Analysis 33: Reasons for Company Elimination

• Video #33: Convenience Innovations

• Video #15: Definition of Convenience

• Video #14: Definition of Reliability

• Video #71: Overview of Products and Services Part 3: What to Do

• Video #37: Performance Innovation Tradeoffs in Hostility

• Video #28: Performance Versus Price in a Hostile Market

• Video #32: Reliability Innovations

PURPOSE: This analysis rank orders the reasons that the company is eliminated when a customer chooses a new supplier. This analysis creates a picture of the reasons behind the company's "hidden", or opportunity, losses of volume.

• Audio Tip #69: Comparison of Reasons for Actual and Hidden Volatility

• Worksheet #14: Identifying Reasons for "Hidden" Negative Volatility

APPROACH: A very important aspect of the company's efforts to improve its product and service package is to make the changes necessary to avoid failures and eliminations. Analysis 32 rank orders the reasons for the average competitor's failing to be considered for potential new volume. This analysis is similar except that it is conducted on the company's specific experience. This analysis identities the reasons why customers, who did change suppliers, failed to choose to use the company.

• Audio Tip #70: Rounds in Evaluation Failures

Product and service innovations to overcome reasons behind customers choosing not to use the company are important. These changes should address the key reasons why the company: (1) is not invited to bid for customer volume; (2) fails to be reviewed seriously if it submits a bid; or (3) is evaluated, but is not selected, as the customer's supplier. Product and service innovations should increase the amount of volatile customer volume the company sees and can convert into its own volume.

• Audio Tip #71: Price Sensitivity Among Core Customers

• Audio Tip #72: Reliability Failures Among Outstanding Companies

This analysis results from estimates made by marketing and sales along with customer interviews. The analysis may have to be done on the basis of percentage of transactions, rather than on volume, because it may be difficult to estimate volume lost on an opportunity basis. To get around this problem, the company might estimate the size of the customer (i.e. VL, L, M, or S) and project volume based on volatile volume averages for that size of customer.

• Audio Tip #73: Advice on Interviewing Customers

Reasons "Why Not" Company: Industry Examples»

For further description of how to use market data to develop performance innovations, see Analysis 35.

• Self Test #14: Identifying Reasons for "Hidden" Negative Volatility
  

Return to Diagnose Products and Services: Negative Hidden Volatility

Return to Basic Strategy Guide Step 14

Analyses:

• Analysis 32: Elimination Reasons for Volatile Customers

• Analysis 34: Reasons for Company Negative Volatility

• Analysis 35: Using "Win" and "Fail" Data to Help Develop a Performance Innovation

• Analysis 36: Comparison of Company to Industry on Reasons for Positive Volatility

• Analysis 37: Share Sources and Beneficiaries

Symptoms and Implications: Symptoms developing in the market that would suggest the need for this analysis.

• Some competitors proliferate products around the heart of the market

• The larger companies are squeezing out the smaller

• Product innovation has accelerated

• Competitors are improving the product by emphasizing the customer's purchase process

• Competitors are changing features of the product

• Customers are more price sensitive

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

• "When Product Mix Matters"
  There are several price point specialists. Some are better positioned than others for long term success in a hostile market place. 1991)

• "Commodities and Hostile Markets"
  Conventional wisdom tells us that a commodity market is one in which the products are virtually indistinguishable and the buying decisions are based on price. Conventional wisdom is wrong. (1993)

• "The Leader's Trap"
  Being the market share leader should be an advantage. But leadership also has its dangers. Many times, in a range of industries, leaders have allowed themselves to be trapped. (1991)

• "The Rust Belt Revival"
  The revival of the U.S. Rust Belt in the late 1980's holds lessons for companies who would prosper in hostile marketplaces.

• "The Tallest Dwarf"
  A suppliers' goal is to take advantage of any market volatility, to take share wherever possible. Doing that requires understanding of what customers need. What are buyers buying?

• "Use Subtle Strategy in Tough Markets"
  A hostile market operates differently than a market with "normal" competitive conditions. But as difficult as a tough market can be, it can also present an astute management team with an unusual opportunity.

• "The Price Segment"
  The price segment is not nearly as attractive as many assume.