Better Late Than Never
Last October, Ortho-Kinetics Inc., an $8 million-a-year manufacturer of orthopedic equipment, announced its Model 4500 power wheelchair with two magazine ads aimed at direct purchasers and with a field sales effort that targeted rehabilitation institutions.
Then, without warning, the supplier of the motor for the chair notified the Waukesha, Wis., company that the design of the motor was obsolete. To make matters worse, the most compatible replacement motor had different dimensions, requiring changes in other major components.What at first looked like a 30-day delay would eventually lengthen into four months.
Edward Gaffney, Ortho-Kinetics's president, estimates that the delay cost his company from $25,000 to $30,000 in out-of-pocket expenses and $250,000 in potential sales revenue. But the short-term financial losses were only the tip of the iceberg.
"When a company announces a product that it cannot deliver on time, the major concern is credibility damage," says Dale Zeskind, a Waltham, Mass., engineering and marketing consultant. The company, he says, must try to salvage both the confidence of its sales representatives and the trust of its customers.
"Obviously, our sales reps were disappointed by the late delivery," concedes Patrick Goggin, sales manager of Ortho-Kinetics. "They'd spent a long time cultivating contacts at rehabilitation facilities, a new market for us. When the delay stretched out, it was only natural they lost some of their steam."
Managers at Ortho-Kinetics, however, were able to maintain morale by keeping the sales reps constantly informed about the product's status, as well as by making themselves directly accountable for problems. Goggin held regular briefings, and reps were encouraged to call the company's toll-free line, not just to check on the product, but also to vent their frustrations over the missed delivery.
In addition, rather than have the sales reps single-handedly cope with customer complaints, both Goggin and the order department personally contacted purchasers at four- to six-week intervals. Customers who wanted more frequent updates were, like the sales reps, provided with the toll-free number. Besides appeasing customers, the calls from the company deflected criticism from the reps.
Gaffney and Goggin also made certain that salespeople knew they would not be penalized for the overall decline in sales figures that resulted from the involvement with the Model 4500. "Time spent on a product that's delayed is time taken away from other product areas," explains John Schlacter, professor of marketing at Arizona State University and a consultant in marketing and management. "Therefore, in addition to quotas not met for the new product, there may be an overall drop in sales figures. Unless the production problem is taken into account when performance is reviewed, it will look as if the person hasn't been doing his job."
Keeping customers happy, though, can require more than personal calls and access to the company's toll-free line. If the time involved in getting the product ready for release is very long, John Schlacter suggests sacrificing short-term profit for long-term good-will by proposing alternative products from other companies.
"At first glance, this may sound crazy -- giving customers away to competitors," he says. "But it can actually cement the company's relationship with its customer, who ultimately cares more about service than a single product." A company can also offer an incentive, such as a price discount, for the customer who waits out the delay.
The best antidote for a missed delivery date, however, may be the promise of an ultimately superior product. In Ortho-Kinetics's case, a major factor in preserving credibility and orders was the decision to turn an unavoidable trip back to the drawing board into an opportunity for improving the product. With information from people who had use-tested demonstrator models of the chair, Ortho-Kinetics's engineers found ways during the delay to incorporate features that improved both the speed and the adjustability of the wheelchair.
Full-page ads for the Model 4500 were placed in four publications, twice the level of advertising that had been allocated in October. The decision to advertise lightly at the outset resulted not from any specific knowledge about potential problems with the 4500, but from natural caution. "When there is a reasonably technical product involved, it is better not to jump in with both feet and risk getting splattered," Goggin explains.
Zeskind believes that companies preparing for a product introduction shouldn't advertise at all until they are "reasonably close" to the date and "reasonably confident" about the product's readiness. The problem, of course, lies in determining what's reasonable.
"People tend to be overly optimistic," says Zeskind. "When the engineering and marketing staff sit down to plan, it's hard to convince them that they're being unrealistic if they don't build in a substantial error margin -- in many cases up to 100%."
Absolute safety is also not always compatible with profit considerations. "I've been playing this game for a long time," says Gaffney. And the only way he has discovered to hit all the timetables is to anticipate that every part of the introduction will take four times as long as it should. Since that's not something you can afford to do when you're running a business, then you just have to make sure that everyone stays as flexible as possible.
"Occasionally we introduce something before I would like," Goggin adds. "If I'm not absolutely sure that it will work out, I just don't give the product a full marketing shot right away. Besides, every time we go through the process, we get a little better."