The customers who repeatedly buy doomed products

The customers who repeatedly buy doomed products

There’s an age-old piece of wisdom in product marketing:

Positive feedback = a sign of success

In most cases, this is true.

Companies love so-called high-value customers, or brand evangelists — folks who buy products repeatedly, leave glowing reviews online, and tell everyone they know to do the same.

Zachary Crockett / The Hustle

These consumers are precious gems in the corporate world. At a typical company, it’s likely that:

  • 80% of revenue is generated by just 20% of customers
  • The top 10% spend ~3x more than the average customer

But it turns out that not every customer who voraciously buys new products is good for business.

In recent years, research has suggested that a certain fraction of consumers are particularly skilled at picking out products that are destined to fail, or get discontinued.

They’re called harbingers of failure, or harbinger customers.

Zachary Crockett / The Hustle

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In 2015, a team of researchers at Northwestern and MIT analyzed 6 years’ worth of transaction data from 130k customers at a large national retail chain.

They found that ~25% of customers consistently buy products that end up flopping within 3 years. Think esteemed artifacts like:

  • Crystal Pepsi
  • Watermelon Oreos
  • Frito-Lay Lemonade
  • Coors Rocky Mountain Sparkling Water
  • Colgate Kitchen Entrees
  • Cheetos Lip Balm
  • Jimmy Dean Chocolate Chip Pancake-Wrapped Sausage
  • Clairol’s Touch Of Yogurt Shampoo

When companies forecast the success of their products, their projections are usually based on an initial window of sales. High sales numbers are seen as a beacon of future success.

But harbinger customers throw a wrench in this model: The more they buy a product, the more likely it is to fail.

Zachary Crockett / The Hustle

Harbinger customers are a distant relative of 2 other types of consumers:

  1. Preference minorities: Customers with niche or unusual tastes.
  2. Lead users: Customers who have specific needs and are dissatisfied with mass-market products.

While lead users tend to identify breakthrough products early on before they hit, harbinger customers seem to have a unique talent for picking epic failures.

They’re sort of like anti-influencers.

Zachary Crockett / The Hustle

Harbinger customers’ purchases are also systemic. Those who buy failures are more likely to buy failures in different categories: 

  • A consumer of Harley-Davidson Cologne (a flop) would be more likely to indulge in Colgate Kitchen Entrees (swing and miss).
  • A consumer of Hershey’s Chocolate Scented Pencils (disaster) would be more likely to buy Cheetos Lip Balm (epic fail).
  • A consumer of Diet Crystal Pepsi (swiftly discontinued) would also be more likely to purchase Watermelon Oreos (not a winning concept).

Zachary Crockett / The Hustle

So, who are these mysterious prophets of floppery?

Unfortunately, current scientific research is pretty limited on this front. We do know that harbingers’ shopping habits differ from their normcore peers in several ways. They’re more likely to:

  • Purchase less expensive items ($3.70 vs. $4.20/item on average)
  • Be early adopters of new products
  • Forego writing product reviews

On a demographic level, harbingers also skew slightly older, less urban, and have a lower household income and home value than non-harbingers who shop at the same store.

Zachary Crockett / The Hustle

Now, here’s where things get a bit weird.

Subsequent research has shown that these fail-prone consumers tend to cluster in “harbinger ZIP codes” — entire geographical swaths that share the same niche purchase preferences.

When they move away from one harbinger ZIP code, they tend to end up in another harbinger ZIP code.

And if they move to a non-harbinger ZIP code — an area where consumers have popular, mainstream tastes — their propensity to purchase flops doesn’t change. This suggests that harbinger purchasing behavior has more to do with geography than social influence.

Zachary Crockett / The Hustle

Even more surprisingly, harbingers’ tendency to pick failures doesn’t stop with consumer packaged goods.

People in harbinger ZIP codes are also more likely to:

  • Purchase less popular clothing items
  • Purchase houses in ZIP codes that appreciate less in value
  • Support losing politicians 

One possible explanation for this is that harbinger customers tend to have niche tastes that are often at odds with the mainstream.

Compared to non-harbinger customers, harbinger customers are 9% more likely to buy niche products (items that make up 1% of total unit sales) and 12% more likely to buy very niche products (<0.1%).

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“Simplicity, patience, compassion.
These three are your greatest treasures.
Simple in actions and thoughts, you return to the source of being.
Patient with both friends and enemies,
you accord with the way things are.
Compassionate toward yourself,
you reconcile all beings in the world.”
― Lao Tzu, Tao Te Ching