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Published: April 28, 2005

 
 

Beware Product Death Cycles

At the same time, consumers’ tolerance for poor product quality and short-lived products is higher because it costs less today to replace a broken toy, cordless drill, or VCR. In the early 1990s, people wouldn’t bother to fix defective products costing $30 or less, according to Consumer Reports, but that price point has steadily risen, to about $100 now. These trends combine with the advancing microchip and with insistent price pressure from retailers, in a way that may have permanently changed attitudes about product quality and the competitive environment in many industries. Rather than retooling for continual upgradeability, manufacturers may simply assume unending consumer tolerance, and slide down the slope of cost reductions and quality erosion. If this attitude continues to take hold, then former major brand producers will move to a new strategy of survival as commodity makers of retail house brands, with devices engineered for replacement every year or so.

That may be an effective strategy in the short run — maybe even for years. But companies that test the patience of consumers could pay a high price for thinking that quality is low on people’s list of priorities when they make a purchase. Greg Brue, president of Albuquerque-based Six Sigma Consultants and author of Design for Six Sigma (McGraw-Hill, 2003), has extensively studied warranty data, such as the number of units returned each year to retailers (and hence to manufacturers) for repair or replacement, and is convinced that the decline of product quality is a cultural Rubicon for companies — a potential point of no return on the road to eroded market share. He claims he can predict whether marketers will lose customer loyalty five years from now on the basis of their profile of warranty costs today.

To Mr. Brue, there are two categories of products that retailers sell, each with its own pattern of deterioration — its own “product death cycle.” According to his research, companies that produce products with lower warranty return rates have far stronger bottom lines five years later than those whose product quality erodes more rapidly. In other words, consumers stop buying products and brands they think are likely to break down. Although many top executives may decide that product failures and loyalty erosion aren’t that important in the larger scheme of business, Mr. Brue says “that’s not a responsible fiduciary attitude.”

“A product failure leaves a scar in a company’s reputation,” he says. “It makes the consumer wonder: Will the company get the next one right?”

Several experts argue that a solution to our latest quality crisis will emerge from competition and innovation. Jack West, past president of the American Society for Quality, says that even some Chinese companies are choosing to adopt Six Sigma techniques. New technologies like radio frequency identification (RFID) chips also offer hope. If your DVD player needs a new loading tray, the RFID chip will detect the problem, notify the factory, and arrange delivery of the proper replacement part, ready to snap into place.

But it’s not certain that manufacturing companies will want to make this kind of shift. Having evolved into suppliers of retail brands, they may not be in a position to innovate or to invest in quality, as they did in the mid-1980s. And in a world of cheap, disposable products, who will care? Maybe only the last few managers, of the last few quality brands, who, like monks in the Dark Ages, keep alive an ideal that others have forgotten — and derive premium profits from a premium audience that nobody else understands.

Author Profile:


Art Kleiner (art@well.com) is the “Culture & Change” columnist for strategy+business. He teaches at New York University’s Interactive Telecommunications Program. His Web site is www.well.com/user/art. Mr. Kleiner is the author of The Age of Heretics (Doubleday, 1996) and Who Really Matters: The Core Group Theory of Power, Privilege, and Success (Currency Doubleday, 2003). 
 
 
 
 
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Resources

  1. Art Kleiner, “Beware the Product Death Cycle,” s+b, Spring 2005; Click here.
  2. David Neely and Kevin Dehoff, “Innovation’s New Performance Standard,” s+b Resilience Report, 03/15/04; Click here.
  3. Arthur M. Schneiderman, “Are There Limits to Total Quality Management?” s+b, Second Quarter 1998; Click here.
 
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