Avoid becoming a victim of improved quality

Tires, fire-proof safes, and exhaust systems have something in common when it comes to quality.

Consider your own situation. When was the last time you used the spare tire of your car? These days, it is not unusual to hear of four- to five-year-old cars being sold with the spare tire still unused. Indeed, the durability of tires has so improved that it takes longer to wear out. As such, the time gap between tire purchases has become longer. Better product quality has resulted in less purchase per unit time. When a new tire outlet is opened, it may experience brisk tire sales from people in the area. But when the saturation point is reached, especially because of excellent quality, there will be no reason for customers to drop by for replacements for quite a long while.

The same is true of fire-proof safes. If you bought a good one, then the promise that fire cannot ever destroy it will hold. So, the likelihood of your buying another one to replace it is nil. The superior quality of the product lends itself to not having a repeat purchase. Most likely, it is a once-in-a-lifetime purchase.

During the introductory promotion period of such a quality product, sales will continue to rise. But when the saturation point is reached, sales will not only taper off but will eventually decline since everyone who should have a fire-proof safe would have bought one.

In the case of exhaust systems of vehicles, they used to have a life cycle of two to three years. With improved metallurgy, the exhaust system components no longer need replacement within the first five years of a vehicle’s life. Since they now last longer, the next purchase will take a long while.

These three situations lead to less and less repeat purchase of the same product. If not recognized early, revenues will start to decline. Worse, ensuring that revenues are kept at the same levels becomes somewhat like a run on the treadmill. New customers are always sought after. Because the time in between purchase is long, there is the risk that even the customer would forget where he/she purchased the item. A case of customer loyalty is undermined by customer forgetfulness.

Is there a better way to get out of this predicament? Would seeking out "new" customers be the only way to resolve this? How does one keep customers coming back to the store in between purchases?

Tire retailing game

The worst thing to do is to sell inferior tires. Although it will make the customer come back more often, this solution is unacceptable. Instead of looking for more new customers, find out what a tire customer would still need in between tire purchases.

Obviously, the person has a vehicle. So what other products/services would be needed to keep his/her vehicle safe or road worthy? This implies a transformation of the business model from tire safety to a safety and vehicle road-worthy industry. This shift opens the opportunities to offer other services. Aside from suspension and brake products and services, this could be a line of new services that will examine and repair the power train (engine and transmission) and electrical systems of the vehicle for safety and road worthiness.

Another alternative is to redefine the tire game beyond safety. The tire can be treated as the shoes of the vehicle. Wrong tires make a vehicle run bad. Wrong shoes make a person walk bad. Bad-looking shoes make a person look bad. Bad-looking tires makes a vehicle look bad. In other words, after vehicle safety is vehicle fashion or vanity. In between the purchase of tires, a customer may need to keep the vehicle (basically) clean and/or may even want the vehicle to be attractively (showcase) clean. This transforms the shoe store to a spa and a tire retailer into a vehicle wellness business. This implies new sources of revenues from vehicle cleaning (interior and exterior) to vehicle detailing. These new sources of revenues make the current customers spend more of their budget for ensuring vehicle road worthiness and/or vehicle cosmetics in the same tire store.

Fire-proof safe game

The opportunity in this game lies in the change-in-the-purpose of purchase. Originally, the customers of the product bought the item for themselves. They saw its value relative to the need to safeguard valuable documents and items against fire. But as mentioned above, this market is finite and is limited to those who have documents and items that are valuable enough to protect.

These customers do not need to be further convinced as to its value. But these very same people who have things of value are also often taken as godfathers or godmothers in weddings. Often, they find themselves in a quandary as to what wedding gifts to give to newlyweds. Their desire is to make sure that the couple will remember their godparents even after the wedding.

This is a case of tapping the same customers for a different beneficiary. Where before, the customer and beneficiary were one and the same, the changed game adds a new beneficiary but remains beneficial to the original customer cum godparent. The operative question is: Does my current pool of loyal and product/service-convinced customers have other needs that my current product/service can serve? This is really no different from the traditional gift certificate from a preferred store.

Consider the appeal of the accompanying wedding gift card that would be attached to the safe: "Use this safe to keep valuable documents and keepsakes that both of you will accumulate together. Start with your wedding documents and keepsakes. May this safe be full soon."

Exhaust system game

Aside from asking what else can be sold to the current customers, another question is: What other products/services can the manufacturing facility do? Is there a market for it? This is what makes this game different. The exhaust systems game has metal working equipment facilities at the point of sale. There are tube benders, welding equipment, metal, metal rollers, and other metal fabrication equipment.

What other products can these fabrication equipment produce? Can they make steel trusses for the construction industry? Can they fabricate other vehicle metal parts that cannot be purchased off-the-counter from auto supply stores?

Alternatively, what other metal products can be made, using the aluminized raw material that made the original product durable? Can outdoor furniture be fabricated? What are the other things that are exposed to the elements and, therefore, subject to corrosion? The more durable material may find other applications outside of exhaust systems.

To sum up, if the improved or inherent durability of your product can lead to less repeat sales, start to ask the above questions early. It will avert a sales decline brought about by market saturation. In other words, innovate and change your game before it changes your growth rate.

(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).