If your customers find your products or services antiquated, why don't you?
By Reed Richardson

Last fall, retail giant Wal-Mart announced it would end its 46-year-old layaway service for its customers. Once a popular way of buying big-ticket items, layaway was now costing Wal-Mart more than it was worth, tying up precious warehouse space for months while forcing stores to track small, often infrequent, payments. In addition, executive vice president for Wal-Mart store operations, Pat Curran, noted that in an era when nearly everyone can get approved for a credit card of some kind, "demand for layaway service has declined steadily." In fact, many other retailers long ago abandoned their expensive and under-utilized layaway services. So the real question might be: What took Wal-Mart so long?


To be fair, Wal-Mart is by no means alone. Many businesses, both big and small, often fall victim to a kind of business version of Newton's First Law: A service or product line on sale tends to stay on sale, no matter what the customer wants. But succumbing to this inertia, either by ignoring flagging sales or by not being attentive to consumers' evolving habits, can end up costing your small business time, energy, and resources. So, instead of waiting until your small business runs off the cliff of obsolescence, consider these five tips to ensure your goods and services don't fall victim to the blahs.

1. Measure true value. If it's a product, analyze its production and marketing costs versus its sales revenues to determine if it's really adding to your bottom line. If it's a service, include it on a survey to see whether your customers value it, ignore it, or hate it.


For decades, both national and local banks alike took the time to mail back every original check to their customers, despite the fact that many customers saw little value in this service and some even considered it a nuisance. Years after the technology existed to efficiently mail scanned copies of checks or, cheaper yet, electronic copies via email, banks continued to stick with this tradition. It wasn't until two years ago that banks finally realized that this "service" wasn't earning much, if any, loyalty from their customers and they stopped it, thus saving an estimated $2 billion a year in sorting and mailing costs.


2. Watch your competition. There's rarely a good outcome for a business if it is the last in its market segment to accept a significant change. Keep up with industry best practices and any changes in your competitors' marketing and advertising.


3. Stay on top of technological changes. If a new product comes on the market that could make yours obsolete or a new service becomes available that could render yours quaint, it might be better to accept the change early on-by either upgrading or phasing out your product or service-rather than cling to an old-fashioned technology that could cause your business to lose market share in more promising areas.


By 2002, DVD players were far outpacing VCRs in U.S. consumer sales and it was evident this new, more versatile technology would supplant the VCR. Despite this, and the fact that the price point on DVD players quickly equaled if not undercut VCRs, companies like Pioneer and Philips continued to build stand-alone VCRs through 2004, selling many of the units at little or no profit and dedicating valuable production time in their factories to a rapidly dying technology.


4. Be attuned to changes in customer behavior. If more of your hotel guests are asking where to find the nearest Wi-Fi connection than the closest shoe shine stand or post office, its time to ditch the old electric shoe buffers and hotel stationery from each room and instead install high-speed Internet access.


5. Send the right message to the right customers. Carefully examine what kinds of signals your products and services are sending to consumers. If they're geared toward a market or demographic your business is moving away from, you might be better off making a clean break rather than muddying your brand by trying to squeeze out a few more quarters worth of diminishing sales.


Another reason Wal-Mart dropped its layaway program was that the change fit in with its ongoing brand restructuring program. Buffered by claims that its products were of increasingly poor quality and lacked cachet-Wal-Mart shoppers have an average household income of $30,000 to $35,000 a year, while customers from one of its main competitors, Target, have an average household income of between $50,000 to $60,000 a year-the retail giant has begun moving more aggressively to court customers with a higher income and more readily available access to credit.

Reed Richardson is managing editor for Business 24/7 magazine.

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