The accountants are fond of telling marketing personnel that certain products or services in the portfolio are not earning their keep and should be deleted. Believe this at your peril! Let’s look at some examples:
In the plasterboard industry some years ago, sales of “fire-rated” board were minimal, relative to other variants and the profit margin was lower than on most other items. However, what if that product line formed a strategically important part of an overall purchase?
The answer – a true situation we uncovered in discussion with many customers was that it simply was not worth getting that one component from a different supplier – it was simpler to get the complete order elsewhere, especially when prices were so competitive and service was comparable.
Here is another one from a different industry:
A major supermarket chain “rationalised” the product range by deleting one variant of breakfast marmalade in favour of a “reduced sugar” product from the same supplier. The competitive supermarket maintained the old variety. This was not the first example of product rationalization across several different categories, including bread, pet food and toilet paper.
The outcome was that despite being creatures of habit and loyal customers of that chain for many years, annoyed customers simply changed supermarkets so they could continue to purchase their favourite brands.
And another example:
A hardware chain rationalised its range of sealants, again because some sold in such low volume. This was despite that item usually being just one of several purchased together. You know the outcome. That particular brand and item was “strategically important” to certain customers who simply took the business to a different supplier OR, horror of horrors- purchased online instead.
What? Change to online purchasing?
Almost regardless of category, humans are largely creatures of habit. In most categories, we become familiar with a particular store, its layout, product range and personnel. The same is largely true of products and services and there usually has to be a good reason the change. However it happens, maybe due to an advertised item from a different store, loyalty points, a change of personnel and certainly failure to be able to purchase trusted and familiar items.
It does not take very long to forge a comfortable bond with the new supplier if the experience is positive and this applies just as much to Internet suppliers as to traditional “bricks and mortar” outlets.
The new experience might just outweigh those old fuzzy feelings. Goodbye and good luck.
Don’t lose customers through product rationalization: It does not take very long to forge a comfortable bond with the a new supplier if the experience is positive and this applies just as much to Internet suppliers as to traditional “bricks and mortar” outlets.
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