When New Products and Customer Loyalty Collide - Essay Example

Jassim Alnajjar When New Products and Loyalty Collide: A Case Study Case Background Henry Carson, the president and CEO of Pacer Athletic Shoes, is currently faced with a dilemma regarding the future thrusts of the company in terms of determining the appropriate strategy with regards to product and market expansion. In the midst of testing a new line of running shoes, identified to be in the final stages of product design, Carson received diverse reactions and feedbacks from the vice president, Sarah Levine and Cal Linden, a former Boston Marathon winner and an established patron of Pacer’s flagship shoe, the Pacesetter. The apprehensions were manifested regarding the introduction and marketing of casual runners and walkers in 11 new designs, instead of focusing on the 5 designs that the company has produced for the last 15 years. Problem Identification There are different symptoms that were identified in the case such as: (1) an eroding regional share; (2) eminent failure to increase the share in the broader market; (3) inability to cope with production of more designs using the present workforce; and (4) ineffective advertisements that confused old customers more than attracting new ones. From these symptoms, one could deduce that using the 5 Why Analysis: why was there an erosion in regional share? (could be due to increasing competition where more product options were available); why did they fail to increase the share in a broader market base despite increasing the number of designs? (could be due to their inability to cope with the required high quality expected of the products they produce); why were they unable to cope with the production of new designs (maybe their present staff of 35 production workers could not comply with the increased product designs or there were failure to detect the quality of work outsourced from two plants in South Korea); and, why was there ineffective advertisements (maybe due to the increase product designs, management could not focus on the product and marketing strategies that they want to project to the consumers). In this regard, after closer evaluation, the root problem actually stemmed from the overexpansion in product lines and designs that have not been supported by appropriate marketing strategies to enhance public awareness and to establish core competence and competitive advantage for a particularly strong product brand or line. Responses to Questions 1. What had Henry done right? Actually, Henry was right in identifying that Pacer must respond to the changing and increasing demands of the athletic shoe market. The industry’s largest players begun to go after their established market share and have started to erode the leadership that they previously held. 2. What had Henry done wrong? In responding to the increasing competition, posed most especially by large players, Henry opted to expand by producing more designs, from 5 to 11; thereby expanding their target market to include casual runners and walkers than focusing on improving the original Pacesetter, regarded to have a strong client preference and demand. Henry opted to implement horizontal diversification by producing more product designs that would cater to different target markets and customers. 3. What new product development process or steps should Henry implement? Pacer has already established a strong corporate image and core competence for their original flagship design for the Pacesetter. As suggested by Sarah, the company could opt instead for a vertical diversification by focusing on improving the Pacesetter design. Their design engineers could make the style flashier, more colorful, provide additional features by improving on comfort, durability, and other details that would capture the old customers’ interests to repurchase and at the same time, entice new clients to try and love the product. 4. What would you recommend that Henry should do? After having identified the root problem, the alternative courses of action open to Henry as follows: (1) stick to his original plan of pushing through with the new product lines in 11 different designs but address all the problems by enhancing quality control, applying appropriate advertisements to enhance product awareness for the different products designs that cater to different target markets; (2) shift to focusing on vertical diversification and focus on improving the original Pacesetter; (3) do nothing (status quo) and just wait for the natural course to happen. The advantage of alternative 1 is that no significant changes would be made in the number of product designs but, by increasing quality control, the problem experienced from the RaceOne would be prevented. The disadvantage of the option is that it would not address product designs that are not marketable and these would continue to use resources without much return for the company. For alternative two, by shifting to vertical diversification, Pacer would focus on offering more variants of the original Pacesetter in term of producing them in different colors, materials, designs, features that could cater to different age groups. The advantage of this is that resources would focus on the core competence and this brand has already been acknowledged to perform well in the market. The disadvantage of this option is that focusing on this design might not be enough to increase their dwindling market share given the stiffer competition offering diverse athletic shoes that cater to broader market base. Finally, alternative three simply allows Henry to wait for nature to take its course. By not doing nothing, the company could wait for its market share to increase given the new product lines being introduced. However, this option could also lead the company in further deterioration of market shares if the customers are not satisfied with their new products and if advertisements continue to confuse their clients. From these alternatives, the most appropriate recommendation that Henry should do should comply with SMART objectives in terms of making the goals and strategies Specific, Measurable, Achievable, Realistic and within a specified Time frame (SMART). Specific: Henry wants to regain market leadership by increasing regional market share to exceed their previously high levels and eventually expand shares in the broader market base to about 10% to 15% within the next 12 months. For the short term, since the new line is already in its final design stage, Henry must incorporate the comments of the test runners before totally deciding to launch the product. One would recommend a review of the current product designs in terms of marketability and increasing quality control to prevent the incident that happened with RaceOne. From 11 designs, Henry should streamline the design and opt to continue production only on the most marketable shoes from the selection. If the outcome of the sales volume depending on product design reveals that only 5 have been marketable so far, then Pacer should only retain the 5 designs in the short term period. For the longer term, Henry must consider focusing on vertical diversification by intensifying marketing research to improve the design, features and marketability of the original Pacesetter to conform to the demands of consumers. Measurable: Further review needs to be pursued in terms of possible product positioning of the improved Pacesetter, including detailed situational and financial analyses to determine the possible impact and effect on the financial picture and performance of Pacer Athletic Shoes in both the short and long-term periods. Standards and projected product volume in sales should be measured after streamlining the designs from 11 to possibly retaining the original 5 and focusing on improving the original Pacesetter. Financial performance should be regularly monitored on a monthly basis to evaluate any significant changes resulting from suggested strategies. Achievable: The original 5 designs have already been proven to be effectively achieved by Pacer. Regular reviews and increasing quality control on outsourced portions would ensure that quality is not compromised. A comprehensive situational analysis encompassing the 5Cs: company, customer, competitors, collaboration and context are assumed to have been accomplished. Further, as mentioned, flashier shoes could be the fad during those times and therefore, their designers and engineers must use materials, innovative colors and designs that would lure new customers to purchase the improved Pacesetter and cater to a wider consumer group: from children, teen-agers, sports enthusiasts, adults: women and men. They have the manpower and resources to improve on the Pacesetter to adjust and adapt to the needs of contemporary customers. Advertisements should be placed in newspapers, magazines and in television to focus on the improved Pacesetter and encourage increased public awareness and re-orient them that the added designs and features on this particular brand could cater to wider customer groups. Realistic: By capitalizing on their core competence: the Pacesetter and the strength that this particular brand has established through the years, Henry could regain the dwindling market share. Through improving the design and features, offering it to a wider consumer base, and applying appropriate marketing strategies on product, pricing, place and promotions, Henry could look forward to ensuring that the brand he built could respond to strategies posed by large competitors in the athletic shoe market. Time: As indicated, there review to streamline the number of product designs need to be accomplished in the short-term or within three months’ time. Concurrent with this, Pacer’s two designers and two engineers can work on finding out ways to improve the original Pacesetter within three to six months, in time for the coming year’s line-up. Conclusion The recommended move to review and streamline product designs and focus on improving the original Pacesetter would assist Henry in regaining patronage of old clients and entice new customers to purchase their athletic shoes. By explicitly stipulated goals which are SMART and by applying appropriate strategies on the marketing mix, Pacer’s aim to regain and increase market share in the long run would definitely be viable and achievable. Read More