Insights For Success

Strategy, Innovation, Leadership and Security

When choice cuts into profits and margin

Branding, Management, Marketing, StrategyEdward KiledjianComment

Until recently, most executives operated under the impression that consumers demand choice and lots of it. You could walk into any electronics store and see 5 different versions of the same computer system (each with only minute differences). But is this really what the modern, educated and busy consumer is demanding?

Early this year, I read a research paper by Forrester Research (1) that discussed the experiential difference between the typical Personal Computer and the iPad. The author discusses the fact that the iPad has a “curated” experience. On a typical PC, you can download and install almost any app, configure it the way you like and use/abuse it to your heart’s content. The choices and options are endless. Because of the limited real-estate on the iPad and iPhone, Apple has carefully chosen and designed every aspect of the device and its interface. When you want a specific functionality, you buy a pre-configured and vetted app from their application store (which is itself carefully “curated”.)

Because of the device’s phenomenal success, we can assume that consumers accept and like this model of limited, carefully controlled functionality. This is the quality over quantity debate. It places a heavier initial burden on the manufacturer since the customer expects everything to “just work”.

This new model not only simplified the use of these devices but helps customers that may have decidophobia (2). We are seeing more and more companies moving away from the “Choice is king” mantra with the aim of:

  • Simplifying their own production and supply chains
  • Simplifying their support processes
  • Simplifying the customer decision process
  • Simplifying portfolio management


Companies are seeing marked reductions in their costs and improvements in their margins. A great example of this is GM. After their unfortunate bout with bankruptcy, they shed many of their brands and emerged stronger and better for it.

As you start planning for 2011, think about your product or service offerings and determine if they can be streamlined. Do you really need as many SKUs? Do the additional products really add value for your customer? What would be the impact to your company if you cut your lineup by 40-60%?

 

REFERENCES

(1) http://forrester.com/rb/Research/apples_ipad_is_new_kind_of_pc/q/id/57008/t/2
(2) http://en.wikipedia.org/wiki/Decidophobia