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Never Was So Much Decided For So Many By So Few

Blog by Adam Dorrell
February 14, 2018
"By cutting prices, you are upsetting our customers," I was told when I presented the sales results of the company's direct sales division to the UK sales director, "and they are threatening to not buy from us". I probably should have been more polite, but instead I pointed out that he surely was confusing his retail partners (to him, customers) and end consumers (who buy from retailers). It didn't help our relationship - let's face it, nobody likes a smart-ass.Consumer Electronics companies have for years dealt with the Power Retailer Oligopoly - a few powerful chains controlling 60 - 80% of the market. Over the years, this has evolved into  cozy manufacturer-purchaser relationships (especially in Europe) based around golf, annual dealer trips to sunny locations and other "boys club" activities. Despite investigations from the UK's Competition Commission in the '90s which eventually led to the prohibition of Recommended Retail Pricing, strong linkages between retailers and major brands still exist.power_retailers-copyAn article about the success of the iPhone reminded me of how destructive this relationship can be. In "Apple Proves... It pays to be late And ignore the mobile networks"  Andrew Orlowski explains how Apple managed to beat large companies full of clever people who devoted years of planning and expenditure to make a mark in the smart phone market. Ironically, Apple, by coming late to the market could buld a product that consumers wanted, not network executives.He writes that in the mobile phone business "the customer isn't you or me, or the billion and a half other phone users in the world. Phone manufacturers have only 800 customers, of which only around 200 really matter: these are the gentlemen from the networks. And one of these stroppy customers can demand changes that cost the manufacturer millions, or cause the cancellation of product lines in which tens of millions have been invested." According to Orlowski, the network executives decided the "butterfly" design Nokia introduced with the 6800 was too complicated, and that disabling Wi-Fi and charging high prices for data was good for all of us.Apple, with their close customer relationships (half of their business is direct via internet or own shops) understood that they could offer features consumers wanted, not the telcos.But with Consumer Electronic companies still mostly dragging their feet on embracing a channel model that includes direct-to-consumer sales, I fear that the best product innovations are still hidden from us.  I wonder how many times  a Retail Purchasing Executive decided to  kill an interesting CE product because of his or her prejudices, or because their business model did not allow for such a price point?The moral is that CE companies may be iPhoned out of business by not listening to the voice of the customer.There are solutions to breaking the Power Retailer addiction: You can upset Retail Buyers. Get some help from the Manufacturers D2C Direct to Consumer Support Group. And CustomerGauge will help you measure and understand customer sentiment, and create innovative products.Pic and Quote: The Few
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