In an effort to maximize profit and growth, companies introduce new products or variations on existing products, thinking that if they give the customer more choices, the customer will be happy, thus translating to larger profits.
What usually happens however is the opposite. Inadvertently, what ends up being created is additional complexity, superficial value add and a cluttered portfolio of products that can end up confusing, not helping customers.
The Shotgun approach
The Shotgun approach to product development does not take the time to really understand your customer. It’s what happens when a company refuses to put forth the effort to create a relationship with their customers and truly understand them. The shotgun method is fast and cheap. Usually it takes existing products and alters them with superficial variations. There’s nothing wrong with offering your product in both green and blue colors, but do not mistake these options for innovation.
A company with too many products and product categories usually indicates that they are failing to understand the needs of their customers. Companies with too many products also run a greater risk of not getting the right product in front of the right consumers in the right distribution channels and retail outlets.
Companies hung up on the superficial shotgun approach to new product and service development end up offering nothing of real value to their customers, and will soon find themselves commoditized and irrelevant.
Organic Growth
By focusing on your core business – the reason your company exist, other than making money – you will naturally limit your introduction of new products to those that add real, genuine value to your customers.
In addition, companies that focus on their core business – their core purpose and mission – they tend to naturally work side-by-side with their customers in the product/service development process to ask new questions and create new solutions that serve deep and genuine needs. When you truly understand your customers, you can add significantly more value to them with fewer products/services. This approach takes more time, effort and in some case capital, but the subsequent return on investment outweighs the costs several times over.
From this approach, innovation and organic growth will blossom logically as a result. The principle of “less-is-more” holds true for both business-to-consumer and business-to-business companies.
Here are two simple examples to illustrate the point we’re making – when you understand your customers, there’s no need to guess what it is they want, flooding them with products and services they may find no value in and regard as useless. You can narrow your efforts to giving them exactly what they desire and value:
Financial
American Funds – 29 mutual funds
Compound annual growth rate 2000 – 2005: 19%
Fidelity – 168 mutual funds
Compound annual growth rate 2000 – 2005: 4%
Cosmetics
Neutrogena – 17 SKUs per product category
Vendor sales growth from 2003 – 2004: 15%
Revlon – 79 SKUs per product category
Vendor sales growth from 2003 – 2004: 3%
Christopher Gayle
Copyright 2006 Christopher A. Gayle & Capital Genesis LLC ©. All Rights Reserved.
