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Harbinger Customers And Their Effect On Startups

Seven years ago, scientists at MIT and Northwestern did a study of six years worth of transactional data of 130 thousand customers in large retail chains. They made an interesting discovery – about 25% of customers consistently buy products that end up failing within 3 years.

Interestingly, these customers also tend to purchase houses in ZIP codes that appreciate less in value, support losing politicians, and purchase less popular clothing items.

This counter-intuitive discovery should make you worried if you are an early-stage startup founder because the most common advice you get is to listen to customer feedback and even to build an ongoing relationship with your first adopters. (It’s worth mentioning that the harbinger customers in the MIT study were more likely to be early adopters.)

What if you are listening to the feedback of a harbinger customer? Surely, it would be better to walk in the opposite direction of the one suggested by such a customer. And what if your startup tends to attract this kind of customer more often than not?

Before remedying these worries, it’s worth mentioning the obvious – the fact that you need to carefully consider customer feedback doesn’t mean that you need to listen to every customer. This would be more than counterproductive – each user is pulling the design of a product towards their unique wants and needs. It is your job to see the common thread rather than to religiously do everything each one of your customers suggests.

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That said, let’s delve into the harbinger customer phenomenon a bit deeper. There could be a few reasons a group of people could be consistently buying failing products in mass-market retail chains over an extended period.

The first one is that they could be price sensitive. If they are purchasing only things that are on a heavy discount, they are more than likely to consistently stumble on clearances of products that have been underperforming.

A second possible reason is that these people have wants and needs that don’t overlap well enough with the needs of the general public. Consequently, this leads them to purchase new, innovative products more often than the average consumer. As we know, innovation is risky, so by definition, a first-adopter will try things that are doomed to fail. Moreover, in a mass retail environment where successful products are only the ones that reach very high sales volumes, products that satisfy only small market niches are unlikely to do well.

Yet, for a tech startup, finding a small unsatisfied market niche is a blessing rather than a curse. This is where innovative offerings are most sorely needed, and while a mass retail business model cannot sustainably satisfy such niches, most online business models are ideally suited to that.

Moreover, due to this harbinger effect, such niches are where you would find the least competition from corporate giants.

Consequently, you shouldn’t think of harbinger customers as people who bear a curse that ruins any product they touch. While harbingers are the customers that the fast-moving consumer goods try to avoid, for a tech startup the person who needs new and different products from the ones currently on the market is exactly the person you are looking for when choosing your startup market.


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