When new product and customer Loyalty collide

Case Analysis by Raj Kumar Singh

Situation Analysis

Henry Carson CEO of Pacer athletic shoes is confused after reading a letter from one of its loyal customer. Henry started product line expansion to compete with new companies with deep pocket. However his new offering did not go well with few of his old and loyal customers. Also to compete with other big boys he started spending huge amount in advertising. But advertising is not paying enough and his market shares are decreasing day by day. Also he has started the product development for new segment of customers like casual walker. This situation has forced him to rethink his decision of expansion. The questions which are looking straight in to his face are:1) Is the decision of new product expansion is correct?2) Is the timing correct?3) Should he reconsider his decision for those loyal customer who want earlier offerings?4) Where did he go wrong in this transition?5) How could he possibly correct thing going wrong? 6) Should he stop the product development for new segment and concentrate on the existing product

portfolio?

Company Introduction

In 1970 Henry Carson started Pacer Athletic Shoes. His aim was to manufacture shoes focused on professional runners like himself. At the beginning the company could produce 80 pairs. By growing at a steady speed in 1990 the company reached in a position to produce 1000 pairs per day. It employs 46 persons and has a revenue of $ 10 million. It has got a status of midsized company. It has outsourced its manufacturing to South Korea.

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Industry Scenario

In 1990 the Athletic shoe market was growing at great speed. This attracted attention of many big shoe manufacturer. All of them wanted to have a pie of this booming segment. As a result of more and more player entering the segment the competition was getting stiffer. This brought option for the consumers and threat for the like of Pacer who were prominent in this niche segment.

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SWOT analysis of PacerStrength

Hands on experience by CEO as a professional runner.

A good base of existing loyal customers.

Player in niche market.

Have advanced in running shoe technology

 

Weakness

Small player compared to others who are present in larger segments.

Limited product portfolio.

Weak Market research appetite

Low product differentiation

Opportunity

Existing loyal customer could be used as early adopter for new segment shoes. So good base of Net Promoter.

Expertise of running shoes could be horizontally deployed to other segments.

Threat

New entry of bigger player in their niche market eating up their share.

Limited product offering could affect their revenue badly.

 

Product Life Cycle

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As per Marketing Guru Kotler the life of any product can

be divide in to 5 stages:

1) Product Development2) Introduction3) Growth4) Maturity5) Decline

Pacer’s employees need to ascertain: at which stage their product is hovering and depending on that only they should decide their product present and future. This can easily be ascertained by conducting a market survey among their customers.

Customer Loyalty

Customer loyalty can be differentiated into following levels:

1) Contact2) Lead3) Prospect4) Customer5) Client6) Supporter7) Advocate

Pacer should find out which of their customers are advocate and involve them in new product process, so that any dissatisfaction can be filtered. This process will help to stop anynegative emotion, shared by Cal Linden in this letter.

Conclusion- When New Product and Customer Loyalty Collide

Pacer’s CEO should have done few market survey to come out of the situation and his confusion which is created due to a letter from one of his loyal customer. Following could possibly be a way out:

1. Analysis of product lifecycle stage for existing product: Henry could get a simple survey conducted to know which product has started to decline and which one could still hold on to customers’ expectations. This survey could help him to plan his product portfolio accurately

Conclusion- When New Product and Customer Loyalty Collide

a) Involve his product advocates in new product development process: Henry must take inputs from his loyal customers while designing new products. Their feedback will drive the designing team on actual need of that particular segment.

b) Update the product line as per changing customer behaviour: Pacer team must collect information from market about changing customer behaviour demand. As the information level increases customer demand changes. Paces need to keep their product line as per the current demand.

Conclusion- When New Product and Customer Loyalty Collide

a) Product DNA: Since Pacer is into manufacturing running shoes, they can adopt this as their DNA and design a proper differentiate product line which can cater to several segment under racing group of customers.

b) Product line width and depth: To compete with new and bigger companies Henry too has to widen his product line width. Each product should have decent depth line to cater to every demand of the customers. But each product must be positioned to right target of customer. Else Pacer team would keep getting such kind of letters.

Conclusion- When New Product and Customer Loyalty Collide

a) Better market research/probable customer input during design: Pacer team should conduct frequent and better market research tools to involve probable future customers. They can adopt customer psychometric test in which one needs to display product to selected set of customer before product launch. They can also use product seeding technique in which they can give few new under design shoes to customer for use. They need to collect feedback from these customers periodically and modify the product accordingly.

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