s fine wine label to avoid brand dilution |
| Segment Firing | Deliberately abandon incompatible customers | Brands disengaging from hostile or misaligned groups |
Conflict Can Be a Brand’s Boldest Asset
Finally, some bold brands choose to embrace the conflict. This approach uses tension as fuel for growth, reinforcing core values and attracting loyalists who align with the brand’s stance. The NFL’s embrace of Taylor Swift’s fan base, the “Swifties,” is a prime example. Done right, conflict becomes a catalyst for consumer engagement, not a threat. This strategy needs a strong brand identity, precise execution and resilience.
Ongoing Practices for Managing Customer Segments
Fences, Bridges and Ladders: Tools for Segment Management
As customer bases grow more diverse, segment relationship management becomes exponentially more complex and more critical. Brands need practical tools to navigate this challenge. Fences help by keeping distinct segments separate, and they allow each to enjoy a tailored brand experience. Nike does this expertly by offering one app for runners and another for sneakerheads.
Meanwhile, bridges link segments and support collaboration and community value. Ladders link segments in a vertical hierarchy that highlights status or expertise. Some segments lead, while others follow. This can create aspiration and influence, but it must be managed carefully, as these relationships are not between equals.
Importantly, segment relationship management is never “done.” It’s not a one-time strategy; it’s an ongoing discipline. It requires constant monitoring, value tracking,and operational checkpoints. CMOs must routinely ask themselves: What are the relationships between our growth segments and our current base? If our organization expands one department, what impact will that have on the other departments?
Managing can be like herding cats, except that these cats have smartphones and strong opinions. Conflict risk will only rise, but so will the opportunity to shape positive inter-segment dynamics. The good news here is that with foresight and discipline, brands can anticipate tension, avoid unnecessary conflict and build sustainable advantage by guiding segments toward relationship patterns that support growth.
Ongoing Practices for Segment Management
Key checkpoints and habits for managing customer segment relationships long term.
| Practice | Why It Matters | Sample Question |
|---|---|---|
| Relationship Mapping | Understand how new and existing segments interact | How does Segment A affect Segment B’s perception? |
| Value Tracking | Monitor what each segment values over time | Are core values shifting in key segments? |
| Operational Checkpoints | Ensure strategy stays aligned with community dynamics | Have we revisited our segment harmony plans this quarter? |
| Segment Stretch Testing | Gauge how far brand can evolve without harm | What moves would break trust with core users? |
| Conflict Risk Auditing | Anticipate backlash before rollout | What ideological or functional risks are we courting? |
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Balancing Growth with Customer Segment Dynamics
Ultimately, the challenge is not just acquiring more customers. It’s equally important to manage the relationships between them. Segment growth can create value or chaos, depending on how well a brand understands the interplay among its communities. Wilson and Hamilton's book matters because it emphasizes that effective segmentation involves curating a balanced mix.
Several key takeaways stand out. For one, growth requires discipline. Not every customer is worth having if they jeopardize the loyalty of your core base. Second, relationships between segments matter. Overlapping segments can conflict in functionality, identity or values, and brands must manage these tensions, not ignore them. Third, there are already available tools for this. Use fences, bridges and ladders to separate, connect or differentiate segments in ways that reinforce brand harmony.
Fourth, segment strategy is ongoing. It requires operational checkpoints, value tracking and the courage to walk away from customers who do not fit. Finally, conflict is not always bad. When managed skillfully, it can become a catalyst for attention, loyalty and even cultural relevance.
In the end, sustainable growth is less about acquisition at any cost and more about intentionally building a brand ecosystem. CMOs must act as architects of community, not just hunters of conversion.
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