When New Products and Customer Loyalty Collide

Examine the strategic errors committed by Pacer culminating in it losing

Pacer with respect to value and volume growth?

There were several grave errors committed by the company with respect to value and volume growth.
Some of these are explained below:

 Losing Focus: One thing that is quite evident, in this case, is that the company did not create a
well though-out and structured plan of action for combating with increased competition.
Instead of looking at the pros and cons of diversifying their product lines, the company went
ahead and introduced new designs that were not well researched nor were these products
error-free. This haphazard attitude created issues because the company could not capitalize on
their existing strengths and instead faced setbacks in the new launches. This affected both value
and volumes. When they lost focus, the existing customers and their sales volumes disappeared.
Also, the value growth in sales was also not witnessed leading to an overall decline in revenue
numbers.

 Scale Issues: Another problem that the company management did not notice was that there is a
huge difference between operations of small niche firms and large corporations. This means
that a small firm might only produce limited products given their budget, manpower and
resource constraints whereas a huge corporation could produce higher efficiencies simply by
reducing costs across its functions. This scale advantage allows large companies to keep
introducing new products despite them failing in the market because their successful products
generate enough volumetric sales to justify introducing new launches.

 Consumer interest: The Company also suffered because they did not listen to what their
customers and runners needed and instead tried to emulate what others were doing. This
approach cannot work in today’s scenario when customer complaints such as the one received
from Westford High can destroy the reputation of any brand. The management should have
realized that introducing new products cannot be possible at the cost of losing loyal customers.
There should have been a robust exercise planned before launching each new product that
tested the performance in real life situations. Unless the consumers show interest and

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 acceptance towards new product launches, it is not possible for the companies to produce good
results.

Most of these problems could have been easily avoided the company prepared a proper plan of action
and business strategy before venturing out to combat large corporations for protecting their market.

What should Pacer do to get back on track and win the race & Why?
There are several things that Pacer can do to come out as winners in the industry. Since it is not possible
for all these strategies to be implemented simultaneously, the company might instead develop a more
prioritized version of these measures. Some of these are presented below:

 The idea for introducing the original Pacesetter is a good one. This could easily be done by
having new marketing campaigns that highlight the high quality aspect of the product. It will
help the company in a lot of ways. For instance, it will allow them to bring the focus back on
technical shoes designed for running. It will also provide the company an outlet just to deliver
on quality and improve brand value considering that the customers have already showed great
faith in the product. If the new product is as well received as the original one, then the company
will also generate enough sales volume and sales value growth to justify spending extra money
on introducing new products. Another reason for going this route is that the company will not
need to spend additional time on product designs.

 The company also needs to realize that launching new products without giving them enough
time in the research and development phase is never a good idea. If they keep following this
approach, customers will continue to complain. Also, since the production team is not equipped
well in handling 11 new product launches, they should either be provided additional resources
or given more time. This could be done by introducing a more staggered version of the product
launch program, or it could also be done by dividing product design and innovation tasks to
different groups within the organization. This approach will create better synergies and
efficiencies for the company.
 There is also a problem of lack of consent and conviction. It seems that the top level strategies
have been solely developed on the whims of Henry. Ideally, there needs to be some sort of
consensus where everyone is brought on board before launching a new idea or a product. This

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 will help each staff member in putting up their best efforts to ensure success. As of now, the
core team members of top management themselves are not sure about company’s current and
future strategies. With this problem in place, it will become almost impossible for them to
create successful strategies when no one believes in the success of these measures with full
conviction. To cater to this problem, the company needs to put certain measures in place that
improve interaction and exchange of ideas. Things like more staff meetings, brainstorming
sessions where inputs from all staff members are entertained, etc. should be employed. These
initiatives will help in building a culture of trust, openness and allow everyone to discuss issues
and opportunities.

Identify the Top 4 marketing objectives that Pacer should pursue.

Sequence them in order of importance.
Although there are several marketing objectives that the company could target here are some of the
main objectives. They are listed in sequence from most important to least important.

 Improve customer retention by 30% as measured by higher sales to existing clients (to help
improve customer loyalty).
 Increase the percentage of customers who rate their new products as "excellent" by 20% within
next two years (to help improve product design).
 Obtain higher brand awareness and brand recognition in minds of new customers by
highlighting company’s past performance and future potential in 1 year (to help the brand
develop a more strong image given their new diversification ideas).
 Increasing the market share within technical shoes by 30% within the next 2 years (to help
improve customer loyalty).

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State two strategy models/ framework that may be applied in effectively
analyzing this case.
Two models that should be used include Porter’s Five Forces and SWOT framework. Both these models
will provide extensive and imperative insights to the case and the several issues prevalent at the
company.

Porter’s Five Forces

This model will be very helpful because it will allow the company to analyze their problems from an
industry-wide perspective.

For instance, the aspect of Substitutes’ threat should be studied so that the company can locate
whether there are any direct substitutes to their products as this can reduce their competitive
advantage in the market. Similarly, the threat of new entrants will also provide insight into how other
players in the market will have incentives to come and capture the niche area that is the current
strength of Pacer. The aspect of bargaining power will be studied from the perspective of suppliers as
well as the customers. With changing times, customers have seen their bargaining power increase as
access to new products; better information and higher understanding of market forces have put them in
a more advantageous position than in the past. Supplier power in case of manufacturing raw materials
needed for shoe production would also need to be studied under this framework.

Overall this approach will help in identifying how intensive competitive rivalry is in the industry so that
Pacer develops required strategies to improve the situation. Without looking at the environment and
making strategic decisions will not be a good idea for the company given their current situation is
precarious, and any small mistakes might bring further problems to their doorsteps.

SWOT Framework
The Porter’s five forces model will help in analyzing the case from an external perspective, but the SWOT
framework will analyze the case and the company from both internal and external aspects.

Internal
The Strengths and Weaknesses of Pacer need to be analyzed in detail. This will help the company in
identifying and focusing on their strong points, and it will also help them in improving on their weak
areas. For instance, it is quite clear that in the technical shoe segment, the brand of Pacer is quite strong

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as exhibited by its past success. Therefore, all efforts should be made to further capitalize on this aspect
and ensure that the focus does not shift.

Similarly, the weak aspect of introducing a new product line that provides casual running shoes needs to
be studied so that the required improvements in the product are made. The company might even decide
to stop producing this product if the negatives outweigh the positives.

External
The framework will also analyze some of the opportunities and threats that the company might
consider. This classification will identify whether there are substantial threats from competing brands or
is the management worrying without cause. Also, new opportunities could be created where the
company uses its strengths and niche market experience to engage a higher customer base. The analysis
will help in not only exploring new opportunities, but it will also help them in creating a focused
approach where the company’s core strengths are not compromised in lure of new opportunities.