Due to the threats from expansion of largest players and the disheartening results of losing customer base by a Industrial research firm, the president and CEO Henry decided to expand Its product line and cater to new markets as well. As part of the strategy, they decided to upgrade their existing core product and introduce a new line of walking shoes. However, the latest returns suggests that the strategy didn’t meet the expectations and has resulted in problems from all functional fronts – marketing, operational, financial etc. 2 Current Issues
The strategy of the expanding Its line and entering new market Is not meeting the sales targets. Significant portion of loyal customer base Is not satisfied with the upgraded product. They are in a dilemma whether to reintroduce their star product which the customers value most. The functions such as marketing, operations are not yet matured properly to meet the challenges resulted by the implementation of new strategy. Erroneous brand positioning resulting in confusion among customers – they are not able to market the key improvements in their upgraded products to their
The move of expanding its product line and entering a new market might be in the right direction considering the boom in the athletic-shoe market and aggressive expansion strategies of Industry giants. However, the proper due diligence is not done before implementing the strategy as the different functions – marketing, operations etc. , are not able to meet their respective goals. A major portion of current customers are not satisfied with the upgraded model. Possible root cause for going towards product line expansion 1 .
Customer Segmentation – Idea to launch the liking shoes and traverse into new customer segment, thereby reaping financial and brand benefits. But this came at the cost of the losing significant loyal customer base. 2. Trade Pressure / Competitive Intensity – As the shoe industry is booming, CEO Henry Carlson envisaged riding this bandwagon and expanding to wider customer base. Pacer being a minor player could not get hold of new market and also is also bleeding its loyal customer base as new products is not liked by its core customer segment.
Below are the possible causes to the direct and indirect problems 1. Eroding Customer Loyalty – This can be evinced from the star campaigner and athlete Cal Linden letter who condemned the new product Pacesetter Plus citing reasons of poor modifications in soft sole. He much appreciated the older product – core product. 2. Losing customer base to competitors – As per the results from a leading industry research firm, significant portion of the loyal customer base are moving to the leading brands getting attracted to their flashy models. 3. Short Term gain vs..
Long term Loss – The product lines were introduced for addressing larger customer base which loud be seen as a short term gain. But the fact is that the new walking shoes have not resulted in any profitable contribution and also this shift in focus has resulted in losing core customer base. This is long term loss. 4. Poor Matching Product – Market Analysis – The core customer base of Pacer are serious athletes who do not want change the core product. The athletes identify themselves with the brand personality. They ensure their body style and shoes matches for best efficacy.