Case Analysis - When New Products and Customer Loyalty Collide

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case analysis |

Case: When New Products and Customer Loyalty Collide |

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Background

This is a classic case of implications of product line expansion leading to erosion of established customer base.

Pacer Shoes is a $10 million shoe manufacturing company which is known for its technical excellence in running shoes. Its core customer base is serious runners who are returning and loyal.

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, financials etc.

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 customers.

Situational Analysis

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...