Team No.

102

Socratix The Case Study Challenge

When New Products

and Customer Loyalty
Collide

Case Analysis Presented by

Name: Vivek Sharma
Staff No.: 11179
Team No.: 102
 Team No. 102

1. Company Introduction

In 1970, Henry Carson started Pacer Athletic Shoes with an aim to manufacture
shoes focussed on professional runners like himself. In beginning Pacer produced 80
pairs a day. By growing at steady speed, in 1990 it reached a position to produce
1,000 pairs a day. It employs 46 persons, has revenue of $10 million and is known
for its technical excellence in running shoes. Its core customer base is serious
runners who are returning and loyal.

2. Industry Scenario

In 1990, athletic-shoe market was booming that attracted attention of big shoe
manufacturers with vast resources and marketing abilities. As a result of more and
more players entering the segment, the competition got stiffer. Industry giants
targeted the largest share with their flashier shoes, thereby eroding as many as 10%
of market share of niche players like Pacer.

3. SWOT Analysis of Pacer

Strength Weakness
Customer-centric business model. Non-dynamic business model.
Hands on experience by CEO as a Relatively smaller player compared to
professional runner. Industry giants.
Good base of existing loyal customers. Lack of investments / funding.
Advanced in running shoe technology. Limited product portfolio.
Long time exposure to industry. Low product differentiation.

Opportunity Threat
Booming market providing scope of Industry giants eating up all market share.
growth. Increase in competition.
Scope for product diversification. Rejection of new products by customers,
Existing loyal customers could be used as thereby losing customer loyalty.
early adopter and promoter of new
segment shoes.

4. Product Life Cycle

Product Life Cycle has 5 very clearly defined stages through which every product
goes through from introduction to withdrawal or eventual demise.
 Team No. 102

Strategy Focus ------------>

R&D and Define product Marketing, Manufacturing High-cost and
engineering. and create need managing and cost. Prices low-share, high
with little or no rapid fall and competition:
competition. growth, competition exit, being low-
focus on intensifies. cost or a niche
quality. player.

Pacesetter Pacesetter is a product in Maturity stage, yielding good revenues and

profits.

New Products Launched by Pacer They are in Introduction stage and need
investments and funding for marketing and growth.

5. Situation Analysis

While taking on head-to-head competition with industry giants, Pacer drifted from its
customer-centric market orientation to competition-centric market orientation, for
which it didnt have quite enough resources.

Pacer seems to be straying from core values that created its success. Drifting its
attention away from its core customers and abandoning the niche, Pacer has entered
mass market where industry giants define the structure of market and rules of
competition. It is not such an appropriate move for a small player like Pacer as it
adopted the strategies of competitors, thereby missing opportunities to differentiate
themselves from those competitors.
 Team No. 102

It was a mistake to eliminate the original Pacesetter in favour of new Pacesetter Plus.
Pacer is facing the same problem that Coca-Cola did in bringing out New Coke.
Market research showed that many customers couldnt tell the difference between
old and new, rather some people had an emotional attachment to the old. Moreover,
consumers were angry that the company took away their option to choose.

Further, Pacer is putting enormous pressure on its production staff to manufacture

such number of new designs in one year without having enough resources. This
could very well lead to sacrificed quality which is definitely evident from some of
feedbacks that they got from different users.

Another thing Henry needs to understand is that he no longer represents Pacers

customers, the serious runners. He must turn to market research rather than relying
on his own two feet to guide Pacers product design and marketing. For example,
engineers at Hewlett-Packard started out making calculators that they themselves
were interested in using. However, market research suggested requirement of new
product designs and ideas to reach out to customers.

6. Alternatives to be Considered

First and foremost, Pacer should bring its focus back to its core customers and
understand their needs and desires. It should do more consumer research by taking
inputs from its most important customers i.e. serious runners before making any
changes in its offerings.

Rather than going for so much horizontal expansion in product line, Pacer should
turn its focus on vertical expansion of product line. Keeping elite shoes for serious
runners, Pacer should produce low-cost shoes to target new customers who either
value similar characteristics in their running shoes or identify with serious runners.
This would help Pacer get back on track with its sales and market share. And then
gradually, Pacer should look for horizontal expansion.

In the interim, Pacer should reintroduce original Pacesetter which is in its Maturity
stage and a cash cow. Pacer should exploit its substantial equity in Pacesetter brand
name. Further, rather than introducing back-to-back new models, Pacer should give
sufficient time and investments in marketing for each of its products to grow and
then reach Maturity stage.
 Team No. 102

Customer Loyalty can be differentiated into following steps of ladder:

|------------| Advocate
|------------| Supporter
|------------| Client
|------------| Customer
|------------| Prospect
|------------| Lead
|------------| Contact

Pacer should find out which of their customers are advocate and involve them in new
product process, so that any dissatisfaction can be filtered. This process will help
stop any negative emotion of Pacers old customers and Pacer could turn these
complaints to its own advantage by making them their promoters.

7. Marketing Objectives

In dynamic market of athletic shoes and new competitors entering the market, it is
need of the hour that Pacer should focus on marketing pursuing following objectives:

i) Increase Customer Retention and Satisfaction Pacer should concentrate its prime
focus to reach out to its core customer, letting them drive its strategy. By focussing
on customers rather than competition, Pacer can uncover differences among market
segments and design products that it needs to focus on.

ii) Store Location An important marketing consideration will be store location.

Strategy will be to operate stores in strip centers where competition is less than in
shoe malls where many footwear retailers compete within the same mall. Other idea
is to open off-price or discount shoe stores with moderately priced and upscale shoes
to attract a target audience.

iii) Product Portfolio In long run, Pacer should expand its product line, first vertically
and then gradually horizontally, preferably with inputs from market research.
Further, it should ascertain at which stage their products are hovering before
deciding their present and future.

iv) Branding Pacer have the opportunity to convert recent negative emotion against it
to its own advantage. Old customers who are disappointed with its new products
may be invited to participate in a panel of experts who advise the company on its
shoes and sign on them to endorse the product.
 Team No. 102

8. Conclusion

An imaginary boundary line separates niche market from mass market. Companies
crossing the line in either direction usually dont understand the market economies
that await them. Pacer is no exception. So its time Pacer reviews its strategy and
aligns itself to protect its niche and assess the likelihood of success there while
avoiding head-on competition with industry giants.