Hill, Principal - Hadley Associates, Inc.
activity is weak, it is a great time to step back and question
your existing product and distribution strategy. With a fresh
look, there will emerge immense possibilities for most manufactured
goods and services. This is true for traditional products,
as well as custom, one-of-a-kind fabrications or assemblies.
expand your thinking and consider some real product strategies
that have impacted companies just like your own, many are
right here in Eastern Pennsylvania. When reading these product
reposition strategies, consider transitioning into your present
market. Try to bring a new perspective to the products that
you may have "learned to take for granted". You
may think of them as "mature" markets, when in all
reality, they are not; you may be just managing that way.
Products or Capabilities
Pursue new channels-of-distribution
Establish independent distribution
Market complete, finished products
Market component parts
are many examples of the above. An obvious one is the emergence
of "alternative" channels-of-distribution for traditional
industrial products. Home Depot and Lowe's are full of these
examples. It can be found in other channels as well.
if you had the foresight and the business daring to be an
original supplier to Home Depot when they were getting started
in abandoned Treasury stores in Atlanta. Today, many traditional
industrial-oriented manufacturers struggle with the issue
of new channels. With good market segmentation, customer understanding
and strong product strategies, you can do well in both worlds.
are companies that have looked at the business landscape and
have moved forward into their customer's market without creating
conflicts. An interesting one is John Deere acquiring professional
landscaper nurseries. It is natural migration when you think
about it; they are getting closer to their end-user customer
of specialized motorized equipment.
are traditional manufacturers who have drifted into marketing
complete products, when they once just manufactured components.
There are others doing just the opposite. Both have created
new markets by shifting into "forward" or "backward"
distribution strategies with existing manufacturing skills.
Associates consulted with several clients that established
entirely new business models to serve similar customers, but
with more intense service and broader product assortments.
In three years, one has seven locations throughout the country,
generating revenues of $20.0mm.
It took them two years to "take the business risk"
and one failed start-up, but today they are exceeding their
is expanding one's vision of what can be done with current
products. With preparation and time, positioning products
can be a "bold move" that changes a company.
Products to Meet Unique Needs
Update physical package graphics
Add high value-added packaging
Adopt commodity-grade packaging
master-pack bulk assortment
Ship in reusable sleeves or racks
way to reposition a product is through a physical enhancement.
Redesigned packaging graphics have renewed many products.
In one situation, Hadley Associates brought an advertising
agency to do creative work for a client. That one product
management change increased sales by 25% for the product within
adding value-added packaging, at a higher price, is the right
product strategy. Manufacturers often find customers modifying
their product. In one instance, customers were repackaging
a product into smaller containers to serve small-users. The
manufacturer seized the moment by developing small-user packaging
of their bulk product. Taking the risk was rewarded; package
development costs were recovered in the first month.
can also be true. In one situation, an industrial customer
wanted to buy product development services, not the product.
An R&D agreement was developed, with the option to supply
the new products or selected components. The bulk supply relationship
lasted for years.
unneeded packaging costs can be a creative solution. While
completing field market research, distributors were asked
a simple question: Why do you sell trucking fleets products
in high-cost packaging? The solution was replacing a high-cost
unit packaging with a sleeve pallet program. It was an immediate
is listen to the customer and watch how the product is being
used. Often repackaging or changing (add or delete) a product
feature will create new applications.
Product Line Expansion
Add premium and/or valued-priced products
Develop a complete product line
Multi-grade product strategies
New applications for current products
customers want the same product grade. With careful differentiation,
manufacturers can expand markets without an unreasonable change
in manufacturing costs. Developing this strategy requires
understanding the product application, price points and cost
Associates had an interesting experience with a focus group.
We were reviewing a casting that sold for $5.00. It was perfectly
machined, tight tolerances, physically attractive and documented
with quality assurance statistics. It was doing reasonably
well in the market. We asked the focus group if they had used
the product; the answer was a universal no.
discussion revealed this market sector did not value all the
features and benefits because of their production processes;
the casting was only worth $2.50. By maintaining the high-end
market, the manufacturing created a valued-priced SKU for
the new customer sector by removing unwanted costs.
is that manufacturers control far more to the success of their
products than they think. Manufacturers need to understand
the company's capabilities and the needs of unique customer
segments. This requires being in the market place questioning,
listening, observing, challenging and comparing to the current
ways the product is used. New opportunities emerge when management
ask, "What if?"
Deleting slow moving products
Increasing the price on "C" and "D"
Outsource high manufactured cost items
Consolidate product grades
not all products are on a growth curve, managing the downside
is also a factor. The easiest decision is to cull all slow-moving
products based on an ABC movement and profitability list.
This may not the best approach.
Associates interviewed a manufacturer that actively managed
the product life cycle of component parts and completed unit
SKUs over a twenty-year span. Their strategy was simple. On
new products, they enjoyed the benefits of being the "first
to market" and rewarded by higher margins; this also
helped to offset initial R&D and tooling costs. As competitors
begin to enter a given SKU market, manufacturing costs and
resale prices are reduced. As the SKU aged, move manufacturing
to low-cost sources-of-supply, often offshore. As demand fell
off, they gradually increase the price as competitors withdrew.
Ultimately, they delete C&D items like everyone else,
but they did it after extracting as much sales and profits
product planning, manufacturing and distribution model requires
data to be managed, but it can be done. It also requires a
long-term strategy to implement it. The company mentioned
above, entered their industry with no experience and created
their own practices. In ten years, they became the industry
leader; in fifteen years, they had revenues of $175.0mm. It
started with a vision and a focus on the fundamentals of product
management, manufacturing and distribution.
understand their processes and products; this is their strength.
Building on this advantage, repositioning products should
be an ongoing driving force. This can be accomplished in a
number of different ways, but the net result is constant renewal.
There are a myriad of strategies and techniques available.
It starts with a vision of being more than what you are today
and working from there. It will ultimately become a journey
of constant product improvement and market expansion.
Associates is a consulting firm located in Birdsboro, PA that
focuses on strategic business management, industrial market
development and facilitating management change. Drew Hill
is a certified focus group leader and management consultant.
He can be contacted at 610 370 1991 (www.hadleyassociates.com)