By Michael Evans and Jack Toolan
A combination of the recovery of the U.S. economy, low interest rates and inflation, and the introduction of new products in the marketplace are all driving consumer product sales — but not for every business. Strong demand by consumers for products is not nearly enough. No matter how attractive the product, a plan to make money in consumer goods must have the following three components:
- A well-defined product strategy
- A highly coordinated product and service distribution channel
- The right mix of brick-and-mortar and online retailing
Does Your Customer Know You?
A well-conceived product strategy starts with clarity on the basics. Is your company offering unbranded commodity products, which require a lean, low-cost structure? Or is the offering a consumer-recognized branded product, which requires a more intensive marketing strategy?
Commodity Products. Commodity products require an intense focus on an ultra-efficient operating model, an efficient supply chain, and a low-cost manufacturing model. The strategy must build in regular improvements to the supply chain, getting products from Point A to Point B at as low a cost as possible.
Branded Products. For high-end fashion or branded products, profitable revenue growth requires considerably higher marketing costs, including advertising, licensing, and marketing staff, or outside market research services to gather and analyze consumer data. Getting the product to the customer, a process know as the supply chain, will have higher costs as fashion products usually involve shorter, less efficient manufacturing runs.
Regardless of strategy, the biggest challenge is to find the time required to make sure that the company stays the course and keeps execution on track. Daily operating distractions are often the management team’s worst enemy.
Do You Know Your Customer?
A highly focused, weekly discussion with the entire management team is essential. Leaders of each of the departments or business disciplines — from product design to logistics to relationships with retailers — should be held accountable for the performance of the company.