Disney in Denial; Part 3; Swapping Customers is Mission Impossible

This is the third in a series of posts regarding missteps taken by The Walt Disney Company. You can navigate to Part 2 here.

The way Bob Iger, Disney’s CEO, explained it to the Wall Street Journal in 2019, as he announced a “pause” in creating Star Wars movies, is that he wanted the next set to be more accessible to “common moviegoers unburdened by decades of Star Wars memories.”

I suppose from the standpoint of creative freedom it would be nice to imagine a world in which a company could harvest the dollars from dedicated fans without having to take into consideration what those fans want to see and experience. But that’s not the world we live in.

The world we live in is roughly governed by the 80/20 rule, which in this context states 20% of a company’s customers account for 80% of sales. To understand the dynamics of Disney/Star Wars spending we need to extend the rule a bit. The proportions of this modified rule are 80/19/1.

The rule states the bottom 80% of customers still account for 20% of sales, but the top 1% (the best of the best) of customers account for another 20%. That means the remaining 19% of customers account for the remaining 60%.

Not all companies will see this kind of spending pattern. The companies that do tend to have customer relationships that last a long time with purchases made every year. That describes Disney/Star Wars very well. At least part of Disney’s marketing department understands this, writing, “Star Wars is generational for many, it is the movie equivalent of passing down family heirlooms,” describing the meaning Star Wars held for families of many different types across the world.

In the context of Star Wars specifically, it’s the top 1% of customers that see the films multiple times, visit the theme parks, purchase merchandise (both their own purchases and gifts they receive), and influence their more loosely engaged friends and relatives to do the same. That’s what sets top customers apart from common moviegoers.

Let’s put some numbers to this. Let’s say over a 20-year period, 1,000 customers spent $1 million on Star Wars experiences and merchandise. On average, these customers each spent $1,000, but that’s a horribly misleading way to characterize the situation. Employing the 80/19/1 rule reveals the top 1% of this company’s customers spent a total of $200,000 or $20,000 per customer. The bottom 80% also spent $200,000—only $250 per customer. So, yes, over time, each of a company's top 1% of customers can spend on the order of 80 times more than each of the bottom 80%.

That’s what makes alienating a company’s top customers so dangerous. It’s practically impossible to recruit enough new customers to compensate for the loss. On average, it would require acquiring 20 new customers to account for the loss of a single customer among the top 1%.

As we explored in the previous post, a company or brand should only risk alienating its core customers if it’s already in crisis. Fifteen years ago, the brand managers of Old Spice got it spectacularly right.

But neither Disney nor Star Wars specifically was in the same situation five years ago.

The next post in the series is available here.