Product Cost Reduction and Market Realignment
Segment: lighting products
Context:
For several consecutive months, the customer has observed a continued reduction in profit margin and sales volume for one of its most important products. During this period, the client's product had not been updated for a few years and, although its quality was superior, it was being overshadowed by the large number of competitors who were selling inferior quality products at extremely low prices.
Challenges:
1. Declining margins: The product was losing competitiveness due to its high price in relation to the competition.
2. Outdated product: The lack of updates made the product less attractive and above the market cost.
3. Intense competition: Competitors sold cheaper and lower quality products, challenging the customer's position in the market.
4. Difficulty balancing quality and cost: Due to high competition, the need to reduce costs was undeniable, but there was concern about doing this without tarnishing the company's brand, known until then for having good products.
Solution
1.
Detailed documentation and prioritization of product requirements:
We identify critical requirements through internal discussions, regulatory analysis and reverse engineering of competitive products. This point is essential for optimizing product costs without losing quality.
2.
Commercial and technical partnership with Chinese supplier:
We collaborate with the supplier in China, aligning the needs and specifications of the project from the beginning and supervising product approval throughout the process. We were responsible for the final approval of the product, planning and carrying out comprehensive tests to ensure that it met the prioritized requirements.
3.
Complete documentation:
We prepare user manuals, technical sheets, packaging design and all technical documentation for scalability. We also optimize packaging requirements for efficient transportation and storage. The client's only concern was to publicize and distribute the product on the market.
Results
• Cost reduction: We were able to reduce product costs by 28% compared to the previous model, in addition to providing visual changes and functional specifications.
• Increase in sales: The customer noticed an increase of approximately 200% in product sales in a few months, when compared to the previous model.
• Brand presence: The results above helped to reestablish the strength of the client's brand, expanding its leadership in the segment that had been undermined before the product readjustment.
Impact and Lessons Learned
This case highlights the importance of monitoring the market and adapting your products to meet changing demands. Accurate understanding of customer needs, collaboration with strategic partners, rigorous validation and documentation required for scalability are essential for successful product repurposing, resulting in a positive impact on business results.