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Magazines Archives - 2008 March
Competition outweighs customer
needs in product launches
Story 6
COMPANIES tend to place
competition before customers’ needs when releasing new products,
a recent survey conducted by the Economist Intelligence Unit (EIU)
discovered.
The survey, Managing the Challenge of Product Proliferation,
reported that, on average, only one-third of the products and
services released in the market stem from documented consumer
needs. Moreover, 60% of product and service launches are in
response to competitors’ introductions, while 31% of new
releases are intended to meet the demand of retailers and other
middlemen.
Released last month, the EIU survey sponsored by Accenture’s
George group, covered 186 senior executives from North America,
the Asia-Pacific and Western Europe, examining how consumer
goods, manufacturing and financial-service firms make decisions
in managing their portfolios. “There is frequently a disconnect
between companies and their customers.
More often than not, market research does not enter into
decisions to launch products and services,” the study noted,
adding that half of the companies have “adequate, limited or
very limited” understanding of customer-buying behaviour and
preferences.
“Most respondents think that a higher number of products
translates into greater customer loyalty. They say customers
expect them to introduce new products/services at an increasing
rate.
They believe customers like choices, even if the customers are
not necessarily gravitating towards the new choices that are
available to them,” the study reported.
Companies give little thought to overall product portfolio, EIU
senior editor Dan Armstrong, observed. “We found that companies
often launch and retire products and services on a piecemeal
basis without much thought to the overall portfolio. They also
tend to introduce products and services faster than they get rid
of old ones, expanding the ... portfolio to an unsustainable
size,” he said.
Only 33% those surveyed considered the effects of new products
cannibalising the sales of old ones. Companies also tended to be
reluctant to phase out old products, with 52% of the respondents
aying their firms retire less than 5% of their products
annually.
When evaluating products for retirement, 40% of companies tend
to ignore their contribution, or the lack of it, to revenues,
the study pointed out. |
