Magazines Archives - 2008 March

Competition outweighs customer needs in product launches
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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.